CHILE: ECONOMIC HIGHLIGHTS APRIL 17 - MAY 8

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SUBJECT: CHILE: ECONOMIC HIGHLIGHTS APRIL 17 - MAY 8

REFS: SANTIAGO 368 AND PREVIOUS


1. SUMMARY: This continues a series of updates on major
developments in Chile's economy. Economic activity fell for the
fifth straight month, contracting by a less than expected 0.7%. The

unemployment rate increased for the third period in a row to 9.2%.
Annual inflation fell to 4.5%, resuming its downward trend. The
Central Bank cut the key interest rate to 1.25%, a reduction of 700
basis points since the beginning of the year. The GOC launched a
$237 million initiative to combat unemployment. Chile's trade
surplus ($774 million) was greater than expected in April. By May
8, copper prices leveled off, the Peso rose against the Dollar, and
the stock market made significant gains. END SUMMARY.

Economic Activity Falls For Fifth Straight Month
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2. On May 5, the Central Bank reported the monthly economic
activity indicator (Imacec) contracted by 0.7% in March 2009
compared with the same month in 2008. The reduction was less than
expected and follows a fall of 3.9% in February 2009. It is the
fifth month in a row to show a contraction. 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. Industrial activity was
hardest hit, contracting 7.1% in March. However, electricity
generation lead sectors of growth with an increase in activity of
2.6%. Many experts hope February's Imacec marked the trough of
Chile's economic slow-down.

Unemployment Rises For Fourth Period In A Row
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3. The National Statistics Institute (INE) reported April 30 that
the national unemployment rate climbed to 9.2% during January -
March 2009 (from 8.5% during December 2008 - February 2009). This
is the fourth time in a row the unemployment rate has increased.
The rate marked an increase in 12 of Chile's 15 regions, hit double
digits in half of Chile's 33 largest cities (breaching 15% in three
of those cities),and rose to 9.4% in Santiago.

Inflation Resumes Downward Trend
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4. On May 7, the INE reported the Consumer Price Index decreased in
April by 0.2% compared with March. This marked a return to negative
inflation, which has marked 5 out of 6 of the last months. The
CPI's annualized growth rate fell to 4.5%. The CPI has decreased
0.9% since the start of 2009. The decrease in the CPI was credited
to falling prices in clothing and footwear as well as food products.


Cut In Key Interest Rate For Fifth Straight Month
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5. The Central Bank cut the key interest rate (monetary policy
rate) by 50 basis points bringing it to 1.25% on May 7. Since the
beginning of the year, when the monetary policy rate was at 8.25%,
the Central Bank has reduced the rate five months in a row, by a
total of 700 basis points. The Central Bank justified the cuts
noting continuing increases in unemployment, decreases in economic
activity, and tightening lending conditions. Experts expect further
cuts -- perhaps below 1% -- in the future.

GOC Launches Major Employment Initiative
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6. On May 6, President Bachelet announced draft legislation that
would implement six measures aimed at sustaining current employment
levels. Many experts fear Chile will reach a double-digit, national
unemployment rate in the coming months. The initiative offers
incentives to companies to promote training for employees, rather
than firing them. If Congress approves the legislation, the
measures will be phased in over the next 12 months on a temporary
basis. It is hoped that they will benefit up to 125,000 workers and
cut the future unemployment rate by 1.5%. The Finance Minister
noted the initiative will cost $237 million, of which the majority
will be covered by a national unemployment insurance fund (FSC)
comprised of contributions from the GOC, businesses, and employees.

Trade Surplus Greater Than Expected
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7. Chile's trade surplus was $774 million in April, greater than
most experts expected. However, the total was down from March's
surplus of $950 million, and more than 51% lower than the surplus in
April 2008. Chile's exports in April totaled $4 billion (40% less
than the year before) and imports totaled $3.2 billion (almost 59%
less than in April 2008).

Copper Prices Level Off
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8. On the London Metals Exchange, copper closed at approximately
$2.15/pound on May 8 (compared to a close of $2.14/pound on April
17).

Chilean Peso Rises Against Dollar
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9. On May 8, the observed exchange rate closed at approximately 563
Chilean Pesos to 1 U.S. Dollar (an appreciation of about 3% from the
close on April 17).

Stock Market Makes Significant Gains
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10. The IPSA closed at 2906.17 on May 8, up 8.6% on the close of
April 17.
SIMONS