Identifier
Created
Classification
Origin
09SANTIAGO368
2009-04-20 12:16:00
UNCLASSIFIED
Embassy Santiago
Cable title:
CHILE: ECONOMIC HIGHLIGHTS MARCH 6-APRIL 17
how-toVZCZCXYZ0014 OO RUEHWEB DE RUEHSG #0368/01 1101216 ZNR UUUUU ZZH O 201216Z APR 09 FM AMEMBASSY SANTIAGO TO RUEHC/SECSTATE WASHDC IMMEDIATE 4811 INFO RUEHQT/AMEMBASSY QUITO 2317 RUCNMER/MERCOSUR COLLECTIVE RUEATRS/DEPT OF TREASURY WASHDC RUCPDOC/DEPT OF COMMERCE WASHDC RUEKJCS/SECDEF WASHDC RUEAIIA/CIA WASHDC RHEHNSC/NSC WASHDC
UNCLAS SANTIAGO 000368
STATE PLEASE PASS TO USTR KATE DUCKWORTH
STATE PLEASE PASS TO FEDERAL RESERVE TOM CONNORS
TREASURY FOR BLINDQUIST
COMMERCE FOR KMANN
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV ECIN PGOV PREL CI
SUBJECT: CHILE: ECONOMIC HIGHLIGHTS MARCH 6-APRIL 17
REFS: SANTIAGO 161 AND PREVIOUS
UNCLAS SANTIAGO 000368
STATE PLEASE PASS TO USTR KATE DUCKWORTH
STATE PLEASE PASS TO FEDERAL RESERVE TOM CONNORS
TREASURY FOR BLINDQUIST
COMMERCE FOR KMANN
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV ECIN PGOV PREL CI
SUBJECT: CHILE: ECONOMIC HIGHLIGHTS MARCH 6-APRIL 17
REFS: SANTIAGO 161 AND PREVIOUS
1. SUMMARY: This continues a series of updates on major
developments in Chile's economy. Economic activity fell for the
second straight month, contracting by 3.9%. The unemployment rate
increased for the third time in a row to 8.5%. Annual inflation
fell to 5%, despite a small increase in March's Consumer Price
Index, the first after four straight months of negative inflation.
The Central Bank cut the key interest rate to 1.75%, a reduction of
650 basis points since the beginning of the year. By April 17,
copper prices made significant gains, the Peso rose against the
Dollar, and the stock market closed higher. END SUMMARY.
Economic Activity Falls For Second Straight Month
-------------- --------------
2. On April 6, the Central Bank reported the monthly economic
activity indicator (Imacec) contracted by 3.9% in February 2009
compared with the same month in 2008. This follows a contraction of
1.4% in January 2009. The Imacec is regarded as a proxy for GDP
growth in Chile, as it includes 90% of the same goods and services
used to calculate GDP. In 2008 GDP grew by 3.2% compared with 4.7%
in 2007.
Unemployment Rate Rises For Third Time In A Row
-------------- --
3. The National Statistics Institute (INE) reported March 31 that
the unemployment rate climbed to 8.5% during December 2008 -
February 2009 (from 8% during November 2008 - January 2009). This
is the third time in a row the unemployment rate has increased.
Unemployment exceeded last year's rate of 7.3% for the same period,
surpassed 10% in several of Chile's regions, and reached 8.7% in
Santiago.
Inflation Shows A Small Increase
--------------
4. On April 7, the INE reported the Consumer Price Index increased
in March by 0.4% compared with February. This was the first
increase after four consecutive months of negative inflation.
However, the CPI's annualized growth rate fell to 5%. The small
monthly increase in the CPI was blamed on the rising price of
education and alcohol and tobacco products.
Cut In Key Interest Rate For Fourth Straight Month
-------------- --------------
5. The Central Bank cut the key interest rate (monetary policy
rate) by 50 basis points bringing it to 1.75% on April 9. Since the
beginning of the year, when the monetary policy rate was at 8.25%,
the Central Bank has reduced the rate four months in a row, by a
total of 650 basis points. The Central Bank emphasizes the cuts are
justified based on negative output numbers, increasing unemployment,
tightening lending conditions, and continued forecasts for reduced
inflation.
Business Confidence Rises
--------------
6. The Santiago Chamber of Commerce reported April 15 that business
confidence rose for the first time since September 2008. The
Chamber's monthly Index of Business Expectations of economic
conditions in Chile rose from numbers indicating general pessimism
to those indicating a neutral outlook.
