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OO RUEHWEB

DE RUEHSG #1044/01 3361032
ZNR UUUUU ZZH
O 011032Z DEC 08
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4004
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEKJCS/SECDEF WASHDC
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UNCLAS SANTIAGO 001044 
 
STATE PLEASE PASS TO USTR KATE DUCKWORTH 
STATE PLEASE PASS TO FEDERAL RESERVE TOM CONNORS 
TREASURY FOR SSENICH 
COMMERCE FOR KMANN 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV ECIN PGOV PREL CI
 
SUBJECT:  CHILE:  ECONOMIC HIGHLIGHTS WEEK OF NOVEMBER 24 
 
REFS:  SANTIAGO 1024 AND PREVIOUS 
 
¶1. (SBU) SUMMARY:  This continues a series of regular updates on 
major developments in Chile's economy since the acceleration of 
global financial turmoil.  By week's end, November 28, copper prices 
hit a three-year low and the exchange rate and stock market 
recovered some lost ground.  Chile's state copper commission 
forecast a sharp price drop in 2009.  The Chilean economy grew 4.8% 
in the third quarter, but the OECD cut its prediction for Chile's 
growth to 2.6% in 2009.  Industrial production and the unemployment 
rate fell in October.  The GOC will spend $120 million on a rescue 
package for the salmon industry.  The Central Bank provided another 
$200 million in liquidity.  Contacts at CorpBanca report a 
relatively healthy banking industry.  END SUMMARY. 
 
Copper Prices Hit Lowest Point in Three Years 
--------------------------------------------- 
 
¶2. (U) On the London Metals Exchange, copper closed at $1.32/pound 
on November 28, down almost 16% from its close on November 21.  The 
average copper price in November, $1.66/pound, is the lowest in 
three years. 
 
¶3. (U) Chile's state copper commission (Cochilco) forecast a sharp 
drop in copper prices for 2009.  Next year's average price for 
copper is expected to be $1.60/pound (down significantly from the 
previous forecast of $3.40/pound).  A decrease in demand and 
increasing copper stocks are the two principal causes for the drop. 
Cochilco predicts Chile will produce 5.57 million tons of copper in 
2009 (less than the 5.8 million previously forecast). 
 
Chilean Peso Recovers Slightly Against Dollar 
--------------------------------------------- 
 
¶4. (U) On November 28, the exchange rate closed up at 660.5 Chilean 
Pesos to 1 U.S. Dollar (an appreciation of 3% from the close on 
November 21).  However, the Peso has depreciated 24.7% for the year 
so far. 
 
The Stock Market Closes Up Slightly 
----------------------------------- 
 
¶5. (U) The IPSA closed at 2407.75 points on November 28, up almost 
2% on the close of November 21.  The index lost 3.28% of its value 
during the month of November. 
 
Growth in 3rd Quarter, OECD Sees Slower 2009 
-------------------------------------------- 
 
¶6. (U) On November 24, the Central Bank reported Chile's GDP grew by 
4.8% in the third quarter (July-September).  This growth was led by 
an expansion in utilities, construction, and the communications 
industry.  Internal demand rose to 11.5%.  The Bank revised upward 
second quarter growth from 4.3% to 4.5%.  Meanwhile, the OECD 
revised downward many of its growth forecasts for various economies, 
including Chile's.  In 2009, the Chilean economy is now expected to 
grow by only 2.6% (as opposed to the 3.9% originally predicted). 
 
Industrial Output Falls 
----------------------- 
 
¶7. (U) According to Chile's National Institute of Statistics (INE), 
the index for national industrial production fell 0.8% in October, 
despite expectations for 1.2% growth in that month.  The drop was 
blamed on decreases in the production of copper, other metals, and 
chemicals. 
 
Unemployment Decreases 
---------------------- 
 
¶8. (U) The INE also reported the unemployment rate decreased to 7.5% 
for August-October 2008.  This is lower (by two percentage points) 
than the same period in 2007.  The rate in the previous trimester 
(July-September 2008) was 7.8%.  This is the third consecutive 
trimester in which the unemployment rate has fallen.  For the first 
time this year in Chile, employment grew at a faster rate than the 
workforce. 
 
Rescue Package for Chilean Salmon Industry 
------------------------------------------ 
 
¶9. (U) On November 27, President Bachelet announced a $120 million 
rescue package for the salmon industry.  The industry has been hit 
hard by reduced demand resulting from the global financial crisis 
and continuing problems stemming from a virus attacking the salmon. 
The package will be applied mostly in loan guarantees to banks that 
lend to salmon producers from Chile's Economic Development Agency 
(Corfo). 
 
Central Bank Injects More Liquidity 
----------------------------------- 
 
¶10. (U) On November 25, the Central Bank provided another currency 
swap to maintain liquidity levels in the banking sector.  The Bank 
offered $500 million for 91 days.  Banks opted to borrow only $200 
million at LIBOR + 120 basis points. 
 
Banking Sector Remains Relatively Healthy 
----------------------------------------- 
 
¶11. (SBU) Embassy contacts at CorpBanca report the banking sector 
remains relatively healthy.  CorpBanca confirmed several pieces of 
information the Embassy has heard from other sources in the 
industry:  liquidity continues to be adequate thanks to ongoing 
Central Bank currency swaps, few international lines of credit have 
been cut, the sector has very little exposure to foreign-held debt, 
the industry remains well-regulated.  CorpBanca added that banks are 
starting to see a significant deterioration in loan repayments, 
especially among lower income customers, as a result of the global 
economic turmoil. 
SIMONS