Why There’s Hope for Chile Economy and ETF

Global economic difficulties have left Chile’s economy and exchange traded fund (ETF) hanging, but there is hope for soft landing.

Planned Stimulus. The government has planned a $4 billion fiscal stimulus package to boost domestic demand, safeguard jobs and avoid a recession. Inflation also dropped to 7.1% in 2008 and the central bank has cut its 2009 inflation forecast from 4% to 3.1%, noting the drop in global prices for commodities such as oil and food.

Projects Delayed. In the last quarter of 2008, $13 billion in investment projects were delayed for up to a year and another $4.2 billion worth of projects were suspended, according to Reuters. Sectors most affected were those in housing and large-scale mining. Projects will resume once uncertainty diminishes, domestic demand recovers, and financing from banks become more lax.

Falling Sales. Sales in 2008 fell 1.9% from the year before and sales forecasts will consequently fall 2%-3% for 2009, reported by Reuters UK.

• iShares MSCI Chile (ECH): up 8.1% in the last week; up 11.7% in the last month; it is also above its 50-day-moving average