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1
Chile-China: Strategic Partners
Francisco SilvaMarch 2014
MexicoUSD 1.178 B
ColombiaUSD 370 B
ChileUSD 268 B
BrazilUSD 2.253 B
PeruUSD 197 B
Chile
Peru
Colombia
Mexico
Brazil
•Macroeconomic imbalances
•Poor political stability
•Institutional uncertainty
•Non Investment grades
•Shallow financial markets
Argentina
Venezuela
Paraguay
Ecuador
others
• Good macroeconomics• Good Institutions• Flexible exchange rates• Investment grades• Deep financial markets
2
LATAM has Two Different Stories with Two Different Models
Source: IMF. Per Capita GDP, PPP adjusted (1990 = 100).
100
150
200
250
300
350
4001990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
GDP per capita (PPP)
Chile
Colombia
MéxicoBrazilPeru
Venezuela
Argentina
3
Chile and the Andean countries have outperformed…
Source: IMF and Bloomberg.
0
50
100
150
200
250
300
350
400
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
GDP per capita (PPP) vs CRB
Chile
CRB Index
Argentina
Venezuela
4
…and they are NOT only a Commodity Story
Source: Heritage Foundation, World Economic Forum. # out of 180 countries.
0
40
80
120
160
200
Chile
Colom
bia
Peru
Mexic
o
Braz
il
Arge
ntina
Vene
zuela
Economic Freedom Ranking (2013)
0
10
20
30
40
50
60
70
Chile
Braz
il
Peru
Mexic
o
Colom
bia
Arge
ntina
Vene
zuela
Financial Development Ranking (2012)
5
Chile: Institutional Strength is KEY
0
20
40
60
80
100
120
140
160
Mala
ysia
Kore
a
Chile
Phili
ppin
es
Bra
zil
Mexic
o
%
Private credit/ GDP Stock market capitalization/ GDP
0
10
20
30
40
50
60
70
Chile
Mexic
o
Mala
ysia
Bra
zil
Kore
a
Phili
ppin
es
%
Financial strength index
Private bonds/ GDP
Source: Betancour, C. De Gregorio, J. Jara A. “Improving the Banking System: The Chilean Experience”. BIS Papers. No. 28, 2006.
Financial Strength Index based on Moody’s index of financial system strength, based on a numerical scale assigned to weighted average bank ratings by country.
… and Financial Development
Source: IMF.7
Chile’s Macro: Low Inflation and steady Growth
GDP pc2013 (IMF)
GDP2013
GDP 2000-2013
Inflation 2000-2013
Curr. Acc. 2010-2013
Public Debt Net 2013
USD Billions USD Growth Av, % Average, % (%GDP) (%GDP)
Argentina 11,679 484.596 4.2 9.1 -0.3 na Brazil 10,958 2,190.218 3.3 6.6 -2.5 34.0 Colombia 7,831 369.225 4.2 5.3 -3.1 25.6 Mexico 11,224 1,327.021 2.3 4.8 -1.0 38.5 Peru 6,797 210.349 5.6 2.7 -3.2 3.6 Venezuela 12,255 367.482 3.5 23.1 4.1 na Chile 16,043 281.666 4.4 3.2 -2.0 -6.1
China 6,569 8,939.327 9.9 2.3 2.7 na Hong Kong 38,605 279.654 4.2 1.0 3.9 na
Alemania 43,952 3,593.238 1.3 1.7 6.3 56.3 España 29,409 1,355.660 1.6 2.8 -2.0 80.8 Francia 42,991 2,738.676 1.2 1.9 -1.7 87.2 Italia 33,909 2,068.366 0.3 2.3 -1.8 110.5
Source: IIF, CIA, IMF.
