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Chile in recession: economy sinks 4.5% in the second quarter

Thursday, August 20th 2009 - 07:17 UTC
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Fishing was down 27.3%, the worst hit sector between April-June Fishing was down 27.3%, the worst hit sector between April-June

Chile’s economy shrank by 4.5% in the second quarter of this year, faring just slightly worse than the 4.4% GDP drop anticipated by economists, the Central Bank reported this week.

The downturn marked the second straight quarter of negative growth for Chile, whose economy contracted by 2.3% during the first three months of the year.

The Chilean economy, in other words, is officially in recession, down an accumulated 3.4% in the first half of 2009.

The sectors most affected by the global financial crisis were fishing, down 27.3% during the second quarter, industrial production, down 13.1%, and commerce, which fell by 7.1%.

The transportation, construction and mining industries also lost ground between April and July, down 6%, 4.8% and 2.5% respectively.

Chilean utilities, however, grew in the second quarter. The electricity, gas and water sectors rose 21.6%. Indeed, top energy companies such as Endesa and Colbún have posted huge profit gains so far this year. Colbún saw its profits nearly double in the second quarter compared to the same three-month period last year: from 48.6 million US dollars to 92.7 million. Chile’s communications sector is also faring well, up 5.3% in the second quarter.

In related news the number of workers laid off in Chile has fallen by 17% since peaking in April, according to data from Chile’s Labour Bureau.

The number of individual sackings reached some 150,000 in April, the highest this year, but has gradually fallen in subsequent months to 124,000 in July.

Large-scale sackings, which involve the collective dismissal of five or more workers at once, were also down by 34%: from almost 50,000 in April to just over 30,000 in July.

The figures were reported by Chilean daily La Nación, which accessed data concerning the number of dismissal letters submitted to the Labour Bureau on a daily basis.

A Universidad de Chile study published some three weeks ago showed unemployment in the Metropolitan Region was down from 12.8% in March to 11.9% in June.

Still, figures remain high, with government sources saying they expect unemployment to remain high throughout the winter months until October, when spring begins and business should begin to pick up.

Patricia Silva, director of the Labour Bureau, told La Nación she was convinced part of the business sector was reacting to the global financial crisis in an alarmist fashion and taking advantage of it to adjust workers’ contracts for their own benefit.

She claimed many companies did not eventually restore their workers’ original contracts as promised. She said the same thing happened following the Asian Financial Crisis in 1997, and called its timing “pretty evil”.

“During the first half of the year, which saw an increase in the minimum wage, there was a net adjustment in contract changes and appendices,” said Silva. “It was a case of:

either you [the worker] accept the changes or you’re gone”

“There are people who both use and abuse the greater level of vulnerability in which workers can find themselves in certain political-economic situations like the one we have been living for the past year,” she added.

However, Silva did suggest Chile’s labour market was gradually becoming more flexible in terms of growing existence of different types of contract, including indefinite, fixed-term, work-based, and part-time contracts.

By Santiago Times Staff (editor@santiagotimes.cl)

Categories: Economy, Latin America.

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