Domestic - intra-coalition tensions could elevate political risk The resignation of Chilean President-elect Michelle Bachelet s deputy education minister following calls for her ouster by student protest leaders is in line with our view that the incoming administration s centre-left policy agenda is likely to clash with elements of Chile s far- left. taBle: Political overview - Long-term political outlook - Broad stability to remain in place < ALACRA META ABSTRACT>Market-friendly policies and strong institutions have been the hallmark of the Chilean government in recent years, and we believe that the country will continue to set the benchmark for political stability in the region going forward. That said, there is a risk that the political landscape could fracture over the longer term if the leading parties fail to address long-term concerns about an economy over reliant on copper export-and-investment-led growth. chapter -: economic outlook -- sWot analysis -- BMi economic risk ratings -- economic activity -- Falling Fixed investment to accelerate economic slowdown We are revising down our ---- real GDP growth forecast for Chile from -.- to -.- , as a sharp drop in fixed investment in Q--- points to weaker economic activity in the months ahead, particularly given the fall in the price of copper, Chile s key export, seen during the first quarter of ----. TaBle: eCONOMIC aCTIVITY -- Fiscal policy -- primary surplus to shrink through We forecast that Chile s primary budget surplus will shrink to -.- of GDP by ----, from -.- in ----, due to decelerating growth in revenues as economic growth weakens, and an uptick in public expenditures. ...While obstacles such as high reliance on copper exports and oil imports continue to pose a risk to economic progress, especially in light of what we view as a long-term downturn in Chinese demand for Chilean copper, we remain optimistic about Chile s economic potential over the next -- years. TaBle: lONG-TeRM MaCROeCONOMIC FOReCaSTS -- chapter -: Business environment -- sWot analysis -- BMi Business environment risk ratings -- Business environment outlook -- institutions --
...Short-Term and Long-Term Political Risk Ratings, and we do not foresee a strong likelihood of lowering the ratings in the near or medium terms. That said, we will be watching the incoming administration s job performance ratings closely in the coming months. ...Moreover, it will be crucial for Chile to build on its region-leading business environment to ensure that it can continue to capitalise on foreign investment into Latin America. -- Business Monitor International Ltd www Chile Q- ---- inequality remains a Fundamental issue latin america � Gini Coefficient Source: BMI, UNDP scenarios For political change Stability Reigns Supreme: With the peaceful transition of power back to a centre-left government reinforcing the strength of Chilean democracy, we believe that by far the most likely scenario is for Chile to remain a beacon of market-friendly political stability in Latin America. Having successfully shaken off the burden of its authoritarian past, both major coalitions are now firmly positioned in the mainstream, bringing a new sense of balance to the political landscape. ...As well as diverting the government s attention from passing market-oriented reforms, a more polarised political landscape could increase levels of disenchantment with the polity in general. -- Business Monitor International Ltd www political outlook
...
