LatinFinance - May/June 2015 - 34

CHILE
CENTRAL
BANK

Reforms in Chile are adding to headwinds from lower commodity prices
and changing US monetary policy. But a strong macroeconomic framework has
set the country up for success, writes Rodrigo Vergara M.

Adjusting to the new
global economy

W

ith international trade accounting for more than 65% of GDP and a highly integrated
financial system, Chile is a very open economy. As such, during the last decade its business cycle has
been shaped, to a large extent, by the significant swings that have characterized the global economy.
Chile was blessed by the super cycle of commodity prices; was hit by the 2008 Great Recession; and
has had to sail across the sea of liquidity generated by the advanced economies' central banks in their
fight against stagnation and deflation. More recently, the slowdown in the Chinese economy, with the
subsequent deterioration in the price of copper, by far Chile's main export product, and the imminent
beginning of US monetary policy normalization, have been some of the factors behind the slowdown
of our economy.

Therefore, and not surprisingly, during the last couple of years the Chilean
economy has had to adjust substantially.
Internal expenditure growth was 1.6% during the last two years, after averaging more
than 8% between 2011 and 2012. Investment
has declined significantly, in particular in
mining-related activities - a sector that had
expanded substantially in the second part
of the 2000s. More generally, the burden of
the adjustment has been borne by imported
goods, especially for durable consumption and investment in machinery and
equipment. The less dynamic expenditure
has helped to reduce the current account
deficit, which by the end of 2012 threatened
to go above 5% of GDP, towards a projected

34 L ATINFINA NCE.COM - May/June 2015

balance this year. However, and even
though an economic adjustment is never a
pleasant thing to do, this time the process
has been rapid and relatively smooth.
Notably, the unemployment rate has remained low, helping to keep consumption
growing at a reasonable pace, without any
significant deterioration in households'
financial balance sheets.
Chile's macroeconomic framework has
been critical for this process. Our strong
and well-regulated banking sector has allowed credit to flow towards the activities
that need it. Our fiscal policy, based on a
rule that shields public expenditures from
cyclical fluctuations, has allowed us to
carry out a substantial expenditure pro-

gram without jeopardizing public finances.
The Central Bank has also collaborated by
aggressively cutting the monetary policy
rate by 200 basis points, thus helping to
reduce medium- and long-term rates to
their historical lows. Last, but not least,
the floating exchange rate system let the
peso depreciate in real terms more than
10% from its 2013 peak, contributing to
the adjustment of the current account and
helping to boost the competitiveness of the
export sector.
In this context, output growth has stabilized during the last months at levels slightly above 2% annually, low when compared
with Chile's record figures, but an improvement over 2014. Even more, according to


