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CHILE.

CHILE

 % Change

 Interest
Date CPI M1 Rate (%)

 1990 27.3 30.0 48.2
 1991 18.7 24.0 28.3
 1992 12.7 15.0 23.8
 1993 12.2 19.0 24.1
 1994 8.9 14.0 20.3
 1995 8.2 19.4 18.1
 1996 6.6 13.0 19.2
 1997 6.0 20.0 15.6
 1998 4.7 -7.6 18.5

 1999 2.3 18.4 12.0
Jan -0.3 2.4 1.3
Feb 0.1 0.9 1.0
Mar 0.6 -1.4 1.0
Apr 0.4 -0.7 1.3
May 0.1 1.7 1.2
Jun 0.1 2.0 1.0
Jul 0.1 -2.7 0.8
Aug 0.2 -2.1 0.8
Sep 0.2 7.0 0.8
Oct 0.4 -0.9 0.9
Nov 0.2 2.2 1.1
Dec 0.3 11.1 1.0

 2000 4.6 2.7 13.5
Jan 0.2 0.3 1.0
Feb 0.6 -2.3 1.0
Mar 0.7 -4.4 1.3
Apr 0.5 -1.1 1.3
May 0.2 -1.2 1.2
Jun 0.2 0.7 1.1
Jul 0.1 1.6 1.1
Aug 0.3 0.0 1.0
Sep 0.6 3.0 1.2
Oct 0.6 -1.7 1.4
Nov 0.3 1.1 1.3
Dec 0.1 10.7 1.2

 2001 4.5 4.0 13.5
Jan 0.3 -0.1 1.1
Feb -0.3 -1.5 1.0
Mar 0.5 6.2
Column
Number [1] [2] [3]

 (In millions US $)

Date Imports Exports Trade Bal

 1990 7,068.0 8,328.0 1,260.0
 1991 6,989.0 8,561.0 1,572.0
 1992 9,250.0 9,900.0 650.0
 1993 10,181.0 9,202.0 -979.0
 1994 10,879.0 11,539.0 660.0
 1995 14,655.0 16,137.0 1,481.0
 1996 16,499.0 15,353.0 -1,147.0
 1997 18,218.0 16,923.0 -1,295.0
 1998 17,391.0 14,895.0 -2,496.0
 1999 13,951.0 15,616.0 1,665.0
Jan 1,225.0 1,275.0 50.0
Feb 1,001.0 1,174.0 173.0
Mar 1,094.0 1,491.0 397.0
Apr 986.0 1,372.0 386.0
May 1,167.0 1,291.0 125.0
Jun 1,206.0 1,240.0 33.0
Jul 1,088.0 1,192.0 104.0
Aug 1,294.0 1,165.0 -129.0
Sep 1,282.0 1,321.0 38.0
Oct 1,268.0 1,309.0 42.0
Nov 1,168.0 1,329.0 161.0
Dec 1,172.0 1,457.0 285.0

 2000 16,724.0 18,159.0 1,435.0
Jan 1,284.0 1,510.0 226.0
Feb 1,205.0 1,490.0 285.0
Mar 1,482.0 1,844.0 362.0
Apr 1,364.0 1,316.0 -48.0
May 1,566.0 1,753.0 187.0
Jun 1,331.0 1,269.0 -62.0
Jul 1,458.0 1,552.0 94.0
Aug 1,491.0 1,635.0 144.0
Sep 1,398.0 1,260.0 -138.0
Oct 1,543.0 1,672.0 129.0
Nov 1,450.0 1,408.0 -42.0
Dec 1,152.0 1,450.0 298.0

 2001 18,000.0 19,500.0 1,500.0
Jan 1,510.0 1,749.0 239.0
Feb 1,298.0 1,411.0 113.0
Mar
Column
Number [4] [5] [6]

 (In millions US $)

