Chile can thank two sectors in particular for the surprise rate of growth it notched in November. The production in those sectors also helped fuel the country’s exchange traded fund (ETF) in the last year.
South America’s fifth-largest economy expanded on the strength of mining and retail industries, with a 3.1% growth estimate for the month of November. Industrial production rose 1%, for the same period, reports Sebastian Boyd for Bloomberg. [How Chile came out of the recession ahead.]
One potential roadblock is inflation, which traders may have already priced in. The six-month break-even inflation rate, a measure of expectations of future price rises, suggests traders expect the cost of living to fall by about 1.23% in the next six months, according to Bloomberg. [What copper means to Chile.]
Matt Moffett for The Wall Street Journal explains that the president-elect Sebastián Piñera says that by cutting red tape, enhancing investment incentives and administering the public sector more efficiently, he will steer Chile to a growth rate averaging 6% annually during his term, roughly twice the rate of the past decade. [4 reasons to watch emerging markets.]
Chile should benefit from increased production and an increase in the investment rate to 28% of gross domestic product by the end of his term in 2014 from the current 23%. A makeover in the capital markets, as well as tax incentives, should also encourage increased funding and lending. This can help put iShares MSCI Chile Index (NYSEArca: ECH) on a path to growth. [Other reasons Chile should do well in the near term.]
For more stories about Chile, visit our Chile category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.