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Friday, December 28, 2007

Chile Industrial Output and Unemployment

Chilean industrial production rose less than economists had expected in November as diminished natural gas supplies curtailed petrochemical output. Industrial production rose 4.2 percent last month from a year earlier after rising 5 percent in October, the National Statistics Institute said today.

Chilean companies this year have had to cope with natural gas shortages stemming from neighboring Argentina's decision to cut shipments to ensure its own domestic supply amid cold weather in the Southern Hemisphere. Argentina supplies almost all of Chile's natural gas.

Gas restrictions led to a 15.9 percent plunge in methanol output from last November. Production was led by a 33.6 percent increase in pulp output due to the opening of new plants and a 13.1 percent increase in cement output to meet domestic demand.

The unemployment rate was 7.3 percent in November while industrial sales rose 2.7 percent during the month, the statistics institute also said.

Monday, December 24, 2007

Merry Xmas and A Happy New Year

Well, a Merry Xmas and a Happy New Year to all my readers. Thank you for taking the time and trouble to pass-by. This blog will now - failing major and surprising new developments in the global economy - be offline till the end of the first week in January, or till after the festival of Los Reyes Magos in Spain (for those of you who know what this is all about). Come to think of it, maybe this is just what our ever hopeful central bankers are in need of even as I write - some surprise presents from the three wise men - but I fear that this year if these worthy gentlemen do somehow show at the next G7 meet, the star in the east which draws them will not be the one described in the traditional texts, but in all likelihood the rising star of India.

Credit crunch, did someone use the expression credit crunch?

Friday, December 21, 2007

S&P Raises Chile's Sovereign Rating

Chile's investment-grade credit rating was raised one level by Standard & Poor's Ratings as a rally in copper, the country's biggest export, boosts the government's budget surplus.

S&P raised Chile's foreign debt rating to A+ from A, saying the government strengthened its finances by setting aside this year more than $10 billion of windfall revenue to cover social program and pension costs when copper prices decline. The rating, the highest in South America, is above rankings on South Korea and China and is on par with Italy and Iceland.

``Chile has consistently followed very disciplined policies,'' said Alonso Cervera, an economist at Credit Suisse Group in New York. ``Chile's treatment of excess revenues is an example other countries should follow. The upgrade is well deserved.''

Moody's Investors Service may follow S&P in raising Chile's rating. On Dec. 13, Mauro Leos, a sovereign debt analyst at Moody's, said the company may boost Chile's rating outlook to ``positive'' from ``stable'' early next year. Moody's rates Chile A2, the fifth-lowest investment-grade rating and one level below S&P's rating for the country.

Chile's peso gained, breaking through the 500-per-dollar level, after the S&P announcement. It rose 0.2 percent to 499.55 per dollar at 3:14 p.m. New York time, extending its advance to 6.8 percent this year and to 39 percent over the past five years.

Record Surplus

Stocks rose, driving the benchmark IPSA index up 0.1 percent. Government peso bonds declined, pushing the yield on the benchmark note due in 2015 up 2 basis points, or 0.02 percentage point, to 6.42 percent, according to HSBC Bank USA Chile.

Chile will have a record budget surplus equal to 8.1 percent of gross domestic product this year, Budget Director Albert Arenas said Oct. 30. The surplus was 6.5 trillion-peso ($13.1 billion) in the first nine months of the year, Arenas said.

``Chile is in the most solid situation of its history, the fruit of good fiscal policy, good monetary policies and the construction of institutions,'' Finance Minister Andres Velasco said at a news conference in Santiago.

Copper prices have more than doubled in the past three years, buoying government revenue from state-run Codelco, the world's biggest producer of the metal. Copper exports increased 21 percent in November to $2.99 billion, bolstered by growing demand from China.

``Chile has been able to manage the upward part of the cycle by significantly strengthening its credit profile, creating the conditions to muddle through a period of higher instability better than in the past,'' S&P said in a statement. ``Its economy is more resilient than ever before.''

Inflation Surge

The economy, South America's fourth largest, expanded 4.1 percent in the third quarter after growing 6.2 percent in the second quarter. Growth may keep slowing as the central bank raises interest rates in a bid to stem a surge in inflation.

In Jose de Gregorio's first meeting as president of the central bank last week, policy makers raised the benchmark lending rate a quarter-percentage point to a five-year high of 6 percent. Annual inflation soared to 7.4 percent in November, the fastest pace since 1996, as fuel and food costs jumped. The central bank targets inflation of between 2 percent to 4 percent.

The inflation pickup will provide ``additional tests to the reputation already gained by Chile's central bank in the implementation of monetary policy,'' S&P said in the statement.

S&P also affirmed Chile's AA local currency debt rating.

Chile's Peso and the Sovereign Rating Decision

Chile's peso gained after Standard & Poor's Ratings boosted the country's foreign currency debt rating one step to A+, the highest in South America.

S&P raised Chile's rating from A as a rally in copper, the country's biggest export, boosts the government's budget surplus. Chile has ``significantly'' strengthened its finances by setting aside more than $10 billion of windfall revenue this year to cover social program and pension costs when copper prices decline, according to the ratings company.

``It highlights their improving macroeconomic fundamentals and debt service capacity over the longer run,'' said Cathy Elmore, who helps manage $700 million of emerging-market debt at WestLB Mellon Asset in London. ``Bond spreads are already reflecting its quality.''

The peso rose 0.2 percent to 499.55 pesos to the dollar at 4:09 p.m. New York time. The yield on Chile's 8 percent peso bonds due 2015 climbed 2 basis points to 6.42 percent, according to HSBC Bank USA Chile. A basis point is 0.01 percentage point.

The spread, or extra yield, investors demand to own Chilean bonds was 1.52 percentage points over U.S. Treasuries yesterday, according to JPMorgan Chase & Co. data. By comparison, Brazilian debt yielded 2.13 percentage points more than Treasuries.

The Colombian peso fell 0.3 percent to 2,012.6 per dollar, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. The yield on Colombia's benchmark 11 percent peso bonds due 2020 rose 6 basis points to 10.35 percent, according to Colombia's stock exchange.

Argentina's peso rose 0.1 percent to 3.1370 per dollar.

Peru's sol gained 0.1 percent to 2.9755 per dollar. The yield on the country's 8.6 percent sol-denominated bonds due 2017 was flat at 6.41 percent, according to Banco BBVA Continental Lima.