Chile, South America
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The Strange Chill in Chile
From The Economist print edition
After presiding over Latin America's big success story for two decades, the centre-left Concertación coalition looks tired and divided.
Alongside an urban motorway in Lo Espejo, a crowded working-class district of Santiago, Chile's capital, builders are labouring in the mud of the southern-hemisphere winter to complete 125 new houses of brick and timber. In the next few weeks families from the dilapidated huts that once stood on the site will move in. The poorest among them will pay just $400 for a house costing about $20,000, part of a government policy aimed at abolishing the last remaining shantytowns in Chile by next year. They are among the 600,000 families who will have received housing grants during the four-year term of Chile's president, Michelle Bachelet, which ends in March.
This year the programme has been expanded, as part of a fiscal stimulus totalling $4 billion (or 2.8% of GDP). This has not prevented recession: in the second quarter the economy was 4.5% smaller than in the same period last year. But it has mitigated its effects. Some 270,000 building workers are now employed on social-housing schemes, up from 145,000 a year ago. "All these projects are helping the unemployed," says Willy Gutiérrez, a carpenter at the site in Lo Espejo.
They have also lifted the popularity of Ms Bachelet, a Socialist (see article). Despite the recession, her approval rating has soared to 72%, up from 40% in June 2008, according to polls by the Centre for Public Studies (CEP), a think-tank. So has that of her finance minister, Andrés Velasco, a liberal former Harvard professor. If the constitution did not prohibit consecutive terms, Ms Bachelet would be strongly placed to win the presidential election in December. As it is, her centre-left coalition, called the Concertación, risks losing power for the first time since democracy was restored in Chile in 1990. >>> Go to Full Story >>>
Chile's Economic Prospects Among Best in South America
From Seeking Alpha
Despite the demographic headwinds that Chile may face until 2017, the country is very well placed to weather this changing landscape thanks to the conservative growth policies of its government.
Its large cash reserves built up in the commodity boom of 2002 to 2007, remains mainly unspent. The country has also been very successful on social reform, as Chile boasts a poverty rate of currently only 13 percent, down from 39 percent in 1990. The country is the world's largest producer and exporter of copper with exports accounting for 43 percent of its GDP. However, the largest sector in the Chile Index ETF (ECH) is Utilities at 31.2 percent (versus the S&P Global ETF with 2.9 percent in utilities) because the Chilean copper mines are owned by foreign companies. Therefore, investors should not see ECH as a geared play on higher Chinese copper demand.
Much of Chile's future commodity excitement is based around lithium and the country's largest global producer Chemical & Mining Co. of Chile (SQM and 8% of ECH), although only a small percentage of their overall revenue is derived from sales of this commodity. The group is thought to have about a 30 percent global market share of Lithium derivates used for electric vehicle (EV) lithium-ion batteries. Currently, hybrid car batteries use nickel metal hydride (NiMH), which are very heavy and not as efficient as lithium batteries. The problem facing the battery industry is that it has yet to develop a way to mass-produce them at the scale the automobile industry requires. Once this occurs global carmakers will shift to the lighter lithium batteries in order to boost vehicle performance. >>> Go to Full Story >>>
