The country with the world’s biggest deposits of copper is expecting to see its economy grow by at least 5% in 2012, while the rest of the globe fights off an incipient recession.
Chilean Finance Minister Felipe Larrain says GDP growth, which hit 8.4% in the first half of the year, will slow in the third and fourth quarters, but will still average about 6.6% for the year.
Economist Sebastian Pinera — elected the nation’s president in 2010 — is aiming for GDP growth to average 6% a year over his four-year term, Larrain says.
For next year, the Pinera administration sees expansion at 5% or “somewhat” more, Larrain says. His comments came at an economic summit in Santiago organized by Bloomberg LP.
The $200 billion, Andean economy is growing at its fastest pace in a decade, powered by higher prices for its chief export. While copper prices are down during the last month, they are still triple the prices from around April 2009. Copper prices are underpinned by “robust” demand, Thomas Keller, chief financial officer of Chile’s state-owned copper company Codelco told the conference.
Technical analyst Tom Aspray, of MoneyShow.com, says prices should recover soon. “Chinese imports started to increase in June and recent reports from the London Metals Exchange indicate that Chinese buying has caused the copper inventories to decline in Asian warehouses,” he wrote.
“Chile’s economy has enormous strengths,” Larrain said. “However, Chile is an economy that is part of the global community and we confront a complicated external environment.”
Copper is a prime ingredient of economic growth, used in everything from building materials to high-tech devices such as computers, cell phones and tablets. China, the world’s largest consumer of basic materials, is trying to slow its growth — currently pegged at 9% for 2011 — to prevent an acceleration in consumer prices.
Policy makers last week kept the benchmark interest rate unchanged at 5.25%, noting the economic slowdown in the U.S., lower commodity prices and heightened concern about sovereign debt and financial risk in Europe.
Other forecasters see somewhat less growth for Chile than the government. The country will expand 4.5% in 2012, according to median forecast of eight economists in a Bloomberg survey, while Morgan Stanley is looking for 4.4% growth.
“Chile is going to be a country where investors increasingly are going to be able to find opportunities and the security that our country brings,” Larrain said.
A good way to follow copper prices is through the iPath DJ-UBS Copper Trust Sub-Index (JJC):
And Chile’s ETF is ECH: