major macro economic indicators
|2013||2014||2015 (f)||2016 (f)|
|GDP growth (%)||4.0||1.8||2.1||1.8|
|Inflation (yearly average) (%)||1.9||4.4||4.3||3.6|
|Budget balance (% GDP)||-0.5||-1.5||-3.3||-2.2|
|Current account balance (% GDP)||-3.6||-1.1||-0.7||-1.6|
|Public debt (% GDP)||33.5||37.0||38.8||38|
(e) Estimate (f) Forecast
- Mining (leading copper producer), agricultural, fishery and forestry resources
- Numerous free-trade agreements
- Favourable business situation and political and institutional stability
- International companies operating in distribution, air transport and paper
- Member of the OECD and the Pacific Alliance
- Small and open economy, vulnerable to external shocks
- Dependence on copper and Chinese economy
- Persistent external deficit
- Vulnerability of the road network and electricity grid, and high energy prices
- Exposure to climatic and earthquake risks
- Income disparity and poor education system
Its dependence on the production and price of copper continues to hold back Chilean growth
Chilean economic activity in 2015 improved slightly thanks to a major budgetary stimulus. The boost to public spending helped offset the decline in investment linked with the fall in copper prices. In 2016, growth should hold steady under the impetus of foreign trade, excluding mineral exports which are continuing to feel the impact of falling commodity prices, mainly copper (the sector represents almost 19% of GDP). Agriculture and manufacturing exports should feel the benefits of increased price competitiveness thanks to the depreciation of the Chilean peso. There will also be a positive impact on these from the growth in demand in the United States (12% of exports). The non-mining sector should also benefit from a restoration of profitability thanks to lower energy costs following the fall in oil and gas prices.
Domestic demand, however, is likely to remain relatively flat. With uncertainties on how copper prices will move continuing to discourage investors, the depreciation of the local currency will also hit any recovery in investments as it makes imported capital goods more expensive. Household consumption should remain restricted as a result of the increased average level of debt (almost 60% of disposable income in 2014).
Inflation is likely to ease slightly in 2016 in a context of muted demand and the limited knock-on of the earlier depreciation of the peso against the dollar. Finally, monetary policy should remain relaxed in order to support economic activity, but some tightening cannot be ruled out in the event of the raising of interest rate by the FED during the year.
Towards a more cautious management of public accounts whilst the external accounts remain dependant on demand and prices for copper
In 2015, the sharp rise in the public accounts deficit was triggered by increased public spending, most notably in the social sphere (healthcare and education) aimed at alleviating the slowing in economic activity. Despite this, consolidated public debt remains relatively low (at around 38% of GDP). The scale of foreign asset holdings has increased the government’s ability to meet its commitments. In 2016, the government is likely to implement a more restrained management of spending because of the continuing weak budget revenues (20% of GDP, with half coming from VAT), which will help reduce the public deficit.
In terms of its external accounts, Chile is the world’s leading producer of copper (one third of world production) and the sector accounts for 13% of GDP, gold 19%, together with other minerals, in particular iron ore. Investments are therefore to a considerable extent dependent on the mining sector. Minerals represent 57% of exports of goods, and copper on its own accounts for 52%. China takes almost 50% of its copper output. The balance of trade is therefore extremely dependent on the demand for and price of copper. In 2016, there will probably be a worsening in the current account because of lower demand in Asia, and China in particular, whilst there is only likely to modest growth in imports given the negative impact of the depreciation of the peso and the resulting rise in the cost of imported products. The balance of services, running a structural deficit, and that of revenues should remain in the red as foreign investors, most notably in the mining sector, take their dividends which are largely in excess of Chilean investments in other countries. FDI, which tends to be largely concentrated on the mining sector, are likely to decline given the continuing trend for low mineral prices.
An economic context less propitious for reforms
Michelle Bachelet, previously President from 2006 to 2010, was re-elected at the end of 2013 for four years with 62% of the vote, but with a turnout of only 42%, as voting was made optional. Her election gave rise to high hopes even if the less favourable economic context could lead to her moderating her ambitions. The President will have to overcome several challenges. Firstly, impatience within the population relating to education and the reduction in inequalities, as well as compliance with tougher environmental regulations, in particular, under pressure from indigenous peoples (5% of the total) living near the proposed mining and hydroelectric projects. There is then the need to drive forward the construction of the road and energy infrastructures needed for the development of the mining industry, and managing the discontent within the business community at the higher duties and taxes needed to carry out these reforms.
