Chile’s New Finance Minister Aims to Sustain Country’s Growth Trajectory

When Felipe Larrain takes over as Chile’s finance minister in March, he will be charged with creating one million jobs and speeding up the country’s recovery from the 2009 global financial crisis. Unlike most countries, Chile reported positive growth in 2009 and Larrain aims to keep the country’s economy on pace in 2010.

Larrain has said that he will reverse a longer term slowdown in Chile’s annual growth rate, which he blames on declining productivity, and help the country’s new president-elect, Sebastian Pinera, fulfill his campaign promise to increase employment. Larrain said that reviving economic growth is the administration’s main challenge. He has publicly said that creating 1 million jobs is feasible with growth of 6 percent a year. Larrain recently told reporters that “this country needs to regain its capacity to grow” and that his goal is to “double the growth rate.”

Recent estimates from J.P. Morgan, the investment bank, have forecast 5% growth for Chile in 2010.

However, even as he claims to want to kickstart the country’s economy into action, Larrain is not expected to make any radical changes to Chile’s highly respected economic policy framework. For example, he is expected to maintain the government’s long-standing “structural balance rule,” which requires saving excess revenue during boom years for use when the economy slows, Alejandro Puente, an economist at Banco Bilbao Vizcaya Argentaria SA in Santiago, recently told reporters.

Larrain will step into office a year after his processor, the Columbia University educated Andres Velasco, and Michelle Bachelet, then Chile’s president tapped US$4 billion of copper savings last year for tax cuts and extra spending to blunt the global economic crisis.

In a recent interview with Latin American Lens, Marpin Binghim, an economist and independent management consultant who specializes in Latin America, explained that “Chile is the most outstanding country in Latin America in terms of macro-economic policy management in the last twenty years.” Binghim added that “even though there is a global crisis, Chile has been able to tap into its rainy-day fund and smooth output, avoiding a major downturn.”

“Larrain’s appointment is a sign of continuity,” Ricardo Hausmann, director of the Center for International Development at Harvard University, told a reporter from Bloomberg in a telephone interview. In all likelihood, Chile’s nascent recovery will gather strength in 2010, and under the direction of Larrain, should fully recover by the year’s end.

As Production Increases, Peru Becomes World’s Second Largest Copper Exporter

As companies like Compania de Minas Buenaventura S.A. (Lima Stock Exchange:BVN) and Minsur S.A. (Lima Stock Exchange: MINSURI1) boost output, Peru has become the world’s second largest exporter of copper, according to data from the country’s National Mining, Oil, and Energy Society (SNMPE). After producing 1.27 million metric tons of the metal in 2009, Peru displaced the U.S. and now stand second only to its neighbor to the south, Chile, when it comes to copper exports.

Hans Flury, Chairman of the SNMPE, told reporters “Peru, after Chile, is the second [most important] producer of copper in the world, and we hope that we’ll be able to maintain [this position].” Peru is already the world’s largest exporter of copper, second largest producer of zinc, and third largest producer of lead.

Despite the slowdown in the world economy, investments in the mining sector, and revenues from export receipts helped Peru’s economy bounce back in 2009. The country’s central bank has estimated that Peru’s economy will grow by 5.5% in 2010, boosted no doubt, by high levels of precious metals exports.

Data from the SNMPE shows that mining companies invested US$2.2 billion dollars in projects in 2009, an investment which helped boost export receipts for metals to US$16 billion for the year.

In a recent report, Moody’s Investors Service said Peru appears “poised to grow the most and maybe surprise on the upside.” Mario Guerrero, an analyst at Scotiabank Peru S.A. (Lima Stock Exchange: SCOTIAC1) in Lima, Peru’s capital, recently told reporters that “Peru is going to post strong growth this year and … attract… investment from abroad.”

Boosted by precious metals exports, Peru should serve as a reminder to investors that all that glitters may not be gold. After all, some of Peru’s luster comes from copper and silver.

