Chilean Finances

Chile also finished these rounds of FTA negotiations with China. During 2007, the first year of the FTA with China, growth in exports to that country by 140% made it to become the first destination of Chilean exports. Clearly these two FTAs will increase the growth potential outside door of the Chilean economy. With all this good news from Chile I might be tempted to say that the outlook for the coming months will be positive. But the reality is not. The problems remain and are latent. As autumn progresses and temperatures continue to fall, tensions over energy capacity will grow.

So far is overcoming this obstacle, but there are doubts about whether it can save it for much longer. With a nominal appreciation of the exchange rate of 18% since early 2007, the competitiveness of Chilean companies has clearly deteriorated. This probably will decrease the trade balance surplus unless the measures implemented by the Bachelet government decides to take effect or new measures to tackle the problem. While the fact of increase in consumer prices, which turned out to be 0.8% in March was lower than expected, which increase the chances that inflation will return to levels around 4% by the end of the year, the annual variation in consumer prices are still held high (at 8.5% to March). High fuel prices and heavy dependence on imports from Chile them (imports about 90% of its oil needs), combined with the problems of drought, are factors that are affecting the current level of inflation and are beyond the control of the authorities.

Despite the good signs that threw economic data in recent days, the problems to be solved Bachelet’s government to maintain the good performance of the economy are many and complex. Will be seen how the government’s response to these challenges.

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