Interesting story in this week’s Economist (”Preparing for tougher times”) underlines a plethora of dour economic forecasts for Latin American economies heading into 2009: In the past two months, Latin America has seen its stockmarkets crash, currencies wobble and credit start to dry up. That comes on top of falling exports and the plunge in the prices of the commodities it sells to the world. Twisting the knife, less money is being sent home by Latin Americans working abroad. Specifically: As recently as October, the IMF expected growth in the region next year of 3.2%.  This week the World Bank forecast 2.1%.  The same day Morgan Stanley, an investment bank whose Latin American research team is among the more pessimistic about the region, cut its forecast for the seven largest economies in 2009 from growth of 1.5% to a contraction of 0.4% ...

Bring up “frontier markets” and most investors envision a potpourri of nations primarily located in Africa or the Middle East. Not so fast, my friend. A closer inspection of the growing number of frontier mutual funds and ETFs, for instance, shows that at least in regards to some of them, there is very little correlation to the aforementioned regions. Consider the Claymore/BNY Mellon Frontier Markets ETF (NYSEArca: FRN). The fund uses an indexing approach and seeks to more or less replicate, before fees and expenses, an equity index called The Bank of New York Mellon New Frontier DR Index. What does that mean? A close inspection of the fund’s holdings shows that Poland (25.07%), Chile (23.55%) and Egypt (14.78%) account for a majority of the top country weightings, and moreover that financials account for 41.61% of the sector weighting. Per Matthew McCall, ...

Chile Country OutlookClaus Vistesen: CopenhagenExecutive Summary and Outlook on key indicatorsThere are many lenses and perspectives through which to look at economic development. In this note, the process known as the demographic dividend is conceptualized in a Chilean context. The analysis shows how Chile during the past two decades has benefited from the dividend proxied by the increasingly favorable trend in overall age structure of the society. By some measures Chile’s demographic dividend is ending in these very years, but by adapting a slightly broader definition of the optimal working age and subsequent productivity profile it appears that Chile still finds itself in the proverbial sweet spot. Coupled with the favorable windfall from copper exports and the subsequent transformation of this into an unprecedented net wealth position of Chile’s public accounts, the economy looks on a very solid footing to face whatever travails which ...

Chile's central bank raised its target interest rate to 8.25 percent, the highest in almost a decade, as policy makers show their determination to win the fight against inflation. The bank's five-member board, led by President Jose De Gregorio, is trying to contain consumer price increases that are triple its target. The bank said today that the speed of further rate increases depends on economic statistics, dropping a clause from last month's statement that said raising the rate is the ``most likely'' scenario.``The future course of the policy rate foresees further adjustments to ensure that inflation converges with the target, at a rhythm that will depend on new information gathered and on its implications for projected inflation,'' the bank said in its statement.Inflation last month was within expectations, the bank said. Core inflation, which excludes food and fuel, remains high, ...

By Claus Vistesen: Copenhagen

There are many perspectives through which to look at economic development and growth. Geography, institutions or perhaps just plain good old physical capital accumulation are all important parameters. This small piece suggests a further metric and attempts to frame the argument with Chile as a case study.

Specfifically, this note explains the process known as the demographic dividend and conceptualizes it in a Chilean context. The analysis shows how Chile during the last two decades has benefited from the dividend proxied by the increasingly favorable trend in overall age structure of the society. By some measures Chile’s demographic dividend is thus ending during these very years. Yet, by adapting a slightly broader definition of the optimal working age and subsequent productivity profile, it appears that Chile still finds itself in the proverbial sweet spot and will continue to do so for the next decade. Coupled with

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Chile's economy expanded faster than expected in the second quarter, indicating that the central bank may well feel more comfortable raising interest rates in order to slow inflation further. Chile's GDP grew by 4.3 percent in the second quarter, up from a revised 3.3 percent in the first quarter, according to data out today from the Santiago-based central bank. The faster-than-expected growth was driven by an 11 percent increase in domestic demand, suggesting policy makers have room to raise interest rates further without bringing the economy grinding to a halt. The central bank has raised its overnight rate by 1.25 percentage points to a nine-year high of 7.75 percent this year in an effort to bring down the highest inflation rate since 1994. The central bank raised interest rates by half a percentage point at each of its last two monthly meetings, and most economists now ...

Chile's central bank raised its target interest rate to 7.75 percent yesterday. This is now the highest level in almost a decade, and marks the strength of the determination at the central bank to slow Chile's inflation back down towards the bank's target zone. Central bank President Jose De Gregorio and his team boosted the key rate by half a percentage point for the third straight month, making borrowing costs the highest since December 1998.Consumer prices rose at an annual pace of 9.5 percent in July, matching June's rate, the fastest since September 1994. The bank warned that further rate rises will probably be needed to bring annual inflation to its target rate of 3 percent. It should also be noted that real interest rates in Chile are still negative - minus 1.75% - when compared with the current ...

Chilean industrial output shrank 0.9 percent in June over June 2007. This was the second consecutive decline. The industrial production index has now fallen year-on-year in three of the past four months, according to National Statistics Institute data. Unemployment was also higher than expected at 8.4 percent, the institute said today in Santiago.Metal production fell as output of molybdenum, which is used to strengthen steel, declined 28 percent. The Chilean peso fell 0.51 percent to 510.22 pesos per dollar as of 10.37 a.m. in New York on expectation the data may slow the pace of interest- rate increases.The central bank raised its overnight lending rate by half a percentage point at each of its last two monthly meetings. The bank is committed to slowing inflation to 3 percent within two years from the 9.5 percent annual pace ...

Chile's principal economic activity index, the IMACEC, rose 2.1 percent in May compared with a year earlier, which was a marked slowdown after growth of 4.8 percent in April, according to data from the central bank yesterday. The IMACEC, a monthly index, measures more than 90 percent of the components which make up Chile's gross domestic product. GDP figures are issued quarterly. So it gives us some short term measure of the level of economic activity.The pace of growth slowed from April, which followed a 0.3 percent contraction in March, the central bank said today. The annual economic growth rate fell to an average of 2.4 percent in the three months through May, from 6.5 percent in the same period a year earlier. Chilean economists generally cut back their forecasts from over 3 percent after a ...

Chile's annual inflation rate rose to 9.5 percent in June, the fastest pace since 1994, the National Statistics Institute said today. Consumer prices rose 1.5 percent month on month, more than the 1.2 percent rise in May. The core inflation rate was 0.8 percent in June, up from 0.7 percent last month.