The Daily Update - Vamos Chile

Recent economic data for Chile has been encouraging. In Q1 the economy grew 4.2% yoy, its fastest rate in the past 4 years, although this is coming off a low base in Q1’17. The domestic sector was robust expanding 3.8% yoy and fixed investment continued to recover growing 3.6% yoy. Exports gained 7.2% yoy adding to growth: the mining sector expanded 19.3% yoy helped by a recovery in the copper price. The OECD also recently raised its 2018 GDP growth forecasts for Chile to 3.6%.

President Sebastien Piñera has been in office since March of this year and his administration’s policy initiatives are starting to take shape. Last week, he stated the corporate tax rate would be held at current levels given ‘the fiscal difficulties we inherited and the breadth and urgency of the social reforms and public works projects still to be done’. Instead, he said the focus would be on simplifying the tax system and encouraging companies to invest. The government has also talked of improvements to education, healthcare, the pension system and infrastructure. Congress is fragmented and Piñera’s centre-right Chile Vamos coalition does not have a legislative majority so policy changes need to be chosen wisely.

Chile’s fiscal deficit edged higher to 2.8% of GDP in 2017 and addressing this is an important goal of the current administration as Chile’s government debt levels have been rising from ~12% in 2012 to 24% at the end of 2017. In a recent interview, Felipe Larraín, the Finance Minister, stated that the government will work to eliminate the structural deficit over 6 to 8 years. In May the government announced an intention to reduce the deficit targeting USD 5bn budget cuts over 4 years, starting with an initial USD 500m of announced cuts, but as Larraín noted every 1% of extra growth in a year gives an extra USD 600m in revenue. So a combination of growth and fiscal prudence is likely to be important for achieving this goal.

Larraín noted that the government would like to regain the notch they lost on their credit rating but it is a longer term goal. Tackling the fiscal deficit and rising debt levels will be important in this respect. Chile still retains a strong credit rating and is rated (LT foreign currency) Aa3(negative)/A+(stable) by Moody’s/S&P rating reflecting its financial and institutional strengths.

Please read this important information before proceeding. It contains legal and regulatory notices relevant to the information on this site.

This website provides information about Stratton Street Capital LLP ("Stratton Street"). Stratton Street is authorised and regulated by the UK's Financial Conduct Authority. The content of this website has been prepared by Stratton Street from its records and is believed to be accurate but we do not accept any liability or responsibility in respect of the information of any views expressed herein. The information, material and content provided in the pages of this website may be changed at any time by us. Information on this website may be out of date and may not be updated or removed.

The website is provided for the main purpose of providing generic information on Stratton Street and on our investment philosophy for the use of financial professionals in the United Kingdom that qualify as Professional Clients or Eligible Counterparties under the rules of the United Kingdom Financial Conduct Authority (the "FCA"). The information in this website is not intended for the use of and should not be relied on by any person who would qualify as a Retail Client. Products and services referred to on this website are offered only at times when, and in jurisdictions where, they may be lawfully offered. The information on this website is not directed to any person in the United States. The provision of the information on this website does not constitute an offer to purchase securities to any person in the United States (other than a professional fiduciary acting for the account of a non-U.S person) or to any U.S. person as such term is defined under the Securities Act of 1933, as amended.

The website is not intended to offer investors the opportunity to invest in any Alternative Investment Fund ("AIF") product. The AIFs managed by Stratton Street are not being marketed in the European Economic Area ("EEA") and any eligible potential investor from the EEA who wishes to obtain information on the AIFs will only be provided with materials upon receipt by Stratton Street of an appropriate reverse solicitation request in accordance with the requirements of the EU Alternative Investment Fund Managers Directive ("AIFMD") and national law in their home jurisdiction. By proceeding you confirm that you are not accessing this website in the context of a potential investment by an EEA investor in the AIFs managed by Stratton Street and that you have read, understood and agree to these terms.

No information contained in this website should be deemed to constitute the provision of financial, investment or other professional advice in any way. The website should not be relied upon as including sufficient information to support any investment decision. If you are in doubt as to the appropriate course of action we recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser. Past performance is not necessarily a guide to the future. The value of investments and the income from them may go down as well as up. An application for any investment or service referred to on this site may only be made on the basis of the offer document, key features, prospectus or other applicable terms relating to the specific investment or service.

Where we provide hypertext links to other locations on the Internet, we do so for information purposes only. We are not responsible for the content of any other websites or pages linked to or linking to this website. We have not verified the content of any such websites. Such websites may contain products and services that are not authorised in your jurisdiction. Following links to any other websites or pages shall be at your own risk and we shall not be responsible or liable for any damages or in other way in connection with linking.

By using this site, you should be aware that we may disclose any information that we hold about you to any regulatory authority to which we are subject, or to any person legally empowered to require such information.

This website uses cookies to improve user experience, by clicking the "I Accept" button below means you consent to the use of cookies on our website.