MercoPress. South Atlantic News Agency

Contingency credit on standby

Chile has not entirely discarded the option of a contingency credit offered by the International Monetary Fund in 2001, in spite of the fact that “financially we don't need a single peso”.

The statement belongs to Chilean Economy and Energy Minister Jorge Rodríguez Grossi, currently heading a business delegation in Mexico to promote bilateral trade, who added that, the idea behind "is having sufficient resources handy in case Chile has to face an unexpected contingency, because we have our financial commitments entirely covered".

The IMF contingency credit line was started last year in the event of countries with strong economic fundamentals facing external contagion, as has happened in South America. IMF' two potential candidates for contingency credit in 2001 were Chile and Mexico, Latinamerica's most sound economies, but both have refused so far. Actually Chile successfully floated a sovereign bond immediately after rejecting the IMF offer. This year Brazil was granted a contingency credit.

However the persistence of turbulence in Mercosur, Argentina's default, Uruguay's banking crisis and Brazil's electoral uncertainty, have made Chilean officials have second thoughts.

"Our international reserves stand at 15 billion US dollars, but given the situation we might look for additional financing to invest in infrastructure or in the Copper Stabilization Fund", said Mr. Rodríguez Grossi.

Mexico is Chile's main trade partner in Latinamerica and fifth most important.

Chilean exports drop

Chilean exports dropped 6,1% during the first seven months of 2002 compared to the same period a year ago. Exports totalled 10,376 billion US dollars while in 2001 they reached 11,078 billion.

"We lack an export strategy for the whole country, and the government has been slow in reacting to give a greater thrust to sales overseas", said Chile's Exporters Corporation, Mr. Rodrigo Ballivián.

United States, with a modest 3% gain figures as Chile's main trade partner in the seven months period, 2,091 billion US dollars, followed by Asia that also recorded a slight 2,4% increase. However exports to the European Union dropped 12,8%, and specifically to the United Kingdom an unexpected 24,5%.

Sales to Mercosur also were down to 300 million US dollars, with Argentina's falling 64,1%; Brazil 23,1%; Paraguay 45% and Uruguay 26,2%.

Regarding produce copper and cellulose by-products suffered most, 17,4% and 18,5%; paper industry 15,7% and fisheries and crustaceans 14,9%. The most dynamic were fruit exports that expanded 12% and animal foods 31,7%.

Copper which is still Chile's main single export has been suffering from rock bottom prices because of the global economy slowing down.