Chile Outlook Still Stable, Says S&P

Despite creeping concerns about the copper-heavy sovereign, S&P has affirmed its A+ rating on Chile and maintains a stable outlook. “Chile has the highest sovereign rating in Latin America,” says S&P analyst Joydeep Mukherji. “This reflects its low public-sector debt and net external debt, ample fiscal flexibility, and increasingly prosperous economy.” Prudent fiscal management has led the government to accumulate assets in two stabilization funds that are estimated to approach 17% of GDP by the end of 2008, the agency adds. The public sector’s strong balance sheet, combined with a sound financial system and a stable political system, should allow Chile to withstand the impact of the global downturn while maintaining stability, S&P notes. The agency does not expect national elections in late 2009 to lead to a weakening of fiscal, monetary, and other policies, which have contributed to Chile’s solid economic performance for many years. “The new government might modify Chile’s fiscal rule, but it will likely maintain prudent policies that sustain investor confidence,” says S&P.