VZCZCXYZ0005
OO RUEHWEB

DE RUEHSG #0111/01 0401021
ZNR UUUUU ZZH
O 091021Z FEB 09
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4399
INFO RUEHQT/AMEMBASSY QUITO 2135
RUCNMER/MERCOSUR COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEKJCS/SECDEF WASHDC
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SANTIAGO 000111 
 
STATE PLEASE PASS TO USTR KATE DUCKWORTH 
STATE PLEASE PASS TO FEDERAL RESERVE TOM CONNORS 
TREASURY FOR BLINDQUIST 
COMMERCE FOR KMANN 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV ECIN PGOV PREL CI
 
SUBJECT:  CHILE:  ECONOMIC HIGHLIGHTS WEEK OF FEBRUARY 2 
 
REFS:  SANTIAGO 94 AND PREVIOUS 
 
¶1. (SBU) SUMMARY:  This continues a series of updates on major 
developments in Chile's economy since the acceleration of global 
financial turmoil.  By February 6, copper prices showed a steady 
rise, the Peso remained stable against the Dollar, and the stock 
market closed higher.  Inflation fell to 6.3% in January 2009. 
Exports fell to $3.7 billion in December 2008.  Economic activity 
fell again to 0.5% in December 2008.  Experts forecast GDP will grow 
3.4% for 2008.  Chile's external investment fell by 37% in 2008. 
Fewer Chileans are traveling abroad (Embassy NIV's are down 30%), 
but an influx of Argentines and others has increased local tourism 
revenue by 9%.  END SUMMARY. 
 
Copper Prices Show Steady Rise 
------------------------------ 
 
¶2. (U) On the London Metals Exchange, copper closed up for the fifth 
consecutive day at approximately $1.56/pound on February 6, up by 
nearly 11% from its close on January 30.  Chile's largest copper 
mine, Escondida, run by BHP Billiton, lost $772 million in the third 
quarter of 2008. 
 
Chilean Peso Remains Stable Against Dollar 
------------------------------------------ 
 
¶3. (U) On February 6, the observed exchange rate closed at 
approximately 616 Chilean Pesos to 1 U.S. Dollar (a negligible 
appreciation of less than 1% from the close on January 30). 
 
Stock Market Moves Up 
--------------------- 
 
¶4. (U) The IPSA closed at 2671.84 on February 6, up almost 5% on the 
close of January 30. 
 
Inflation Falls Again 
--------------------- 
 
¶5. (U) For the third straight month, there was a drop in the 
inflation rate.  On February 6, the National Institute of Statistics 
(INE) reported that the Consumer Price Index decreased in January by 
0.8% compared with December (the lowest value for January since 
1966).  The CPI grew at an annualized rate of 6.3%.  The decrease 
was again more than expected and credited to falling fuel, 
transport, and retail prices.  In remarks to the press, Interior 
Minister Perez Yoma (Acting President while President Bachelet and 
much of the GOC is on vacation) said the development was a piece of 
"very good news" and hinted that it might cause the Central Bank to 
reduce its key interest rate again. 
 
Exports Drop Significantly 
-------------------------- 
 
¶6. (U) According to Chile's export promotion agency, ProChile, 
exports in December 2008 fell to $3.7 billion, their lowest level 
since February 2006.  December's totals decreased by 17% when 
compared with the month before and 24% when compared with December 
¶2007.  The drop is credited to lower production of copper and 
falling demand in Chile's major export destinations such as Japan, 
China, South Korea, the U.S., and the EU.  Copper exports alone were 
46% lower in December than their yearly average of $1.7 
billion/month. 
 
Economic Activity Slows Further 
------------------------------- 
 
¶7. (U) The Central Bank reported February 5 that the index of 
economic activity (Imacec) grew by only 0.5% in December 2008 when 
compared with the same month in 2007.  December's Imacec was at its 
lowest level since 1998, during the Asian Crisis.  When compared 
with November 2008, seasonally-adjusted economic activity actually 
fell by 1.1%.  The slow-down in activity was credited to the poor 
performance of mining and industry.  Economic analysts forecast 
Chile's annual GDP growth would be 3.4% for 2008 (official numbers 
for GDP will not be released until March 23 by the Central Bank). 
 
Investment Outside of Chile Decreases 
------------------------------------- 
 
¶8. (U) Santiago's Chamber of Commerce (CCS) reported February 3 that 
Chile's investment in other countries was approximately $2.9 billion 
for 2008.  This represents a 37% decrease from the level of external 
investment in 2007.  Peru was Chile's first destination for 
investment, representing 26% of the total sum.  Latin America 
accounted for 87% of the total.  Following Peru in order, were 
Colombia, Argentina, and Pakistan as Chile's other destinations for 
investment. 
 
President Bachelet Prioritizes Employment 
----------------------------------------- 
 
¶9. (U) Minister Perez Yoma informed the press that President 
Bachelet would cut short her vacation to participate in a key 
meeting of the GOC's employment committee on February 9.  That same 
evening, she was scheduled to depart on a trip to Central America, 
including stops in Honduras and Cuba.  The committee will meet to 
consider several Government projects aimed at boosting employment. 
 
 
Effects of Crisis on Tourism 
---------------------------- 
 
¶10. (U) International tourism in Chile seems to be weathering the 
effects of the global financial crisis.  The National Tourism 
Service (Sernatur) reported recently that the number of 
"long-distance" travelers to Chile (mostly from North American and 
Europe) fell by 10% for January 2009 when compared with January 
¶2008.  However, during the same month tourism is up by 6.4% compared 
to the year before.  The increase comes mostly from a surge in 
Argentine tourists to Chile (up more than 22%).  Tourists have spent 
an estimated $289 million, a 9% increase from 2008. 
 
¶11. (SBU) However, tourism out of Chile has seen a significant dip. 
Anecdotal evidence from sources at Santiago's airport indicates 
fewer Chileans are traveling outside of South America than in 
previous years.  Sernatur reports a more than 18% drop in trips by 
Chileans outside of Chile during January (one of the prime vacation 
months).  Chilean tourist agencies are offering 10-40% discounts on 
popular packages.  Embassy's Consular Section reports that 
Non-Immigrant Visa cases for December-January are down 30% when 
compared with levels last year and the year before. 
SIMONS