Experts reduce forecasts for 2016 GDP growth in Chile

On 12 December 2016, Chile's Central Bank released the results of its monthly survey on Economic Expectations. The survey respondents were 57 academics, consultants, and advisors to financial institutions. Forecasts were more pessimistic than in previous months, reducing the GDP growth expectations for 2016 to 1.6 percent from a previous level of 1.7 percent. Expectations for 2017 and 2018 were left untouched, remaining at 2 and 2.8 percent respectively (La Nación). The experts consulted also expected a 0 percent inflation rate for December, and a 0.2 percent increase in January 2017. Within this context, and in light of the poor economic activity data released for the month of October 2016, the survey results forecasted that the Central Bank's interest rate would remain at 3.5 percent for the remainder of 2016, with expectations of a 0.5 percent reduction during 2017 (La Vanguardia).

IADB to provide financing for the Chile - Argentina tunnel

The IADB announced on 12 December 2016 that it will provide funding in the form of two loans worth a combined US$40 million for the construction of the Agua Negra Bridge that will link San Juan province in Argentina with Coquimbo in Chile. The announcement will enable the Argentine and Chilean governments to launch the tendering process for the tunnel's construction. Total estimated construction costs are projected at US$1.5 billion, with an estimated construction time of 8.5 years. (BioBio). Chilean government officials argued the tunnel constitutes a vital step forward in Chilean-Argentine economic integration, and will also contribute to deepening integration between Mercosur countries. The tunnel could eventually become part of a transport link that will connect the Atlantic with the Pacific, from Porto Alegre in Brazil to Coquimbo in Chile. Chilean Minister of Public Works, Alberto Undurraga, expects to conduct a tendering procedure to select a contractor in the first half of 2017 for construction work to begin in early 2018 (Diario Financiero).

Chilean state energy company purchases AMEC-Foster Wheeler subsidiary

Chile's state-owned oil company, ENAP, on 9 December 2016 announced a deal to purchase Petropower, an electricity generation company owned by U.S. company AMEC-Foster Wheeler. Petropower's main asset is an electricity and steam-generation plant in Chile's Biobío region. ENAP previously held a 15 percent stake in the Petropower, and will now own 100 percent (Emol). ENAP's General Manager, Marcelo Tokman, explained the purchase will allow ENAP to ensure the survival of the Biobío refinery and supply excess electricity to the country's central power grid. The amount paid by ENAP for the purchase of Petropower has not yet been confirmed (La Vanguardia).

IMF and World Bank release report praising Chile's financial sector management

As a response to a request from Chile's Treasury Ministry and the Central Bank, the World Bank and the International Monetary Fund (IMF) released a report on Chile's management of its financial institutions and markets on 6 December 2016. The report concluded Chile has a robust financial infrastructure, in line with international best practices and risk management standards. Chile's regulatory and supervisory environment were also praised, and the report explained they have sufficient power to make adjustments to the system as needed. However, specific weaknesses were pointed out that may require legislative changes (La Tercera). Treasury Minister Rodrigo Valdés expressed his team's commitment to continuous improvement and early detection of problems, while Central Bank President Rodrigo Vergara stated the report's positive conclusions contribute to maintaining Chile's international prestige as a solid financial market (Emol).

Economic activity slows down in Chile in worst third quarter results since 2009

Chile's Central Bank reported on 5 December 2016 the country's index for economic activity, the IMACEC, had fallen by 0.4 percent in October 2016. This represented the first fall in the index since October 2009, when the country was in the midst of the global financial recession. Some of the key factors behind this fall are the poor performance of the mining and manufacturing sectors (BioBio). Economy Minister Luis Felipe Céspedes issued calls for a calm reaction, and argued the fall in the index was caused by specific factors, rather than underlying issues. Céspedes linked the poor performance to the the drop in copper prices, and called for a reduced dependence of the Chilean economy on copper in order to promote sustainable growth (La Nación).

Chilean government announces US$975 million recapitalization package for Codelco

Chilean Treasury Minister Rodrigo Valdés announced on 1 December 2016 the government would inject US$975 million of public funds into Codelco, the state-owned mining company. Of this amount, US$475 million correspond to a special allocation provided by the executive to mitigate the effects of the Copper Reservation Law, which dictates that 10 percent of Codelco's copper sales must be given to the Chilean Armed Forces in 2016 and 2017 (La Nación). The remaining US$500 million was granted as part of the Law on Codelco Capitalization, which stipulated that the government is to support Codelco with US$3 billion in the period 2014-2018. In addition, this law was extended until 2019. It is worth noting that Codelco had requested US$800 million in government funds in 2016, so the executive's allocation exceeds the company's requested amount (La Tercera).