 Current Exchange Rate
Date Acct Bal Reserves Off/Par

 1990 -1,100.0 2,700.0 327.0 328.0
 1991 -800.0 6,639.0 375.0 378.0
 1992 -1,200.0 9,009.0 382.0 382.0
 1993 -2,500.0 9,759.0 431.0 434.0
 1994 -1,500.0 13,446.0 404.0 401.0
 1995 147.0 14,805.0 407.0 407.0
 1996 -2,918.0 15,474.0 425.0 425.0
 1997 -4,057.0 17,841.0 440.0 440.0
 1998 -4,144.0 15,992.0 474.0 473.0
 1999 -700.0 14,710.0 497.0 538.0
Jan - 15,439.0 483.0 489.0
Feb - 15,002.0 499.0 502.0
Mar 380.0 14,898.0 484.0 485.0
Apr - 15,706.0 484.0 482.0
May - 16,589.0 486.0 485.0
Jun 50.0 15,014.0 489.0 502.0
Jul - 15,005.0 491.0 517.0
Aug - 14,917.0 490.0 513.0
Sep -467.0 14,615.0 491.0 525.0
Oct - 14,564.0 491.0 538.0
Nov - 14,443.0 494.0 544.0
Dec -42.0 14,710.0 497.0 538.0

 2000 -989.0 14,741.0 525.0 575.0
Jan 14,239.0 499.0 520.0
Feb 14,320.0 504.0 513.0
Mar 473.0 14,497.0 506.0 504.0
Apr 14,338.0 508.0 508.0
May 14,687.0 513.0 522.0
Jun -622.0 14,597.0 511.0 530.0
Jul 14,578.0 513.0 543.0
Aug 14,379.0 517.0 551.0
Sep -533.0 14,157.0 521.0 566.0
Oct 14,262.0 524.0 568.0
Nov 14,220.0 525.0 575.0
Dec -307.0 14,741.0 525.0 575.0

 2001 1,600.0 15,000.0 550.0 600.0
Jan 14,545.0 525.0 571.0
Feb 14,522.0 527.0 563.0
Mar 14,535.0 530.0 595.0
Column
Number [7] [8] [9] [10]

FOOTNOTES BY COLUMN: Annual figures for 2001 are projections.
[1-2]: Annual figures represent January-December increase. [3]:
Short-term monthly rates for local currency loans. Annual figures are
monthly rates expressed in annual terms. [4-9]: Annual figures are
year-end.

SOURCES BY COLUMN: As of third-quarter 1999, all figures are from the
Informe Economico y Financiero of the Banco Central. Prior
to that, they were from: Instituto Nacional de Estadistica, Boletin
Mensual. 2: Banco Central. 3: Indicadores de Estrategia. 4-9: Banco
Central.


FINANCIAL OUTLOOK

* With first-quarter inflation at 0.5%, the figures are well within the government target of 4.5%. March inflation grew considerably due to education and recreation, since March is back-to-school month. Also, given the peso's significant depreciation in March, the cost of imported goods increased, also contributing to higher inflation. Financial market experts are currently expecting inflation of 1.1% for the first half of the year and 3% for the year, which is far lower than the government's projections.

* M1A (checking and savings accounts) rose 6.7% from February to March, an increase of 15.1% year-on-year. The surge of deposits was provoked by February's negative inflation and a steady drop in nominal interest rates.

* The reference interest rate, at 4% following a 50-basis-point slash on March 2, was cut another 25 points to 3.75% on April 10 by the central bank. This represents the fourth rate cut this year in an effort to boost domestic economic activity and stimulate internal demand. The central bank announced that this may not even be the last reduction in interest rates, depending on how much the drop to 3.75% actually does stimulate domestic consumption. It also depends on how the global economic situation progresses in the coming months. The fact that the central bank appears to have bowed to pressure from Finance Minister Nicolas Ezyguirre to drop interest rates will damage its credibility as an autonomous institution.

* The trade surplus shrank to $113 million in February from a surplus of $239 million in January. The value of some of Chile's principal export products dropped considerably compared to February 2000. These include plywood (-38%), fresh fruit (-35%) and crude wood pulp (-27%). At the same time, the value of copper exports rose by 6.6%. The year-end trade balance could reach a $1 billion surplus, but then drop to a $500 million deficit in 2002. The current account balance finished 2000 with a deficit of $989 million, or 1.4% of GDP. The deficit is expected to increase to 2.5% of GDP in 2001 and continue growing to 4.7% of GDP in 2002.

* Reserves finished the quarter at $14.545 billion. Financial sector analysts expect reserves to reach $16 billion by year-end and to remain constant through 2002.