http://www.LATINFINANCE.COM

LatinFinance - May/June 2015

Table of Contents for the Digital Edition of LatinFinance - May/June 2015

Contents
LatinFinance - May/June 2015 - Cover1
LatinFinance - May/June 2015 - Cover2
LatinFinance - May/June 2015 - Contents
LatinFinance - May/June 2015 - 2
LatinFinance - May/June 2015 - 3
LatinFinance - May/June 2015 - 4
LatinFinance - May/June 2015 - 5
LatinFinance - May/June 2015 - 6
LatinFinance - May/June 2015 - 7
LatinFinance - May/June 2015 - 8
LatinFinance - May/June 2015 - 9
LatinFinance - May/June 2015 - 10
LatinFinance - May/June 2015 - 11
LatinFinance - May/June 2015 - 12
LatinFinance - May/June 2015 - 13
LatinFinance - May/June 2015 - 14
LatinFinance - May/June 2015 - 15
LatinFinance - May/June 2015 - 16
LatinFinance - May/June 2015 - 17
LatinFinance - May/June 2015 - 18
LatinFinance - May/June 2015 - 19
LatinFinance - May/June 2015 - 20
LatinFinance - May/June 2015 - 21
LatinFinance - May/June 2015 - 22
LatinFinance - May/June 2015 - 23
LatinFinance - May/June 2015 - 24
LatinFinance - May/June 2015 - 25
LatinFinance - May/June 2015 - 26
LatinFinance - May/June 2015 - 27
LatinFinance - May/June 2015 - 28
LatinFinance - May/June 2015 - 29
LatinFinance - May/June 2015 - 30
LatinFinance - May/June 2015 - 31
LatinFinance - May/June 2015 - 32
LatinFinance - May/June 2015 - 33
LatinFinance - May/June 2015 - 34
LatinFinance - May/June 2015 - 35
LatinFinance - May/June 2015 - 36
LatinFinance - May/June 2015 - 37
LatinFinance - May/June 2015 - 38
LatinFinance - May/June 2015 - 39
LatinFinance - May/June 2015 - 40
LatinFinance - May/June 2015 - 41
LatinFinance - May/June 2015 - 42
LatinFinance - May/June 2015 - 43
LatinFinance - May/June 2015 - 44
LatinFinance - May/June 2015 - 45
LatinFinance - May/June 2015 - 46
LatinFinance - May/June 2015 - 47
LatinFinance - May/June 2015 - 48
LatinFinance - May/June 2015 - Cover3
LatinFinance - May/June 2015 - Cover4
https://www.nxtbook.com/nxtbooks/latinfinance/0319QMR
https://www.nxtbook.com/nxtbooks/latinfinance/1218JYM
https://www.nxtbook.com/nxtbooks/latinfinance/paraguay_2018
https://www.nxtbook.com/nxtbooks/latinfinance/8320YTM
https://www.nxtbook.com/nxtbooks/latinfinance/8465TBM
https://www.nxtbook.com/nxtbooks/latinfinance/1476YBW
https://www.nxtbook.com/nxtbooks/latinfinance/7835THM
https://www.nxtbook.com/nxtbooks/latinfinance/8655TGL
https://www.nxtbook.com/nxtbooks/latinfinance/0614IJP
https://www.nxtbook.com/nxtbooks/latinfinance/ecuador_20170910
https://www.nxtbook.com/nxtbooks/latinfinance/2713KNP
https://www.nxtbook.com/nxtbooks/latinfinance/4982CFT
https://www.nxtbook.com/nxtbooks/latinfinance/7803HWE
https://www.nxtbook.com/nxtbooks/latinfinance/3829THA
https://www.nxtbook.com/nxtbooks/latinfinance/7891MDD
https://www.nxtbook.com/nxtbooks/latinfinance/7714JCR
https://www.nxtbook.com/nxtbooks/latinfinance/5619CMK
https://www.nxtbook.com/nxtbooks/latinfinance/6939ASL
https://www.nxtbook.com/nxtbooks/latinfinance/1364ASF
https://www.nxtbook.com/nxtbooks/latinfinance/0453DAS
https://www.nxtbook.com/nxtbooks/latinfinance/0453DAS_supp
https://www.nxtbook.com/nxtbooks/latinfinance/1304APV
https://www.nxtbook.com/nxtbooks/latinfinance/7234GSD
https://www.nxtbook.com/nxtbooks/latinfinance/1643XGS
https://www.nxtbook.com/nxtbooks/latinfinance/9511JKM_supp
https://www.nxtbook.com/nxtbooks/latinfinance/9511JKM
https://www.nxtbook.com/nxtbooks/latinfinance/8745TNV
https://www.nxtbook.com/nxtbooks/latinfinance/3629PBC
https://www.nxtbook.com/nxtbooks/latinfinance/7466TBC_HSBC
https://www.nxtbook.com/nxtbooks/latinfinance/7466TBC_supp
https://www.nxtbook.com/nxtbooks/latinfinance/7466TBC
https://www.nxtbook.com/nxtbooks/latinfinance/9463RVB
https://www.nxtbook.com/nxtbooks/latinfinance/7345GPY
https://www.nxtbook.com/nxtbooks/latinfinance/6398TVB
https://www.nxtbook.com/nxtbooks/latinfinance/4899EXM_supp
https://www.nxtbook.com/nxtbooks/latinfinance/4899EXM
https://www.nxtbook.com/nxtbooks/latinfinance/3885CWS
https://www.nxtbook.com/nxtbooks/latinfinance/45923GBC
https://www.nxtbook.com/nxtbooks/latinfinance/67449NBD
https://www.nxtbook.com/nxtbooks/latinfinance/46733NLP
https://www.nxtbook.com/nxtbooks/latinfinance/78456HCL
https://www.nxtbook.com/nxtbooks/latinfinance/89456RBM
https://www.nxtbook.com/nxtbooks/latinfinance/22278HBL
https://www.nxtbook.com/nxtbooks/latinfinance/2895YBM
https://www.nxtbook.com/nxtbooks/latinfinance/9033TBM
https://www.nxtbook.com/nxtbooks/latinfinance/8934TNP
https://www.nxtbook.com/nxtbooks/latinfinance/costarica20130304
https://www.nxtbook.com/nxtbooks/latinfinance/4672PNB
https://www.nxtbook.com/nxtbooks/latinfinance/9377BKL
https://www.nxtbook.com/nxtbooks/latinfinance/drmtest
https://www.nxtbook.com/nxtbooks/latinfinance/drmtest2
https://www.nxtbook.com/nxtbooks/latinfinance/5532LMC
https://www.nxtbook.com/nxtbooks/latinfinance/9044TBM
https://www.nxtbook.com/nxtbooks/latinfinance/4877RBC
https://www.nxtbook.com/nxtbooks/latinfinance/3008JHV
https://www.nxtbook.com/nxtbooks/latinfinance/3728YBC
https://www.nxtbook.com/nxtbooks/latinfinance/9337KLM
https://www.nxtbook.com/nxtbooks/latinfinance/5674GNJ
https://www.nxtbook.com/nxtbooks/latinfinance/8330KMC
https://www.nxtbook.com/nxtbooks/latinfinance/7663HCM
https://www.nxtbook.com/nxtbooks/latinfinance/2319ZMB
https://www.nxtbook.com/nxtbooks/latinfinance/7110MKL
https://www.nxtbook.com/nxtbooks/latinfinance/8599FHG
https://www.nxtbook.com/nxtbooks/latinfinance/4517HJK
https://www.nxtbook.com/nxtbooks/latinfinance/7813GHB
https://www.nxtbook.com/nxtbooks/latinfinance/1564FBM
https://www.nxtbook.com/nxtbooks/latinfinance/8884HGV
https://www.nxtbook.com/nxtbooks/latinfinance/7863SVB
https://www.nxtbook.com/nxtbooks/latinfinance/5233SFB
https://www.nxtbook.com/nxtbooks/latinfinance/5899SML
https://www.nxtbook.com/nxtbooks/latinfinance/4311PMN
https://www.nxtbook.com/nxtbooks/latinfinance/1366FBB
https://www.nxtbook.com/nxtbooks/latinfinance/9355AXC
https://www.nxtbook.com/nxtbooks/latinfinance/8559EBN
https://www.nxtbook.com/nxtbooks/latinfinance/8244QXC
https://www.nxtbook.com/nxtbooks/latinfinance/1779BBN
https://www.nxtbook.com/nxtbooks/latinfinance/7144XVB
https://www.nxtbook.com/nxtbooks/latinfinance/8971QGH
https://www.nxtbook.com/nxtbooks/latinfinance/200805
https://www.nxtbook.com/nxtbooks/latinfinance/200804
https://www.nxtbook.com/nxtbooks/latinfinance/200803
https://www.nxtbookmedia.com