Chile: Boost in Private Investment Helping Drive Economic Recovery

Business spending is on the rise in Chile. Half of the 105 Chilean investment projects that were affected in some manner by the global economic crisis in 2009 have already been re-activated by their owners, according to a report by Chile’s Capital Goods Corporation, an investment company.

In the fourth quarter alone 15 privately financed projects, worth a total of US$3.7 billion, including Cencosud’s (Santiago Stock Exchange:CENCO) Costanera Center and the Phase V expansion of Minera Escondida were re-started. In total, for the year, 52 projects worth a total US$9.4 billion, were set back into motion. However, other projects that are worth a total of US$12.1 billion remain in limbo.

However, overall, the boost in business spending was one of the factors that helped Chile recover quickly from the recession and report an annual growth figure of 1.8%, the best in the OECD, according to figures reported in Chilean daily El Mercurio.

Alvaro Merino, Director of Research at Chile’s National Mining Society, an industry group, said “this [news] is very positive, we have signaled that in the next few years… we’ll have projects worth a total of US$45 billion.” Not just in copper, Chile’s major export, “but also in gold, silver, and non-metal mining,” he added.
Carlos Urenda, General Secretary of Chile’s Construction Chamber of Comerse, said that the country’s improved economic performance and outlook was a major factor venid the jump in investment in the contruction sector. “Better economic conditions… have translated into the initiation of projects in housing as well as infrastructure,” he explained.

In a recent interview, Luis Oganes, head of Latin America research at J.P. Morgan in New York said, “a year after the worst crisis the region has experienced in decades, it’s nice to see [Chile] bounce back in this manner.”

Chiquita Murder Trial Highlights Importance of Socially Responsible Business in Colombia

According to recent court filings, Chiquita Brands International Inc. (NYSE:CQB), owner of the Chiquita banana company, will face a lawsuit that accuses it of illegally providing support to left-wing criminal groups in Colombia who murdered five American missionaries a decade ago. Chiquita is one of many companies caught in a public relations pinch, due to bad press related to their operations in Colombia. In Colombia, Latin America’s fifth largest economy, foreign companies operate in an environment that can put them in a squeeze between sabotage, terrorist attacks, and kidnappings by left-wing guerillia groups on one side, and theft, extortion, and attack from right wing paramilitary and criminal groups on the other side.

Many companies have complained that the steps they must take to protect their operations in Colombia, can make them liable to criminal charges abroad. On February 4, 2010 U.S. District Judge Kenneth Marra in West Palm Beach, Florida, ruled that families of the murdered missionaries may to pursue claims that the Chiquita aided and abetted in the murder and provided material support and resources to the terrorists.

The families accuse Chiquita of paying the left wing guerilla group known as the FARC for protection and supplying it with weapons from 1989 to 1997. Chiquita initially sought dismissal of the case, which was the first under a 1992 law allowing Americans to sue U.S. firms over terrorism-related deaths abroad.
In his ruling, Judge Marra argued that “Plaintiffs have sufficiently alleged that Chiquita’s provision of money and weapons to FARC aided and abetted the commission of the kidnappings and murders at issue.”

Chiquita has already been fined US$25 million after pleading guilty in March 2007 to engaging in transactions with a terrorist group for paying Colombian paramilitary militias $1.7 million from 1997 to 2004.

Chiquita has been accused of paying the FARC to intimidate labor unions and sabotage rival growers. The Chiquita case raises the importance of good governance disclosure and effective and transparent corporate social responsibility policies. In the end, after all, Chiquita shareholders will see the value of their holdings fall due to the bad press and concern over settlements.

RBC Capital Markets Views Colombia as Top Investment Choice in Latin America

A recent report by RBC Capital Markets named Colombia, as one of the “most attractive investment opportunities” in Latin America.

Venezuela's Chavez Orders Investigation of Toyota, Says Company "Can Leave"

According to local press sources, Venezuela's president, Hugo Chavez, who has become embroiled in disagreements with several major car companies recently, is working to push Toyota Motor Corp (NYSE:TM), the world's largest car company, to do more to encourage technology transfer, saying that the government would expropriate the assets of any company that failed to meet new regulations.

