Abstract
With the Latin American economy set to contract by 2.6% this year, Chile' s
sound macro fundamentals
and prudent policies are placing the country in a
league of its own to deal with global recessionary forces.
Although large
fiscal reserves make Chile well-placed to cope with the global economic
downturn, the
country has been hit by falling levels of trade ─ in
particular by falling demand for copper, which is the
country' s most
important export. Lower levels of trade have also reduced foreign investment
in the
country. Indeed, the macroeconomic headwinds facing Chile are
hitting the economy hard and are
presenting the most challenging climate
since the country' s 1999 recession. Despite stalling domestic
demand, BMI
is holding to its existing forecast for the Chilean economy to grow by 0.1% in
2009.
Consumer retrenchment has already become evident during the first
quarter of this year, when private
consumption contracted by 1.4%
year-on-year (y-o-y), a slightly smaller magnitude than in Q199, when
private consumption fell by 2.8%.
Indeed, the indicators coming from the
country’s major food, drink and retail players over the last quarter
remain quite mixed. For example, at the start of April, the chairman of
Chile' s largest supermarket
operator D&S said that the firm may not enter
Peru this year as originally planned. This review may have
been driven by
the global economic downturn or may reflect opposition to this strategy from
Wal-Mart,
which has recently raised its stake in the business to about
73%. Up to now, D&S has been able to
piggyback on Chile' s high economic
growth and has achieved buoyant sales growth over the last 10 years.
However, with the firm' s domestic market showing signs of maturity, D&S has
been looking to increase
its exposure to markets where the retail sector
is less developed. At the same time, Chile’s largest brewer,
Compañía Cervecerías Unidas (CCU), announced plans to invest
around US$70mn this year, half the
level of 2008. The company also
reported in its first quarter results that in Chile, sales of beer, soft
drinks,
bottled water and wine all declined. CCU' s beer sales in Chile
fell by 4%, sales of soft drinks fell by
5.2%, sales of bottled water fell
by 5.9% and sales of wine fell by 2.9%.
On the other side of the coin,
Chile-based Coca-Cola affiliated bottler Embotelladora Andina has
announced plans to invest US$67mn in capital projects in 2009, despite the
global economic crisis. The
company will invest US$26m in Chile, US$28m in
Brazil and US$13m in Argentina in 2009, primarily to
revamp production
lines and logistics plants in each country. Equally, Chilean soft drinks
bottler Coca-
Cola Embonor announced that the company is planning to boost
investment for expanding business
operations in Chile and Bolivia by 22%
to US$33mn in 2009
Although Chile remains the Latin American country best
placed to ride out the recession, only
developments in the second half of
the year will confirm whether the nation has indeed managed to stave
off
the problems seen by many of its regional neighbours.
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