The business climate remains stable and favourable. Despite the corruption scandals involving members of the President’s close family, Chile continues to be a model of transparency in Latin America.
Last update: January 2016
The promissory notes, checks and bill of exchange are frequently used for commercial transactions in Chile. In the event of default, it offers creditors certain safeguards, including access to the summary proceeding (Juicio Ejecutivo) under which, based on his appraisal of the documents submitted, a first instance judge (Juzgado Civil)may order a debtor to pay at the moment of the notification or his property will be attached. Some of these documents need a previous step at court to get this legal force.
Widely accepted though somewhat difficult to obtain, bill of exchange guaranteed by a bank limits the risk of payment default by offering creditor additional recourse to the endorser of the bill.
The check, which is most used than the bill of exchange or the promissory note , offers similar legal safeguards under summary proceeding (Juicio Ejecutivo), in the event of unpaid for a cause (protesto) of not founds or account closed. Also be recorder at a public registers (Boletín Comercial)
The same is true of the promissory note (pagaré), which, like bill of exchange and check, is an instrument enforceable by law and, being unpaid, is also recorded at Boletín Comercial. The promissory note needs to be protested (protestada) by a public notary or in a judicial trial.
An outgrowth of the Boletín Comercial provide to other information companies (such as Dicom, SIISA) about the unpaid debt registered at the national level, but Boletín Comercial is the official and most important company at national level under the dependence of the Santiago Chamber of Commerce (Cámara de Comercio de Santiago) . Commercial companies and private persons are recorded and where banks and other deposit and commercial institutions can check a company or person’s payment record before extending credit or a commercial transaction.
Electronic transfers via the SWIFT network, widely used by Chile banks, are a quick, fairly reliable, and cheap instrument, provided the purchaser, in good faith, orders payment.
Collection begins with amicable collection process (non judicial intervention yet). Once NOA is received, debt collection will proceed to contact the debtor, the objective is that the parties can agree about a payment settle or a payment plan.The time of this amicable phase depends on if the parties have agreed on a settle or a payment plan within the 60 days following the presentation of NOA, if there is no agreement, debt collection will proceed to transfer the case to an external law office where legal actions will begin in order to avoid the prescription of the documents that support the debt (check, invoices, promissory note, bill of exchange).A formal notice served by recorded delivery letter is send inviting the debtor to pay. The principal amount increases according to the interest set by the parties in case of not complying due date.
Barring special clauses included in the commercial contract, the applicable rate is the” interés máximo convencional” regulate by the law number 18.010 obtained from a estimated since 2000 for operations on national currency of 90 days or less or under 200 UF (unidades de fomento)
Annually, the Central Bank publishes the rate thus determined in theDiario Oficial del Estado.
Where there is a lack of settlement agreement with the customer, the creditor will initiate a legal collection process by reference to the law on civil procedure (Código de Procedimiento Civil) which came into force since 1902.
Besides the summary proceeding (Juicio Ejecutivo) a seller unable to settle with a buyer out of court may enforce his right to payment through the civil procedure , divided into ordinary proceedings (Juicio Ordinario)or extra summary proceeding (Juicio Sumario) depending the amount of claims and the type of documents that support debt .
The claimant has to explain the facts on which he exercises its right and to support all case documents, in original or certified copies, when he files its initial petition. After the presentation, judge decides to accept or not the action initiated. If accepted, the trial begins with times depending type of the procedure.
Any juridical action needs a barrister or solicitor (lawyer) even if it is minor court (Juzgados – primera instancia) or superior court (Corte Apelaciones o Suprema- segunda instancia ) where the debtor is located.
Debtor can disputes the ruling with motivated arguments that law contains at the Código de Procedimiento Civil (excepciones) such as payment of debt, prescription, compensation, etc. Judge will observe those arguments and initiate a parallel trial about the defence.
The duration of a trial can take to 6 month to 2 years or more depending of the document, debtor defence and if an appeal action has being executed.