* The peso fell 22% in the first quarter of the year, and ended March at P595:$1, mainly because of the three interest rate cuts in the US and because of market speculation related to the economic crisis in Argentina and its potential fallout in Chile. The peso is expected to remain weak, especially after the last interest rate cut.

ECONOMY MONITOR

* Growth Outlook: Growth forecasts for 2001 have been lowered to 4.5% by private analysts, while the government has cut its prediction from 6.2% to 5%. The culprits are lower average world copper prices, and worse-than-expected slowdowns in the US, Japan and Argentina.

* Political Factors: The country took a critical look at President Ricardo Lagos' first year in office, and many feel that he has not done enough to create jobs, a big campaign promise. Lagos responded that he is willing to meet with the business sector to discuss a reactivation, and the government has announced 15 new measures. Finance Minister Nicolas Ezyguirre has also been criticized for trying too hard to maintain macroeconomic balance. Judging by the new growth estimates and unemployment figures, some say he should abandon positive fiscal balance and start investing in social programs that will help deal with slowed growth and joblessness. In early March, Chilean and US negotiators had their third round of talks, bringing the two countries closer to a free trade agreement meant to pave the way for the FTAA.

* Fiscal Situation: Several sectors are expecting a fiscal deficit this year similar to 1999's 1% of GDP. If GDP does drop down to the 4% range, the state will effectively lose $265 million in tax revenues. Since spending will stay in the range of the budget approved by congress, a deficit is more than likely. This will certainly not help the government's medium-term fiscal goals, which began with finishing the year at a 1% surplus.

* Major Sectors: Construction and telecommunications are expected to show the most growth this year. Mortgage rates are at their lowest levels in a long time, and real estate values have dropped 10%-15%, which will stimulate activity. Telecommunications is expected to grow by 7%, thanks to new technologies, expansion of Internet use and installation of new underwater fiber optic cables. Fruit exports have grown 10% in volume year-on-year to March 25. Table grapes were by far the leader, representing 68% of all exports, followed by red apples (12%). Forestry exports are only expected to grow 2%-5%, due to economic difficulties in both Japan and the US, which are this sector's biggest importers. In February, industrial production fell by 0.2% for the fourth month in a row, and mining production dropped by 2.5%.

* Employment: Unemployment reached 8.4% from December 2000-February 2001, a year-on-year increase of 0.3 points. Several factors are keeping unemployment rates high, including pending labor reform and legislation to end tax evasion. Given the seasonality of Chile's work force, many experts expect this figure to rise further, even to double digits, once winter sets in. For example, from July-September 2000, unemployment rates hit 10.7%.

* Stock Market: The IPSA stock index fell 3.2% in March, from 101.1 points to 97.9 points, due to worries about economic problems in Argentina and the US. Surveys show business leader expect the IPSA to grow by 10% this year.

COMPANY MONITOR

* The Luksic-owned Quinenco holding company sold $174 million of bonds on the local market March 30, to purchase an additional 34.68% of Banco de Chile for $516 million. Quifienco already holds 52.7%, and is currently studying the possibility of merging it with Banco Edwards.

* Telecom Italia doubled its stake in telecom Entel to 54.7% through a $905 million purchase in mid-March. Meanwhile, Entel announced plans to offer telephony and Internet services in Peru and Venezuela.

* US-based PSEG Global bought 94% of Chilean electricity distributor Saesa on March 9 from Copec for $460 million. Chilean law requires PSEG to tender the remaining 6% on the Santiago stock exchange.

* US-based AES bought an additional 2.9% of power generator Gener in a second public offering in early March, giving it 98.6% of the company.

* US forestry firm Boise Cascade suspended its $160 million Cascada Chile joint venture with local logging firm Maderas Condor in southern Chile. Boise Cascade cited strong environmental opposition and excessive bureaucracy as major reasons for the decision.

* The Luksic group sold the Argentine operations of its Lucchetti pasta company to Argentina's Molinos Rio de la Plata for $45 million. Lucchetti was Luksic's least profitable company.
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Title Annotation:economic aspects
Publication:America's Insider
Geographic Code:3CHIL
Date:Apr 30, 2001
Words:2248
Previous Article:BRAZIL.
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