ECR: Which way next for Chile?
|LatAm safe-haven ranking||1st|
|Euromoney Country Risk score||77.14|
|Three-year score change||1.9|
|Implied default probability (1-year %)||0.01|
The darling of Latin America’s bond issuers for many years, Chile remains by far the safest sovereign in the region. Commanding a first-rate score of 77 points out of 100, the business-friendly nation is comparable with safe havens such as New Zealand, Hong Kong and even the US. However, Chile’s macroeconomic scores have slipped since last year. Economic headwinds include reduced demand from China weighing on copper prices – its principal export – and on the peso’s exchange rate, boosting inflation. Investment is also contracting slightly. Yet although economic activity has slowed, 3% growth is still expected for 2014, the current account deficit is narrowing and FX reserves exceed five months of import coverage. Chile’s survey score for government finances remains rock solid and less risky than any of its other economic sub-factors. A strong starting point and a manageable debt profile allow for a small fiscal deficit to arise in 2014/15 without derailing sovereign creditworthiness.