Chile Business Forecast Report Q3 2009

Publication Date	June 2009
Publisher	Business Monitor
Product Type	Report
Pages	60
ISBN Number	1745-0500
Product Code	BMI03951

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Summary

In the aftermath of the credit crunch and with the global recession taking its toll on Latin America, we believe Chile stands out as a safe haven among emerging markets, reaping the benefits of a stable business environment and years of prudent economic policies. Indeed, in the Q309 Chile Business Forecast Report we assess the country's macroeconomic fundamentals and make our case for Chile being one of the few contenders in the region to avoid a full-year recession. The country stands to benefit from an increasingly constructive outlook on global commodity prices, particularly copper, and growing investor confidence in local assets, which should keep the financial system relatively well-cushioned against another bout of volatility and a return of risk aversion down the line. Though we still envision a change of government by the end of the year, the ruling Concertacin de Partidos Por la Democracia (CPD) will be happy to play these credentials up ahead of December's general election.

The Chilean political landscape is rapidly changing in the run-up to December's general election.

With President Michelle Bachelet constitutionally barred from another consecutive presidential term, the desire for change is ringing loudly among the electorate. Long-standing divisions in the ruling CPD are reaching boiling point as Bachelet's administration comes to an end, and the one factor previously uniting CPD members - hostility towards former Chilean dictator Augusto Pinochet - is hardly any great importance to voters faced with a sharp economic slowdown. Therefore, we continue to put our money on opposition leader Sebastin Piera to succeed Bachelet following December's poll.

Though Latin America's fifth-largest economy has long set itself apart from its regional peers on matters of political stability, market openness and established financial markets, in recent years prudent and well-timed economic policies have placed Chile in a league of its own to deal with the global recession. Expanding at a less robust pace and competing from a relatively higher foreign investment base than most of its neighbours, Chile's strong macro fundamentals and political stability may not have been at the forefront of investors' interests during the years of abundant financial market liquidity and asset price inflation. However, with the global economy slipping into its most challenging period in the post-World War II era, and Latin America set to contract by 2.6% in 2009, Chilean assets have once again become one of the top picks for investors since the start of this year.

Operators in Chile's telecoms markets have said more spectrum needs to be auctioned in order to keep up with the rising demand for mobile broadband services. The request came from both wireless and wireline operators at a roundtable discussion to celebrate World Telecommunications Day. Regulator Subtel has already said that mobile broadband connections could overtake fixed broadband connections by 2012, and there is a general agreement that mobile broadband is key to the continued development of Chile and its telecoms market.

Content

Executive Summary
- The EM Safe Haven
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Crumbling Concertacin Consolidates Piera
- Chile's conservative presidential candidate Sebastin Piera is receiving high-profile endorsement for his promises of change in his election campaign
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Dodging The Recession
- With the Latin American economy set to contract by 2.6% this year, Chile's sound macro fundamentals and prudent policies are placing the country in a league of its own to deal with global recessionary forces
- Fiscal Policy
- Fiscal Reserves Cushion The Blow
- Chile posted its first central government budget deficit since 2003 in Q109, as the economic downturn and lower copper prices hurt public revenues
- Monetary Policy
- Recession Concerns To Dominate Policy Agenda
- Chile's central bank remains committed to further monetary easing, as concerns about a recession continue to dominate the policy agenda
- Balance Of Payments
- Current Account: Not As Bad As Initially Feared
- Stronger global commodity markets and a sharper than-expected fall in domestic demand have prompted us to revise our current account outlook for Chile
- Exchange Rate Policy
- CLP: From Bullish To Neutral
- The Chilean peso is on the verge of hitting our CLP550.00/US$ target, set back in February when the unit was trading at CLP630.00/US$
Chapter 3: 10-Year Forecast
- The Chilean Economy To 2018
- 10 Year Forecast - A Strong Case For Steady Progress
- A sTable political outlook and sound economic fundamentals position Chile for steady economic progress, and underpin our view that Chile's economy will head towards developed state status by 2018
Chapter 4: Special Report
- The Outlook For Global Banking
- Business Environment Rating Outlook
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Infrastructure
- Market Orientation
- Operational Risk
Chapter 6: Key Sectors
- Consumer Electronics
- Executive Summary
- Despite current economic headwinds, and signs of a decline in retail demand in H208, Chile will continue to be a promising market for consumer electronics devices over the forecast period
- Mining
- Executive Summary
- BMI estimates that the mining sector in Chile contracted by 5% in real terms in 2008, although we expect the market to return to marginal growth in 2009
Chapter 7: BMI Global Assumptions
- Global Assumptions
List of Tables
- Table: Politica l Overview
- Table: ECONOMIC ACTIVITY
- Table: FISCAL POLICY
- Table: MONETARY POLICY
- Table: BALANCE OF PAYMENTS
- Table: EXCHANGE RATE POLICY
- Table: Long -Term Macro economic Forecasts
- Table: LOAN-TO-DEPOSIT RATIOS, Selected Stat es
- Table: LOAN GROWTH, Selected Stat es
- Table: COMMERCIAL BANKING BUSINESS ENVIRONMENT RATINGS, SELECTED STATES
- Table: BMI BUSINESS AND OPERATIONAL RISK RATINGS
- Table: BMI LEGAL FRAMEWORK RATINGS
- Table: Lat in America Annua l FDI Inflows
- Table: BMI TRADE RATINGS
- Table: TOP EXPORT DESTINATIONS
- Table: Consumer Electron ics Overview
- Table: Chile Mining Industry Forecast
- Table: GLOBAL ASSUMPTIONS
- Table: GLOBAL & REGIONAL REAL GDP GROWTH
- Table: EMERGING MARKETS
- Table: COMMODITIES