“An incredible recovery”

Chilean economy to grow 6% in 2011, predict top U.S. banks

Latin American analysts from the investment banks Merrill Lynch and Goldman Sachs expect continued expansion for Chile’s economy next year, highlighting rising copper prices, fiscal policy and the rapid recovery from the February earthquake as key factors.

Wednesday, December 15, 2010  
"It has surprised everyone how strong domestic demand has been, with double-digit growth". "It has surprised everyone how strong domestic demand has been, with double-digit growth", said Goldman Sachs.

It has been a dramatic year for Chile. Thrust onto the global stage in February by the devastating earthquake, and then again in October with the incredible rescue of the 33 miners, 2010 has been anything but predictable.

 

But Chile’s economy, overseen by President Sebastián Piñera’s new government from March onwards, has drawn praise from international experts for its stability, showing buoyancy and resilience with consistent month on month growth.

 

Two leading analysts, from the U.S. investment banks Merrill Lynch and Goldman Sachs, now say they expect this growth to continue into 2011, predicting an expansion of 6 percent or more for the year to come.

 

“The February earthquake affected (economic) activity in March and a little in April,” said Alberto Ramos, senior economist for Latin America at Goldman Sachs, in the Chilean newspaper El Mercurio.

 

“But the recovery has been incredible. It has surprised everyone how strong domestic demand has been, with double-digit growth. A very strong recovery – which I believe will continue into 2011.”

 

Ramos now expects an excellent year ahead for Chile, with consumer and corporate confidence, copper prices and the credit market driving “growth of 6 percent, perhaps more.”

 

Marcos Buscaglia, head economist for Latin America at Merrill Lynch, predicted an even higher growth of 6.3 percent. “Although we anticipated a rise after the earthquake due to reconstruction work, the recovery has been stronger and faster than expected,” he said in El Mercurio.

 

The high price of copper, one of Chile’s most important exports, is a major factor in the positive outlook of both experts, who expect prices to continue rising in 2011. Buscaglia said Merrill Lynch analysts were “very optimistic” about the commodity, while Ramos predicted a rise in copper values of 30 percent next year.

 

The experts also praised Chile’s Central Bank for its role in managing inflation, which has remained low in 2010. While the analysts said they expected inflation to remain low into 2011, they predicted some rise, noting that growth and increased demand can cause an increase in rates.

 

“We have an economy that is growing very strongly and on the one hand, the demand that this generate can cause inflation,” said Ramos. “On the other hand, the Central Bank is doing very good work, holding back monetary stimulus while the economy does not need it.”

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