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South America and South Atlantic Islands
Chile |
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Country information
Economy
Basic economic facts
Nominal GDP: US$141 billion (2005)
Nominal GDP per head: US$8,630 (2006)
Annual growth: 4.0% (2007) – 2008 forecast 4.58-5.5%
Currency: Chilean Peso July 2008 £1 = 988 or U$1 = 499)
Inflation: 8.5%
Unemployment: 7.3% (February 2008)
Major industries: Copper mining; other mining (gold, nitrates, molybdenum, iron and silver); wood and wood products; fish and fishmeal; fruits and wine.
| Chilean exports | vs | Chilean imports |
|---|---|---|
| Asia 31.5% | Mercosur 30% | |
| NAFTA 24.1% | NAFTA 17.3% | |
| EU 23.7% | EU 16.8% | |
| Mercosur 5.8% | Asia 16.5 | |
| Others 14.8% | Others 19.4% |
Chile is widely seen as one of the most stable emerging market economies and has a record of high growth. Spurred on by an early commitment to market-oriented reform and international openness, Chile was the first Latin American country to privatise state enterprises, reduce tariffs, liberalise investment and open its doors to foreign capital. This, combined with tight fiscal and monetary policies, led to record growth averaging 7.6% per annum in the 10 years to 1998. Strong annual GDP growth continued in 2006 at 5.5% largely on the back of continued high copper prices. but dipped to 4% in 2007.
Chile has an open economy which thrives on foreign trade – bilateral free trade agreements cover over 80% of Chile's import/exports. Import tariffs are low. In 2006 exports (principally copper-led) totalled US$59bn and imports US$36bn. However, non-copper exports also continue to enjoy strong growth. The trade surplus in 2006 reached US$23bn (up from US$10bn in 2005). The Central Bank's overnight reference interest rate is currently 6.25% Inflation in the year to March 2008 stood at 8.5%, up from the 7.8% yearly rate for 2007 which was itself the highest annual level since 1995. .
Santiago's Selective Share Index (IPSA) – the principal stock market - closed in March 2008 at 2902, a drop of 4.9% on its start of year level. Share trading for the first quarter was 7.2% below the equivalent level in 2007. The stock market continues to be driven by Chile's pension fund administrators who have combined assets of around U$100bn.
At February 2008 unemployment stood at 7.3%.
Chile has an extensive network of bilateral and multilateral free trade agreements (FTAs), including with the EU, the US, South Korea, Mexico, Japan and Canada. An agreement on free trade in goods with China came into force in October 2006 and the two countries concluded negotiations on an agreement on services in March 2007. The so-called P4 economic association agreement including Chile, New Zealand, Singapore and Brunei came into force in November 2006. In August 2006, Chile and Peru signed the first FTA between two South American countries. Agreements with Colombia, Ecuador and Panama are currently before Congress. Chile is also in the process of negotiating FTAs with India and Australia.
Exports – principally copper, forestry and fish products, fruit and vegetables and wine – continue to enjoy strong growth due to strong international prices. Chile is the world's largest producer of copper, which made up 40% of the country's exports in 2005. In March 2008, the international copper price reached a new record of US$4/1b. Pundits continue to forecast strong prices due to continued strong Chinese demand plus low international inventories (warehouse stocks).
As with many emerging economies, Chile's most immediate economic challenge is matching energy demand with supply. However, this problem has been made worse with natural gas supplies being severely cut from Argentina. Chile is trying to move quickly to diversifying its energy supply matrix by developing LNG (liquid natural gas), hydro, coal and wind. Chile needs an additional 7,000MW of supply over the next 10 years to keep up with increased demand.
