Core Views
Robust economic growth will continue to be driven primarily by strong private consumption levels, with consumer-focused industries such
as telecoms, financials and autos to benefit as a result.
Although President Sebastián Piñera continues to face an opposition dominated congress and an electorate unhappy with recent reforms, political stability will persist in Chile over the long term. We expect Chile’s fiscal accounts to register a marked improvement in 2011 based on the positive outlook for tax and copper export revenues, and on the administration’s commitment to fiscal retrenchment.
Major Forecast Changes
We have revised up our real GDP growth forecast for 2011 to 5.9% from 5.4% previously, based on strong Asian demand for key commodity exports, and fast rates of private consumption and fixed investment.
Surging inflation expectations and the prospect of higher oil import costs feeding through into domestic prices encouraged us to revise up our end-2011 interest rate forecast from 5.5% to 6.0%.
Key Risks To Outlook
Upside Risks To Inflation/Interest Rate Forecasts: Rapidly rising global commodity prices pose a risk to our monetary policy outlook, as Chile is a net food and fuel importer.
Downside Risks To Fiscal Outlook: The potential for expenditure on food and fuel subsidies to increase could delay the expected
improvement in Chile’s fiscal accounts.
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Executive Summary 5
Core Views5
Major Forecast Changes5
Key Risks To Outlook5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Ratings 7
Long-Term Political Outlook 8
Political Stability To Persist
The election of the first centre-right government for two decades has caused a pronounced shift in Chilean politics
Table: CHILE POLITICAL OVERVIEW 11
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Ratings 13
Economic Activity 14
Strong Growth To Continue
We are upwardly revising our 2011 real GDP growth forecast for Chile to 59%, from 54% previously, and retaining our 50% growth forecast for 2012
Table: ECONOMIC ACTIVITY 14
Monetary Policy 15
More Rate Hikes Ahead
Banco Central de Chile’s decision to raise rates to 525% in June 2011, from 500% previously, suggests Chilean policymakers are determined to cool inflation
Table: MONETARY POLICY 16
Balance of Payments 17
Risks To External Accounts Persist
Chile’s external accounts were still healthy in Q111, but risks to their long-term stability remain
Table: CURRENT ACCOUNT 18
Currency Forecast 19
Table: EXCHANGE RATE 19
Table: CURRENCY FORECASTS 20
Fiscal Policy 21
Fiscal Consolidation Remains On Course
Chile’s fiscal accounts will remain healthy over the coming quarters, driven by President Sebastián Piñera’s commitment to fiscal retrenchment
Regional Monetary Policy 22
Inflation Threat Still Looms, Led By Domestic Demand
Latin America emerged relatively unscathed, both economically and politically, from the period of surging commodity prices in early 2011
Chapter 3: 10-Year Forecast 25
The Chilean Economy To 2020 25
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 its economy will head towards developed state status by 2020
Table: Long-Term Macroeconomic Forecasts 25
Chapter 4: Business Environment 27
SWOT Analysis 27
BMI Business Environment Risk Ratings 27
Business Environment Outlook 28
Institutions 28
Table: BMI Business And Operation Risk Ratings 28
Table: BMI Legal Framework Rating 29
Infrastructure 30
Table: Labour Force Quality 30
TABLE: ANNUAL FDI INFLOWS 31
Table: Trade And Investment Ratings 32
TABLE: TOP EXPORT DESTINATIONS 33
Operational Risk 34
Chapter 5: Key Sectors 35
Pharmaceuticals 35
Table: Patented Drug Sales Indicators 37
Table: Prescription Drug Sales Indicators 37
Telecommunications 39
Table: Telecoms Sector – Mobile – Historical Data And Forecasts, 2008-2015 42
Table: Telecoms Sector – Internet – Historical Data And Forecasts, 2008-2015 42
Table: Telecoms Sector – Mobiles – Historical Data And Forecasts, 2008-2015 42
Other Key Sectors 43
Table: Chile Infrastructure Sector Key Indicators 43
Table: Chile Oil & Gas Sector Key Indicators 43
Table: Chile Food & Drink Sector Key Indicators 43
Table: Chile Autos Sector Key Indicators 43
Table: Chile Defence & Security Sector Key Indicators 44
Table: Chile Freight Transport Sector Key Indicators 44
Chapter 6: BMI Global Assumptions 45
Global Outlook 45
Second Half Risks
TABLE: GLOBAL ASSUMPTIONS 45
Table: EMERGING MARKETS AGGREGATE GROWTH 46
Table: DEVELOPED STATES REAL GDP GROWTH FORECAST 47
Table: REAL GDP GROWTH CONSENSUS FORECASTS 47
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