GDP 2012Inflation
2000-2012Current Account
2000-2012
General Government Gross
Debt 2012
General Government Net
Debt 2012
Total External Debt 2012
Reserves 2012
US$ bn % % GDP % GDP % GDP % GDP % ImportsArgentina 475,211 8.9 -0.1 47.7 -- 30.1 40.7Brazil 2,253,090 6.6 -2.2 68 35.2 25.6 105.5Chile 268,177 3.3 -1.1 11.9 -6.7 43.9 37.9Colombia 369,018 5.5 -3.1 32.6 25.2 21.4 41.8
Mexico 1,177,398 4.9 -0.8 43.5 38 29.5 36.8Peru 198,851 2.7 -2.6 20.5 4.3 29.5 99.9Venezuela 381,286 21.9 4.5 46 -- 31.2 11.1China 8,221,015 2.3 2.7 26.1 -- 8.8 149.2Germany 3,429,519 1.7 6.5 81.9 57.4 168.2 --France 2,613,936 1.9 -1.8 90.2 84 197.9 --Italy 2,014,078 2.4 -2.4 127 106.1 123.8 --Spain 1,323,500 2.9 -3.1 85.9 73.5 170.9 --
8
And (like China) Low Levels of Debt
Source: Bloomberg, 11/18/2013.
0
100
200
300
400
500
600
700
E-0
6
E-0
7
E-0
8
E-0
9
E-1
0
E-1
1
E-1
2
E-1
3
Brazil
Chile
Colombia
Mexico
Peru
0
100
200
300
400
500
600
700
E-0
6
E-0
7
E-0
8
E-0
9
E-1
0
E-1
1
E-1
2
E-1
3
Spain
France
Italy
Germany
CDS 5y (points)
193 192
164
129 124102
86
48
25 19
0
50
100
150
200
250
Italy
Braz
il
Spain Pe
ru
Colom
bia Mexic
o Chile
Franc
e US
Germ
any
CDS 5y (points)
9
Good Macroeconomic Policies are Rewarded with Low Interest Rates
0 20 40 60 80 100
UruguayJapanBrazilIndiaItaly
IsraelIndonesia
USAFrance
ParaguayPeru
GermanyPortugal
ColombiaArgentinaVenezuela
United KigdomMexico
MalaysiaSwitzerland
SpainAustralia
CanadaNew Zealand
SwedenIrlandChina
ThailandFinland
SingaporeKoreaChile
Macro Management The Global Competitiveness and Ease of doing business index
Source: World Bank, World Economic Forum .
GCI EoDBI Switzerland 1 29 Singapore 2 1 Finland 3 12 Germany 4 21 United States 5 4 Sweden 6 14 Hong Kong SAR 7 2 United Kingdom 10 10 Denmark 15 5 New Zealand 18 3 France 23 38 China 29 96
Chile 34 34
Spain 35 52
Italy 49 65 Mexico 55 53 Brazil 56 116 Peru 61 42 Colombia 69 43 Ecuador 71 135 Argentina 104 126 Venezuela 134 181
10
Good Environment for Doing Business
Source: Central Bank of Chile.
China’s Participation In Chile’s Trade Of Goods has Increased Dramatically…
0
5
10
15
20
25
0123456789
10
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Imports from China (% GDP) left
Exports to China (% GDP) left
Exports and Imports (% Total X+M) right
Source: World Trade Organization (2012).
By main destination (% of total exports)
China EU US
Brazil 17 20.1 11Chile 23.3 15.3 12.3Colombia 5.5 15.1 36.9Mexico 1.5 6 77.6Peru 17.1 17.1 14.2
12
…and Now China is our Main Exports’ Destiny
Rest, 5.7
China, 51.6Japan, 20.6
South Korea, 11.5
India, 6.2Taiwan, 4.4
% of total exports to Asia 2013
Source: BCCh.
Chilean Exports to China so far is Mainly Commodities% of total exports to China 2013
79.0
6.0 3.411.6
0102030405060708090
Copper Other mining Agriculture, forestry and
fishing
Industry
19961993-
94 1998 1999
Economic Agreements
BoliviaColombiaEcuador
VenezuelaFTA CanadaAssociation
with Mercosur
FTA MexicoEconomic
Agreement Peru
FTA Central America
2002
Economic Association
EU
2003
FTA USA EFTA
South Korea
2005
FTA ChinaEconomic
Association P-4
2006
Partial Scope Agreement
India
Current negotiations with India and JapanStudy for an
FTA with Thailand
2007
Western Hemisphere Asia
Source: Dirección General de Relaciones Económicas Internacionales de Chile, 2006.
