A devastating earthquake has disrupted everyday life in Chile. While cleanup and rescue efforts continue, though, many are still sorting out what the total impact on the economy and exchange traded fund (ETF) will ultimately be.
Chile’s economy is regarded as one of the best in Latin America. Thanks to the country’s already stable economic position, the impact of the earthquake on the country’s economic well-being will likely be minimal, reports Will Smale for BBC News. [Copper and Chile ETFs Impacted by Earthquake.]
Eqecate, a company that helps insurers model catastrophe risks, believes that the Chilean quake may cost up to $30 billion in damages, or 15% of annual economic output. Research group Capital Economics estimates that the cost will be between the range of $15 billion to $30 billion. Despite the temblor, the research group projects that the economy will expand by 5% this year. [Your Guide to Investing in Metals ETFs.]
How’s that? Chile may have positioned itself to weather storms like this by thinking and planning ahead. The Chilean economy is seen to be sound as a result of prudent fiscal spending. The government has saved much of the revenue that came from its copper reserves. Additionally, inflation is currently 1.5% and the Chilean interest rate is 0.5%. All together, these factors contribute to Chile’s strong credit rating.
One black mark: Chile’s unemployment rate stands at 9.7%.
Chile’s copper mines suffered minimal damage from the earthquake and most have already resumed normal operations, but the country’s refineries are still closed. The earthquake halted nearly a quarter of the Chile’s copper output, but by getting back online so quickly, may close the gap sooner than later. [Why Metals Are Showing Strength.]
Copper prices have been surging since the quake, moving for a fourth consecutive session today.
For more information on Chile, visit our Chile category.
- iShares MSCI Chile Index (NYSEArca: ECH)
- iPath Dow Jones UBS Copper Tr Sub-Index ETN (NYSEArca: JJC)
- PowerShares DB Base Metals Fund (NYSEArca: DBB)
Max Chen contributed to this article.