Sunday, January 13, 2013

Economic Growth in Chile

When you look at Latin America it is the likes of Brazil, Mexico, Colombia, etc who grab the headlines with other countries such as Chile often left in the shadows. However, while economic growth in Brazil and Mexico continues to push forward at a slower rate it was interesting to see that earlier this week it was announced that economic growth in Chile was actually well above expectations.

This perfectly illustrates the reason why so many expats are now considering Chile as their home of the future. It is a country which has been in the doldrums for some time, it is a country rich in natural resources and finally it is one which is beginning to fulfil its potential.

Economic growth in Chile

Economic growth in Chile was reported at 6.7% for January 2013 compared to the same period in 2012. This is a very impressive result and continues the 19 month long trend of economic growth in excess of 6%. This is the kind of figure which European counterparts can only dream of and even the likes of Brazil and Mexico are nowhere near this kind of growth.

While it is unlikely that growth for the full year will match the 6.7% rise in January 2013, it is still expected to exceed 5.4% with potential for further upward revision. Even this figure of 5.4% is well in advance of the International Monetary Fund's prediction of 4.4% annual growth in 2013. If anything, the Chilean central bank is erring on the side of caution because there seems to be great momentum behind the upward curve in economic growth across the country.

What is behind the increase in economic activity?

While there is no doubt that retail sales, up 9.5%, and mining production, up 8.4%, during the last 12 months have had a major impact upon the overall growth figure, there is more to this than meets the eye. There is now a general feelgood factor throughout Chile which is likely to lead to more confidence from internal and international investors going forward. The fact that the country is finally beginning to fulfil potential income streams from its array of natural resources is a bonus which looking back has been replicated across many successful economies - most notably Australia in recent times.

Taking a step back from the situation, the Chilean government will need to ensure a balance between economic growth and sensible management of the economy. It would not take much to tip the economy one way or the other and overheating of the Chilean economy would be very difficult to cool down.

Benefiting from Latin America

Even though the likes of Brazil and Mexico continue to grab the lion share of both internal and external trade amongst Latin American countries, Chile is beginning to benefit from ongoing trading arrangements. Many of the Latin American governments have come together to speak as one voice on the international trading stage to gain more access and more business for the continent as a whole. While the vast majority of the new business is going the way of Brazil, Mexico, Colombia, etc there will be opportunities for the likes of Chile to build on recent economic growth and push ahead for the future.

No comments:

Post a Comment