MercoPress. South Atlantic News Agency

Contradicting data about Magallanes economic activity

Economic activity in Magallanes Region, extreme south of Chile, has fallen dramatically during the second quarter of this year compared to the same period a year ago according to the latest data from the country's official Statistics Office.

Data shows a 20% retraction in the Economic Activity Index, Inacer, in the April-June period of 2008, compared to what happened in 2007. However this is closely linked to methanol production, the huge Methanex complex next to Punta Arenas which has been forced to drastically cut production because of insufficient natural gas provision, which according to contract should have been supplied by neighboring Argentina. Nevertheless if methanol production in not computed in the overall index, economic activity in Magallanes Region actually expanded 2.8%, which is below Chile's average, but still acceptable. "This responds to a specific situation; the regional economy is not in crisis and this is reflected in the low unemployment rate and the enormous business opportunities which are forecasted for the coming quarters in energy, mining, tourism, aquaculture, construction and retail" said Javier Solis the representative of the Economy Ministry in the Magallanes region. Solis added that any of these projects will need much labor input which Magallanes actually does not have and will mean a boost for the regional economy. "This is why the Incer data is not worrisome since it's linked to a specific situation, easily reversible through the same dynamism of the economic process", added Solis. According to the latest Incer report manufacturing suffered the most because of the methanol situation although there was also a drop in retail sales, less cars traded at the free zone and a slight retraction of supermarket sales. But growth in fishing, construction, mining, transport, communications and storage "helped to absorb the contraction in the rest of sectors included in the Incer data", pointed out Solis. "We must understand that Inacer data is a picture of what happened in the successive quarters and methanol production has an overwhelming influence". The significant reduction in Argentine supply of natural gas to Magallanes region begun in May last year and has since worsened, but "we believe that the situation should begin to improve in the third and fourth quarters", according to Solis. Anyhow Solis admitted that the overall performance of the Magallanes economy has been suffering for the fourth consecutive quarter an erosion of activity, "although still positive", compared to the previous twelve month period.