Chile's Centre-right Presidential Candidate, Billionaire Businessman Sebastian Pinera Fights Berlusconi Comparison

Chilean billionaire Sebastian Pinera, owner of Chile's LAN Airlines, a media company, and a sports team, who is currently leading polls in the run-up to Chile's January 17, 2010 presidential election, is working to downplay statements made by rivals that compare him to controversial Italian media magnate Silvio Berlusconi.

Peru's Economy Could Grow by 5.5% in 2010, Central Bank Says

In a report published on its website, Peru's central bank, el Banco Central de Reserva del Peru, said that as economic activity picks up, the country should report GDP growth of 5.5% in 2010 and 2011.

FDI in Peru Could Grow 50% in 2010, Ministry of Finance Says

According to estimates from Peru's Ministry of Economics and Finance, foreign direct investment in the country could grow by as much as 50% in 2010.

Chile's Central Bank Keeps Interest Rates at Record Lows

As Chile battles its worst bout of deflation since 1934, the country's Central Bank announced today that it would hold benchmark interest rates at record lows, in order to keep the country's economic recovery on track and help provide a boost to inflationary pressures.

Argentine Corn Yields Expected to Increase in 2010

After several difficult years of dry weather and battles with the country's government over export taxes, farmers in Argentina, the world's second largest exporter of corn, are expecting crop yields in 2010 to reach 14 million metric tonnes, up 6% from 2009 levels.

Brazil Telecom Sector to Offer Strong Opportunities in 2010

Joao Cox, the CEO of Claro, the Brazilian subsidiary of Mexican telcom giant America Movil S.A.B. de C.V. (BMV:AMXA), told reporters that Brazil’s mobile carriers will probably surpass 170 million lines by the end of 2009, equal to almost 90% of the country’s population.

Argentina Authorizes Swap of Defaulted Bonds

According to local press sources, Argentina's President, Cristina Fernandez de Kirchner, authorized the country's Economy Ministry to carry out a swap of $20 billion of defaulted debt, readying the country for its first international bond sale since 2001.

Consumer Prices in Chile Fall 2.3% in November

According to data from Chile’s National Statistics Institute, consumer prices in the country fell by 2.3% in November, the worst bout of deflation Chile has experienced since 1934.

Venezuela's Bolivar Falls 9% as Chavez Threatens to Nationalize Banks

Venezuela's Bolivar fell 9% in trading yesterday, as investors scrambled to convert Bolivars for dollars after the country's president, Hugo Chavez, threatened to nationalize the country's banking system, a sector he accused of engaging in speculation rather than working to promote the country's development.

Ecopetrol Lists ADR on Peruvian Exchange

Ecopetrol S.A. (NYSE:EC), Colombia's largest oil company, announced that it has listed its American Depositary Receipt (ADR)on Peru's main stock exchange, the Bolsa de Valores de Lima.

Chile's Central Bankers Vote Unanimously to Hold Rates at 0.5%

According to a report published on the website of Chile's Banco Central, all five of the country's central bank presidents voted unanimously to hold interest rates at a record low 0.5%, a sign that despite indications of renewed economic growth, inflation fears remain low, and continued monetary policy support is in order.

Venezuela Threatens Military Action Along Colombian Border

In the latest of a series of heated exchanges with Colombian diplomats, Venezuela's president Hugo Chavez threatened to destroy foot bridges that connect the two countries, a further disruption in relations between the two countries.

Brazil's Real Most Over-Valued Currency in World, Goldman Sachs Says

Even as currencies throughout Latin America have jumped in recent months, according to a note by Goldman Sachs economist Thomas Stolper, despite the country's new 2% tax on foreign purchases of equity and fixed-income assets, Brazil's Real, which has gained 34% in 2008, remains the region's most over-valued currency.

Peru's Exporters Expect 10% Increase in Global Demand in 2010

Representatives from Adex, one of the counry's exporter associations, told press sources that the expect demand for exports from Peru, the world’s biggest exporter of silver, fishmeal and organic coffee to jump by 10% in 2010.