MercoPress. South Atlantic News Agency

Chilean peso stronger and stronger.

With the country risk at its lowest and favourable trade prospects following the signing of the free trade agreement with United States, Chile's peso is appreciating and the price of the US dollar in Chilean money markets falling, a downward tendency that promises to continue.

Last week the US dollar in Punta Arenas was trading at 635 and 642 Chilean pesos, and this week operators estimate it could drop even further.

"With copper prices the strongest ever in three years and the US-Chile free trade agreement money in pouring into Chile and strengthening the peso, a situation that is set to continue", indicated Jorge Ivelic from Travel Sur.

Only at mid term can the situation begin to reverse "when exporters start complaining to government about high costs and difficulties to sell overseas".

However Mr. Ivelic also pointed out that with a coming tourist season "that is more promising than last year, and more dollars, it's hard to see how the US currency will bounce back".

Patricio Corcoran from Corcoran and Co. Ltd said responsibility for the weak dollar is shared "between the huge US trade deficit, and US authorities who want to promote exports and a stronger economy".

"The US dollar selling at 740 and 750 Chileans peso as was seen at the end of 2002, was completely unreal and caused by regional turbulences and fears of instability", added Mr. Corcoran.

"We won't be seeing a US dollar for 750 Chilean pesos unless there's a new 11/09 terrorist attack or Brazil collapses, none of which nobody wishes".

Chilean bonds the safest in the region

Chile's country risk reached this week 92 basic points, its lowest ever. The country risk is measured by the spread between local sovereign bonds and US Treasury bonds.

According to JP Morgan from New York four Chilean sovereign bonds are now below the 100 points mark as follows: 2009 has a 70,93 risk spread; 2007, 81,95; 2013, 96,86 and 2012, 99,99.

Mexico is the runner up in Latinamerica with a risk spread that is dropping and now stands at 198 points; Peru figures in third place with 277 points (down from 333); Colombia 402 points.

However Argentina that has just began to negotiate with private creditors defaulted bonds remains at 5,360 risk points.

Brazil stands at 591 basic points, 885 less that in the crucial month of December 2002.