Chile Business Forecast Report Q1 2008

Publication Date	November 2007
Publisher	Business Monitor
Product Type	Report
Pages	53
ISBN Number	1745-0500
Product Code	BMI00830

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£375.00
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Summary

Tough Tests In 2008 After accelerating in H106, the economy has begun to slow, and we have revised down our end-2007 real GDP forecast from 5.9% to 5.7%, which is still considerably higher than the 4.0% registered in 2006. We expect to see a further moderation in economic activity over the forecast period. Chile's political backdrop continues to be very stable, despite a continued decline in President Michelle Bachelet's popularity. Indeed, the transportation problems in the country's capital, combined with protests over wages and general discontent with the levels of income inequalities will continue to weigh on the government. On a more positive note, Chile continues to set the example for Latin American countries when it comes to our Business Environment Ratings and has recently made efforts to forge stronger trade ties with Asia and the rest of Latin America.

While the Transantiago transport issue continues to be a central theme in the political sphere, and has thus weighed on President Michelle Bachelet's popularity, other political developments have also come to the forefront of the political debate. Spiralling food price inflation is hurting the real wages of poorer workers, who are unhappy at the still-high levels of income inequality in the relatively prosperous country. We believe this could prove to be Bachelet's next major political challenge. Meanwhile, political tensions with neighbouring Peru, which we felt may have been another obstacle for the Bachelet government, appear to have calmed.

The Chilean economy performed well in Q207, with a stronger-than-expected growth rate of 6.1% year-on-year (y-o-y). However, we are expecting the Q307 growth figure to disappoint, with economic activity slowing. Going forward, a test will be whether the economy can overcome the aggressive interest rate hikes undertaken in Q307. While monetary policy was supportive of higher growth rates at the start of 2007, when the Banco Central de Chile cut rates from 5.25% to 5.00% in January, at 5.75% the interest rate bias has now changed significantly to the upside.

The Chilean government has continued to push forward with its efforts to improve its business environment and has recently taken part in various international meetings with its Latin neighbours.

Peru and Chile have recently discussed forming an alliance between their business sectors in order to help tap into Asian markets. Energy shortages from Argentina may also adversely effect Chile's industrial sector. In the long run, energy shortages will force the government to diversify its energy suppliers, a task it has already embarked on, with talks with Brazil and Bolivia already underway.

Content

Executive Summary
Tough Tests In 2008
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Government's Popularity Tumbles
The Chilean President Michelle Bachelet has witnessed a severe decline in popularity in recent months, with the
poorer sections of society angered by the failure of the government to redress social problems.
Foreign Policy
Warming of Chile Relations
Despite making trade and economic integration the centre plank of its foreign policy, relations with two neighbours,
Bolivia and Peru, have been strained ever since Chile defeated the two in a war in the late 18th century, whereby
Chile seized a significant portion of its resource rich northern region.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Growth Outlook Starting To Dim
The Chilean economy faces a tough test in the coming months, with economic activity easing and inflation soaring
by historical standards.
Monetary Policy
BCC To Maintain Tightening Bias, Further Hikes Unlikely
Inflation continues to rise in Chile, and with economic growth now starting to under perform, the Banco Central
de Chile (BCC) is faced with a tough balancing act. We believe that the risks to growth of further tightening
outweigh the benefits of short-term inflation fighting.
Balance Of Payments
Trade Account Surplus To Narrow
The Chilean external sector is largely supported by its mining sector, with copper exports accounting for roughly
60% of total exports.
Debt Outlook
Sanguine Debt Outlook
Risks To Outlook
Chapter 3: Special Report
Negative Oil Price Shock Scenario
Introduction
Business Monitor International Ltd
chile Q1 2008
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Legal Framework
Labour Force
Foreign Investment Policy
Foreign Trade Regime
Tax Regime
Chapter 5: Key Sectors
Pharmaceuticals & Healthcare
Executive Summary
In 2007, the pharmaceutical market is expected to reach a market value of US$1.05bn, representing 7.7% y-o-y
growth and a value of US$1.35bn by 2011.
Food & Drink
Executive Summary
List of Tables
- Table: Cabinet List
- Table: Economic Activity
- Table: Monetary Policy
- Table: Balance Of Payments
- Table: Foreign Debt
- Table: Top 10 Energy Producers, Consumers And Importers
- Table: % Point Changes To Base Forecasts From A Downward Oil Price Adjustment Scenario
- Table: Latin America, Annual FDI Inflows
- Table: Chile, Annual FDI Inflows
- Table: Top Export Destinations
- Table: Value OF Exports By Category
- Table: Chile Drug Market Expenditure Forecasts, 2005-2011
- Table: Chile Health Expenditure Forecasts 2005-2011
- Table: Value/Volume Sales Of Selected Food Sub-Sectors - Historical Data And Forecasts
- Table: Chile Mass Grocery Retail, Value Sales by Format - Historical Data And Forecasts (US$bn)

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Product features / use

Scope	Expert Insight/Opinion
Level	General Industry Strategies
Data	Detailed Market Forecasts
Profiles	Profiles of Key Companies
Features	Contains SWOT Analysis
Extra Info	Consumer Trends Highlighted