MercoPress. South Atlantic News Agency

Negative April inflation in Chile.

Consumer prices in Chile during April dropped 0,1%, the first negative index in 21 years according to the latest release from the Chilean Statistics Institute.
The fall in fuel prices was the main impact in the index, which did not surprise market expectations and signals a relief from the previous two months when uncertainty over the Iraq crisis pushed the annual inflation to 4,5%.

With the April negative increase the twelve months inflation index dropped to 4%.

Chilean Finance Minister Nicolás Eyzaguirre said that the April figure does not reflect a drop in overall demand but rather the end of the Iraq crisis.

However Mr. Eyzaguirre indicated he was "cautiously optimistic" regarding the performance of the Chilean economy in the second half of the year.

"The convergence of positive signs are pointing in the right direction", said Mr. Eyzaguirre arguing that the re-emergence of regional economies such as Brazil, Argentina and Mexico are encouraging, "but we still need a rebound from the US economy".

"Confidence is the main ingredient for growth, and I'm cautiously optimistic; I estimate the Chilean economy will be expanding 3 to 4% in 2003".

The latest activity report from the Chilean Central Bank showed that the economy expanded at a 4,6% rate in February with important increases in industrial and mining production plus a jump in imports. It was the best February in five years and the strongest month since June 2001.

Mr. Eyzaguirre also praised the recent nomination of economist Vittorio Corbo as president of the Chilean Central Bank, a close friend of President Ricardo Lagos but also a renowned professional and academic with a long career in international consulting and teaching both in Chile and United States.

Mr. Corbo replaced Mr. Carlos Massad who was forced to resign following the disclosure that his most trusted secretary was passing privileged financial information to private brokers.

Mr. Corbo this week will be presiding the Central Bank's Monetary Council that will be reviewing the current level of interest rates that stand at a basic 2,75%.