Chilean copper mining company posts better than expected third quarter results

Codelco, Chile's state-owned copper mining company, announced better than expected third quarter results on 25 November 2016. Third quarter profits reached US$79 million, marking the second consecutive profitable quarter. However, on a yearly basis, the company still has losses of US$18 million for 2016 (La Nación). The main causes behind increased profitability include a rise in productivity levels, and appreciation of the US$. Codelco produces 11 percent of the world's copper and has generated revenues of US$733 million for the Chilean government so far in 2016 (BioBio). 

OECD improves GDP growth forecasts for Chile

On 28 November 2016, the OECD released its updated growth forecasts for Chile for 2016, 2017, and 2018. The new macroeconomic outlook is more optimistic, as the organization increased its GDP growth prediction for the Chilean economy from the 1.5 percent it had predicted in June, to 1.7 percent. For 2017, the OECD maintained its 2.5 percent GDP growth forecast, while revealing its 2018 prediction is 2.6 percent (La Nación). While the GDP growth figure for 2016 is set to be Chile's lowest annual GDP growth since the 2009 financial crisis, the improved predictions for 2017 and 2018 reflect that some of the macroeconomic factors that have held back the country's economy, such as low global prices for the commodities that Chile exports, are expected to wane (Emol).

Chile works to position itself as a touristic destination for the Chinese market

A delegation representing 40 Chilean businesses from the tourism sector participated in an event held in Shanghai on 15 November 2016 to promote Chile as a varied touristic destination for Chinese tourists. The event was hosted by Chile's Economy Ministry as part of its "Chile Experience" campaign. Director of ProChile (Chile's commercial promotion agency) César Suárez pointed out that Chile and China have very close relations, and the Andean country offers an exotic type of tourism that appeals to the Chinese market (La Nación). While the numbers of Chinese tourists arriving in Chile are still relatively small - numbering little over 15,000 in 2015 - they are growing fast: 2015 showed a 38 percent growth in tourist arrivals from China compared to 2014, and the number has grown a further 58 percent so far in 2016 (Bolsamanía).

Prices for Chile's main export, copper, soar following Trump victory

Following Donald Trump's victory in the US election, on 9 November 2016 prices for Chile's main export, copper, increased by 5.8 percent. This increase was followed by a further 5.6 percent rise on 10 November 2016, taking the price up to US$2.5 per pound, the highest level since July 2015 (La Tercera). The initial reaction of copper prices to Trump's victory was, as with most commodities, a sharp drop in prices due to increased uncertainty, but following his victory speech the prices recovered and starting rising rapidly. This was due to Trump's announcement that his government will include a US$ 500 billion infrastructure plan (focused on roads, bridges and airports), which led to increased demand expectations, according to Saxo Bank's Chief Strategist for raw materials, Ole Hansen (Diario Financiero).

Chilean inflation figures for October lower than expected

Chile's National Statistics Institute (INE) released its monthly inflation figures on 7 November 2016. The figure for October was 0.2 percent, slightly below the expected 0.3 percent. Combined with the rest of 2016's figures, this amounts to an accumulated 2.9 percent inflation rate for 2016. The category of goods and services experiencing the sharpest price increase in October 2016 was Transport (1 percent increase) and Housing and Basic Services (0.3 per cent). Conversely, food and non-alcoholic drinks prices decreased by 0.4 percent (La Nación). Treasury Minister Rodri Valdés welcomed the news of slightly lower than expected inflation. Valdés explained this would help ongoing discussions about salary raises with public sector workers, given that the workers' demands and government's proposals were made under the expectation of 3.5 percent inflation by this point in the year (La Tercera). 

Chile rejects proposed salary increase for public sector workers

In a new twist in the ongoing conflict between government and public sector workers on salary increases, on 2 November 2016, the Chilean Congress rejected the executive's proposed 3.2 percent salary increase--which the public sector workers had considered insufficient. Following a defeat in the Chamber of Deputies, the proposed increase was sent to a mixed commission of Senators and Chamber of Deputies Representatives, which also rejected the agreement. The executive will now have to decide how to proceed to gain approval for its proposal (La Tercera). The proposal was not only rejected by opposition Senators and Deputies, but also by representatives of ruling party Nueva Mayoría, both in the Chamber of Deputies and in the mixed commission. This opens up a new front of controversy for a government that is already facing criticism due to low participation in municipal elections held on 23 October 2016 (BioBio).

Codelco to invest US$ 371 million to reduce arsenic in Chilean copper

On 31 October 2016, Chilean state owned copper mining company (Codelco) announced a US$ 371 million investment on a processing plant to reduce the levels of arsenic detected in its copper. The project will be led by Codelco's sister company, EcoMetales, and entails the building of a processing facility in Calama (Northern Chile) by 2020, with the capacity to process up to 200k tons of copper per year. Given the size of the required investment, EcoMetales is considering incorporating partners to help finance the project (La Tercera). The level of arsenic present in Chilean copper has become a significant problem for the industry, given the increasingly stricter environmental requirements for transport and processing on a global level (Tele13).

