International Media: Chile stands out as economic heaven for investorsPublished: April 21, 2009
Positive risk classifications, credibility, and economic stability are among the aspects of the Chilean market highlighted by international media, such as The Economist and The Financial Times.
The Wall Street Journal (WSJ) emphasizes the performance of the local market in an article entitled "Chile Proves Haven for Defensive-Minded" dated February 24th. In a year when the stock markets are in a predicament, the IPSA's (one of Chile's stock market index) output - more than 7%- has been highlighted by the newspaper. "Chilean stocks, snubbed in recent years for those of its jazzier neighbors like Brazil or Colombia, are enjoying a contrarian rally this year -one of the few markets on the upside", remarks the WSJ.
The WSJ also emphasizes the economic stability of the country and its conservative administration as part of the virtues of the local market, "that is because the country's conservative long-term macroeconomic policy is now a good fit for fund managers who have been forced by the credit crisis to invest more conservatively."
"If any country has built credibility, it is Chile. Santiago has run fiscal surpluses equivalent to 6-7% of GDP over the last three years and now has room for public spending to increase." says the FT. WSJ suggests that savings from the copper boom - in the Economic and Social Stabilization Fund- give the local economy favourable perspectives for new rate cuts.
Chile's economic strength provides the country with the ability to face the current financial cycle. To the question "Can emerging economies now afford counter-cyclical policies?", The Economist answers: "Several emerging markets face this slowdown from a position of unaccustomed fiscal strength. Chile is a shining example. It accumulated a budget surplus of 8.8% of GDP last year, thanks to soaring revenues from its copper mines. This abstinence has served it well as the commodity cycle has turned."
Euromoney emphasizes that "Chile is on track to weather the financial crisis and avoid a recession." In an article entitled "Fiscal stimulus: Chile signals pump-priming" dated February 2009, Casey Reckman, associate director of Fitch's Latin American sovereign group told the publication that "Chile managed the boom years incredibly well and now they have the funds to help smooth the financial cycles and work through this crisis. We have a pretty favourable outlook on Chile for 2009." Reckman was referring to the US$ 4 billion fiscal stimulus package announced by the Chilean government. This plan is the world's fifth largest investment in GDP -equivalent to 2.8% of Chilean GDP- and aims to bolster the country's economy against global recession.
Credibility, stimulating fiscal policies and stability have also given Chile very positive risk classifications that would not be influenced by the global financial turmoil. Currently, Chile's risk classification is A+, one of the highest we currently have in emerging markets.
Morgan Stanley's Global Economic Forum also praises the good overall economic environment of the country in its article "Chile: Time to shine". The piece remarks that "Latam (Latin America) watchers ought to ask themselves not only which countries can avert a crisis, but also which ones have the most levers to pull in order to lean against the strong global headwinds. And on both of these counts - namely macro stability and the ability to engage in counter-cyclical policies - Chile seems to be in a league of its own."