MercoPress. South Atlantic News Agency

Chile with lowest inflation since 1935

With December recording a negative 0,3%, retail prices in Chile finished 2003 with a 1,1% increase, the lowest since 1935, when the index actually dropped 1,4%.

According to the Chilean Statistics Institute, 2003 confirms the longest decade in the country's history with a one digit inflation and progressive price retraction.

During 2003, Clothing, Housing Equipment and Food experienced negative price growth ranging from ? 4,8% to - 0,8%. On the other hand, Health, Education and Leisure, Housing and Others, and Transport increased between 4,8% and 0,3%.

Last December the retail price index for Transport dropped 0,8%; Food 0,7%; Clothing 0,3%; Housing 0,1% and Health 0,1%. Only Education and Leisure and Others experienced increases, 0,4% and 0,3%.

The Transable Consumer Price Index, that is those with international competition, increased 1%, while the non Transable Consumer Price Index, limited to goods and services in the domestic market, experienced a 1,1% variation in 2003.

The 18% contraction in fresh fruit and vegetable prices during 2003 was an important component of the drop in Chilean inflation.

Commenting of the almost unchanged (1,1%) 2003 inflation rate, Chilean Finance Minister Nicolás Eyzaguirre said it's a time of "celebration" for consumers.

"We've had seven months with no inflation (6 negative and one flat), salaries continue to increase at an annual rate of 3% in pesos, which means the purchasing capacity of salaries is growing even faster, probably 4%, and this translates into more sales, and more sales into more production and more production greater employment", stressed Mr. Eyzaguirre.

However, the strong recovery of the economy (and the international price of copper, the country's main export) is making Chile face the challenge of its won success. In Santiago money markets the weakened US dollar traded this Tuesday at 565 Chilean pesos, the lowest in the last 35 months.

Only a year ago when Brazilian Socialist president Lula da Silva was taking office, financial turbulence in the region had the US dollar selling at a speculative 720 pesos in Santiago.

The strong appreciation of the Chilean peso helps consumers, but also harms those Chilean exporters trading in the US dollar area.