Monthly report: Chile

Resumen

Amid institutional scandals that took place in recent months, Michelle Bachelet called for the resignation of five ministers, including the minister of Treasure. It is the first time since the return to democracy in 1990 that a president has requested the resignation of such official. The measure aimed to demonstrate the commitment to institutional transparency promised during the campaign. Despite all efforts, the popularity of the president is at record lows: according to Adimark surveys, 66% of respondents disapprove of her administration .

Amid institutional scandals that took place in recent months, Michelle Bachelet called for the resignation of five ministers, including the minister of Treasure. It is the first time since the return to democracy in 1990 that a president has requested the resignation of such official. The measure aimed to demonstrate the commitment to institutional transparency promised during the campaign. Despite all efforts, the popularity of the president is at record lows: according to Adimark surveys, 66% of respondents disapprove of her administration .

In May the eCommerce DAY Santiago 2015 took place. It was organized by the Chamber of Commerce of Santiago (CCS). The Under-Secretary of Economy, Katia Trusich, attended the event. According to estimates revealed during the event, in 2015 e-commerce sales would grow between 15% to 20%, amounting over USD 2,300 million in transactions, an amount that would double in five years. By 2018, the arrival of big players in the region is expected, as is the case with Amazon.com to Brazil and Mexico.

Moreover, in April to retail sales surprisingly declined by 1% yoy, accumulating two successive monthly falls. While the drop has maintained its transversal nature, clothing and footwear managed to be the exception, with growth of 5.5% and 3.8%, respectively. In addition, a further decline is recorded in the index of consumer confidence, reaching falls in the recent six years (the lowest level since international sub-prime crisis).

In contrast, wages showed an improvement in purchasing power, growing by 2.8% yoy in real terms in March yoy. As for the Chilean unemployment rate, it fell by 0.1 percentage points for the feb'15- abr'15 rolling quarter in yoy terms, reaching 6.1%.

As for tax matters, the expansionary bias has caused Treasury spending to grow at a 5 pp rate above income (10.1% vs 15.5%). We maintain our forecast of a 2.2% deficit of the GDP this year, after a 1.6% fiscal red in 2014.

Regarding monetary policy, the Central Bank of Chile held the benchmark rate for the seventh consecutive month, even after the increase of 0.6% CPI in April. The figure was above the forecast of the institution and the market. Anyway, inflation remains controlled in yoy terms.

In this context of weakening consumption, the Minister of Treasure, Rodrigo Valdes, slashed the GDP forecast growth for 2015 from 2.5% -3.5% range to 2.25% -3.25%.%.

Tabla de contenidos

Political contextCurrent situation and economic policyEconomic activity and labor marketFiscal situationMonetary policy, currency and inflationTrade balanceForecast