EFTA: European Free Trade Association: Iceland, Liechtenstein, Norway, Switzerland.Note: TheP-4 group are: Brunei Darussalam, Chile, New Zealand, Singapore.
And we Keep Looking Towards Asia
INSTALLED CAPACITY (MW) AND AVERAGE SALES PRICES SIC GENERATION (BY TECHNOLOGY)
15*Estimation for the average energy sales price from customers contracts
0
20
40
60
80
100
120
140
160
-
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
2006 2007 2008 2009 2010 2011 2012 2013
SIC SING PMM SIC PMM SING
18%
20%
0%19%
34%
4%4% 1%
Hydro Dam Hydro ROR Gas LNG CoalBiomass Diesel Wind Solar
Looking Towards Asia: Energy is a Key Sector for Cooperation
2.63.2 3.5
4.3 4.45.2 5.2
5.6
0
1
2
3
4
5
6
7B
razi
l
Co
lom
bia
Per
u
Mex
ico
Ch
ina
Ch
ile
OE
CD
m
emb
ers
Un
ited
S
tate
s
16
Quality of port infrastructure, WEF (1=extremely underdeveloped to 7=well developed and efficient by international standards)
Looking Towards Asia: Infrastructure has Room for Improvement
17
05
1015202530354045
E-9
3E
-94
E-9
5E
-96
E-9
7E
-98
E-9
9E
-00
E-0
1E
-02
E-0
3E
-04
E-0
5E
-06
E-0
7E
-08
E-0
9E
-10
E-1
1E
-12
E-1
3
Departments houses
Months to deplete stock
800
1300
1800
2300
2800
3300
3800
E-9
7
E-9
8
E-9
9
E-0
0
E-0
1
E-0
2
E-0
3
E-0
4
E-0
5
E-0
6
E-0
7
E-0
8
E-0
9
E-1
0
E-1
1
E-1
2
E-1
3
Real estate sales
90
100
110
120
130
140
150
E-0
4
E-0
5
E-0
6
E-0
7
E-0
8
E-0
9
E-1
0
E-1
1
E-1
2
E-1
3
Housing Prices
-4
0
4
8
12
16
I II III IV I II III IV
2012 2013
Var%12m Velocity
Activity
Looking Towards Asia: Construction and Real State
Conclusion
» So far the economic relationship between Chile and China has been highly beneficial for both countries.
» The focus of this relationship has been mainly through commodity trade.
» But they are many potential areas of further cooperation such as Energy, Infrastructure and Real State.
ECONOMIC INDICATORS: Summary
Source: Estudios Security.
Chilean Indicators 2008 2009 2010 2011 2012 2013 2014 e
GDP (Var %) 3.3 -1.0 5.8 5.9 5.6 4.0 3.5
Unemployment rate (aver. %) 9.3 10.8 8.1 7.1 6.4 5.9 6.4
CPI dec-dec (%) 7.1 -1.4 3.0 4.4 1.5 3.0 3.0
MPR (eop,%, en $) 8.3 0.5 3.3 5.3 5.0 4.5 3.8
BCP-10 base 365d (eop, % $) 6.2 6.4 6.1 5.3 5.6 5.2 5.0
BCU-10 base 365d (eop, % UF) 3.3 3.3 2.9 2.7 2.6 2.2 1.7
Exchange Rate (eop, $/US$) 629 506 468 521 479 524 580
Global Indicators 2008 2009 2010 2011 2012 2013 2014 e
World Growth (PPP, %) 2.8 -0.6 5.1 3.8 3.2 2.9 3.5
Cooper Price (aver., cents US$/Pound) 316 234 342 400 361 332 324
Oil Price WTI (US$ p/b, aver.) 100 62 79 95 94 98 99
Fed Funds (eop,%) 0.6 0.3 0.3 0.3 0.3 0.3 0.3
Treasure Bonds 10-year yields (eop, %) 2.2 3.8 3.3 1.9 1.8 2.9 3.2
Euro (eop, US$) 1.40 1.43 1.34 1.30 1.32 1.37 1.33
Yen (eop, ¥/US$) 91 93 81 77 87 105 106