Chile Business Forecast Report Q2 2008

Publication Date	March 2008
Publisher	Business Monitor
Product Type	Report
Pages	55
ISBN Number	1745-0500
Product Code	BMI00754

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£250.00
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Summary

Tough Tests in 2008

While Year-End Real Gdp Growth Figures Are Not Yet Available, The Chilean Economy Ended 2007 Weak with Growth Slowing to An Estimated 5.2% and Inflation Rising to 7.8%. We Expect to See A Further Moderation in Economic Activity over 2008, Owing in Part to A Slowdown in Global Growth, and Are Forecasting Real Gdp Growth to Come in at 4.0% This Year. We Also See Inflation Falling over The Course of The Year, but Believe That It Will Remain above The Central Bank's 2.0-4.0% Target Range.

Chile's Political Backdrop Continues to Be Stable, despite A Continued Decline in President Michelle Bachelet's Popularity and The Growing Security Threat from The Mapuche Indigenous Minority. on A More Positive Note, Chile's Business Environment Continues to Set The Example for Latin American Countries. Furthermore, The Government Continues to Make Efforts to Forge Stronger Trade Ties with Asia and The Rest of The Region.

Stubborn Food Price Inflation Is Hurting The Real Wages of Poorer Workers, Many of Whom Are Unhappy at The Still-High Levels of Income Inequality in The Relatively Prosperous Country. Meanwhile, Political Tensions with Neighbouring Peru, Which We Felt May Be Another Obstacle for The Bachelet Government, Appear to Have Calmed. We Believe The next Major Political Challenge for The Bachelet Administration Is The Growing Resentment towards Foreign Companies among The Indigenous Minority, Which Could Seriously Impact The Security Threats and Social Stability Categories of Our Political Risk Ratings.

The Economy Faces A Number of Tests This Year. 12 Basis Points of Interest Rate Hikes since July 2007 Has Taken The Sting out of Economic Activity and, despite Fears of A Global Economic Slowdown, Policymakers Are Likely to Maintain A Hawkish Bias for Now. The Rapid Appreciation of The Chilean Peso Is Also Taking Its Toll on Exporters, Who Are Now Finding Their Exports Uncompetitive. with The Spread between Chilean and Us Interest Rates Expected to Widen over The Coming Months, We Could See Further Currency Strength, Which May Further Weigh on Export Growth.

The Chilean Government Has Continued to Push Forward with Its Efforts to Improve Its Business Environment and We Expect It to Remain The Most Attractive Place to Do Business in The Region for The Remainder of The Forecast Period. However, Chile Is Facing Growing Energy Production Problems Which Pose A Significant near-Term Threat, Particularly to The Industrial Sector. to Help Combat The Country's Overarching Dependence on Natural Gas Imports, The Government, through Its Codelco Copper Company, Has Teamed up with French-Belgium Energy Company Suez to Construct A Liquefied Natural as (Lng) Plant, Which Should Help The Country Achieve Its Goal of Total Energy Independence in The Medium Term.

Content

Execuive Summary
Tough Tests Lie Ahead
Chapter 1: Political Outlook
- Swot Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Political Risks Begin to Surface
- The Low Level of Political Risk in Chile Is Captured by Its Impressive Scores in Our Political Risk Ratings.
- Table: Cabinet Republic of Chile
Chapter 2: Economic Outlook
- Swot Analysis
- BMI Economic Risk Ratings
- Table: Economic Activity
- Economic Activity
- in Need of A Fiscal Stimulus
- with Private Sector Demand Slowing and The External Sector Expected to Deteriorate Further, Economic Growth in
- Chile This Year Will Become Increasingly Dependent on Fiscal Expenditure.
- Monetary Policy
- Bcc to Leave Rates on Hold amid Growth Concerns
- with Increasing Risks to Growth Arising and Inflation Showing Signs of A Peak, We Believe That The Banco Central
- De Chile Will Refrain from Hiking Its Policy Rate Further over The Coming Months.
- Table: Monetary Policy
- Balance of Payments
- Imbalances to Persist in Export Sector
- Given Chile's Huge Reliance on Its Mining Sector, The Trade Account May Face Some Difficulties from A Slowdown in
- Global Growth.
- Table: Balance of Payments
- Debt Outlook
- Private Sector Bears The Burden
- Chile's External Debt Load Is Highly Concentrated in The Private Sector, with Private External Debt Equivalent to An
- Estimated 25% of Gdp.
- Table: Total Foreign Debt
- Fiscal Policy
- Fiscal Austerity Still Winning out
- Chile's Fiscal Accounts Posted A Surplus worth 7.6% of Gdp in The First Three Quarters of 2007.
- Table: Fiscal Policy
Chapter 3: Special Report
- Looking beyond 2008
- The Future of The World, in Three Acts
- Us: The Rebalancing Act
- Unwinding The Imbalances
- We Believe That A Substantial, Multi-Year Shift in The Us External Accounts Is under Way.
- China: What If We're All Wrong?
- Our Core Scenario for China
- We Are Retaining Our Positive Headline Growth Projections for China across The Forecast Period to 2012, with Our
- Expectations of The Continued Success of The Urbanisation Process and Export-Driven Growth Model Underpinning
- Our Assumptions. Japan: Immigration Key to Long-Term Growth
- Demographic Woes Portend Long-Term Decline
- Immigration Remains The Only Realistic Way That Japan Can Overcome Its Long-Term Economic Challenges.
Chapter 4: Business Environment
- Swot Analysis
- BMI Business Environment Risk Ratings
- Business Environment (Q208)
- Introduction
- Table: BMI Business and Operational Risk Ratings
- Table: BMI Legal Framework Ratings
- Institutions
- Legal Framework
- Infrastructure
- Physical Infrastructure
- Market Orientation
- Foreign Investment Policy
- Table: Latin America, Annual Fdi Inflows
- Table: BMI Trade Ratings
- Table: Top Export Destinations
- Operational Risk
- Security Risk
Chapter 5: Key Sectors
- Mining
- Executive Summary
- Owing to Its Rich Geology, The Chilean Mining Industry Is Expected to Continue Deriving Benefits from High Metal Prices.
- Table: Chile Mining Industry Forecast
- Power
- Executive Summary
- BMI Forecasts That Chile Will Account for 5.19% of Latin America Regional Power Generation by 2011.
- Market Overview
- Primary Energy Demand
- Table: Chile Power - Historic Data & Forecasts