Copper Prices Still Climbing
--------------
7. On the London Metals Exchange, copper closed at approximately
$2.14/pound on April 17. The price of copper has risen 27% from its
close on March 6, and 62% since the beginning of the year. Copper
production at Escondida Mine fell 33% in the first quarter of 2009,
compared with 2008. Escondida produces the most amount of copper of
any single mine in the world.
Chilean Peso Rises Against Dollar
--------------
8. On April 17, the observed exchange rate closed at approximately
579 Chilean Pesos to 1 U.S. Dollar (an appreciation of about 4% from
the close on March 6). The Peso has appreciated against the Dollar
by almost 9% since the beginning of the year.
Stock Market Closes Higher
--------------
9. The IPSA closed at 2676.79 on April 17, up 13% on the close of
March 6. The Index is up almost 13% since the beginning of the
year.
SIMONS
STATE PLEASE PASS TO USTR KATE DUCKWORTH
STATE PLEASE PASS TO FEDERAL RESERVE TOM CONNORS
TREASURY FOR BLINDQUIST
COMMERCE FOR KMANN
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV ECIN PGOV PREL CI
SUBJECT: CHILE: ECONOMIC HIGHLIGHTS MARCH 6-APRIL 17
REFS: SANTIAGO 161 AND PREVIOUS
1. SUMMARY: This continues a series of updates on major
developments in Chile's economy. Economic activity fell for the
second straight month, contracting by 3.9%. The unemployment rate
increased for the third time in a row to 8.5%. Annual inflation
fell to 5%, despite a small increase in March's Consumer Price
Index, the first after four straight months of negative inflation.
The Central Bank cut the key interest rate to 1.75%, a reduction of
650 basis points since the beginning of the year. By April 17,
copper prices made significant gains, the Peso rose against the
Dollar, and the stock market closed higher. END SUMMARY.
Economic Activity Falls For Second Straight Month
-------------- --------------
2. On April 6, the Central Bank reported the monthly economic
activity indicator (Imacec) contracted by 3.9% in February 2009
compared with the same month in 2008. This follows a contraction of
1.4% in January 2009. The Imacec is regarded as a proxy for GDP
growth in Chile, as it includes 90% of the same goods and services
used to calculate GDP. In 2008 GDP grew by 3.2% compared with 4.7%
in 2007.
Unemployment Rate Rises For Third Time In A Row
-------------- --
3. The National Statistics Institute (INE) reported March 31 that
the unemployment rate climbed to 8.5% during December 2008 -
February 2009 (from 8% during November 2008 - January 2009). This
is the third time in a row the unemployment rate has increased.
Unemployment exceeded last year's rate of 7.3% for the same period,
surpassed 10% in several of Chile's regions, and reached 8.7% in
Santiago.
Inflation Shows A Small Increase
--------------
4. On April 7, the INE reported the Consumer Price Index increased
in March by 0.4% compared with February. This was the first
increase after four consecutive months of negative inflation.
However, the CPI's annualized growth rate fell to 5%. The small
monthly increase in the CPI was blamed on the rising price of
education and alcohol and tobacco products.
Cut In Key Interest Rate For Fourth Straight Month
-------------- --------------
5. The Central Bank cut the key interest rate (monetary policy
rate) by 50 basis points bringing it to 1.75% on April 9. Since the
beginning of the year, when the monetary policy rate was at 8.25%,
the Central Bank has reduced the rate four months in a row, by a
total of 650 basis points. The Central Bank emphasizes the cuts are
justified based on negative output numbers, increasing unemployment,
tightening lending conditions, and continued forecasts for reduced
inflation.
Business Confidence Rises
--------------
6. The Santiago Chamber of Commerce reported April 15 that business
confidence rose for the first time since September 2008. The
Chamber's monthly Index of Business Expectations of economic
conditions in Chile rose from numbers indicating general pessimism
to those indicating a neutral outlook.
Copper Prices Still Climbing
--------------
7. On the London Metals Exchange, copper closed at approximately
$2.14/pound on April 17. The price of copper has risen 27% from its
close on March 6, and 62% since the beginning of the year. Copper
production at Escondida Mine fell 33% in the first quarter of 2009,
compared with 2008. Escondida produces the most amount of copper of
any single mine in the world.
Chilean Peso Rises Against Dollar
--------------
8. On April 17, the observed exchange rate closed at approximately
579 Chilean Pesos to 1 U.S. Dollar (an appreciation of about 4% from
the close on March 6). The Peso has appreciated against the Dollar
by almost 9% since the beginning of the year.
Stock Market Closes Higher
--------------
9. The IPSA closed at 2676.79 on April 17, up 13% on the close of
March 6. The Index is up almost 13% since the beginning of the
year.
SIMONS