Kuczynski discusses negotiations with EPN

President Pedro Pablo Kuczynski met with his Mexican counterpart Enrique Peña Nieto during the Iberoamerican Summit 2016 on 29 October 2016 in Cartagena, Colombia. During bilateral meetings, they discussed the Pacific Alliance, a cultural collaboration between Peru and Mexico, and steps to improve the price of exported gas to Mexico (La Republica). Kuczynski desires to sell Peru’s gas at a higher price and commented that the current rate was very low. The President also met with Chilean President Michelle Bachelet and took to Twitter to share the success of these meetings (Andina).

Chilean municipal health workers to join public sector strike

The National Confederation of Municipal Health Workers (Confusam) announced on 30 October 2016 it will join the public sector strike scheduled for 2 November to protest against the salary increases offered by the government to public sector employees, which they deem insufficient. The public workers' negotiation team invited Confusam to join the strike, which will include a march on Valparaíso, Chile's second-largest city (La Nación). The protesters plan to apply more pressure on Congress to reject the executive's proposed deal and force the deal to be evaluated by a mixed commission of senators and deputies (BioBio).

Voter turnout in Chilean municipal elections reaches historical lows

Municipal elections held on 23 October 2016 registered the lowest turnout in Chilean elections since the country's return to democracy. According to the first recounts, only 4.9 million out of 14.1 million registered voters exercised their right to vote. This meant a turnout of 34.9 percent, easily the lowest figure in the elections and referenda held in the country since 1988. Experts identified several reasons for this, ranging from the public's lack of interest in politics to the corruption scandals that have undermined trust in the country's institutions. The restriction on political campaigning mandated by transparency and democratic strengthening laws passed in April 2016 was also quoted as having contributed to low turnout. Low participation in the election has sparked discussion on potential measures to address the issue, including a return to mandatory voting (abolished in 2012) and promoting the use of electronic voting to facilitate voter turnout (La Tercera).

Breakdown in Chilean public sector negotiations: government employees announce strike

The public sector workers' negotiation team ("Mesa del Sector Público"), representing 17 workers' organizations and trade unions, announced a 72 hour national strike set to start on 26 October 2016, following an impasse in negotiations with the Finance and Employment Ministers on salary increases (Emol). On 24 October, the government improved its proposal for a salary increase from a general 3 percent to 3.2 percent, as well as larger increases for lower salaries along with improved holiday allowances. However, the proposal was contingent upon the Mesa accepting it and signing an agreement immediately, which did not occur. Central Unitaria de Trabajadores President, Bárbara Figueroa, said the Mesa had no choice but to reject the agreement and end the dialogue (BioBio).

President Bachelet to announce cabinet reshuffle

In reaction to ruling party Nueva Mayoría's poor showing in municipal elections held on 23 October 2016, Government spokesman Marcelo Díaz shared on 25 October, President Michelle Bachelet is contemplating a cabinet reshuffle (La Tercera). Bachelet faces sinking popularity levels after an influence peddling scandal involving her son, and her cabinet has received heavy criticism over mismanagement of errors in the electoral register. Justice Minister Javiera Blanco resigned on 19 October amidst criticism for her handling of the political register errors as well as other issues (El Economista América, Diario y Radio Chile).

Chilean Empresas Masvida sells 55 percent stake to Southern Cross Group

Chilean company Empresas Masvida (EM) announced on 21 October 2016, its Board of Directors agreed to accept a Southern Cross Group (SCG) proposal of US$90 million for 55 percent ownership (Emol). The EM Board came to the unanimous decision to accept the proposal after carefully analyzing a number of other potential offers (Emol). Empresas Masvida issued a statement claiming the alliance with SCG would have a positive impact toward improving Chilean healthcare. Further details of the transaction will be presented at an extraordinary shareholder’s meeting scheduled to be held in November 2016 (Economía y Negocios).

Chilean president's approval rating improves slightly

An Adimark survey released on 6 October 2016 revealed Chilean President Michelle Bachelet's approval rating rose by four percentage points from August 2016 to reach 23 percent in September 2016 (Bío Bío). Partido por la Democracia Deputy Jorge Tarud called the new poll numbers a step in the right direction, and reserved his criticism for the current cabinet, which received a 20 percent approval rating, the lowest rating since 1990. Tarud suggested Bachelet was assessing weak areas and would have his full support on changes (La Nación). The survey also revealed the overall approval of government rose from 13 percent in August 2016 to 20 percent in September 2016 (Bío Bío).