geopolitical risk ratings firm

Chile Country Update

18-Month: *CPD 60% (50%)
Five-Year: *CPD 55% (45%)
Turmoil Financial Transfer Direct Investment Export Market
18-Month: Low A A- A-
Five-Year: Low A- A- A-

( ) Indicates change in rating.     *  Indicates forecast of a new regime.

Years Real GDP Growth % Inflation % Current Account ($bn)
2008-2012(AVG) 3.8 3.6 -1.87
2013(F) 4.8 1.7 -12.10
2014-2018(F) 4.9 3.1 -10.30

Bachelet Poised for Return
The governing center-right CPC and the opposition center-left CPD held primary elections to choose their presidential candidates in late June.  To no one’s surprise, former President Michelle Bachelet secured the CPD’s nomination with ease, and she will face off in November against former Economy Minister Pablo Longueira.  The CPC settled for Longueira after the runaway favorite to get the nod, Laurence Golborne, became embroiled in two separate corruption scandals and was forced to bow out in April.
If the voting numbers from the primaries are any indication of what will happen in November, Longueira does not stand a chance.  In the CPD primary, where the result was never in doubt, more than 2 million votes were cast.  The CPC contest, a tense battle that went down to the wire, drew a little more than 800,000 voters.  Significantly, Bachelet alone received 1.5 million votes, nearly double the total for both of the CPC candidates combined.
Bachelet is promising some pretty big changes if she is returned to power, including sweeping reforms of the tax, pension, and education systems.  With regard to taxes, she has called for higher taxes on mining operations (which will also face tighter environmental regulations) and changes to make the overall system more progressive.
The issue of how to continue funding the pension system has received a great deal of attention during the campaign, and is sure to rank high on the legislative agenda during the next congressional term.  In order to sustain the existing system, some combination of higher contributions and a later retirement age will be needed.  Bachelet has instead proposed a complete overhaul, advocating the replacement of the current model with a state-run fund.

Economic Forecasts for the Three Alternative Regimes

  CPD CPC Divided Government
  Growth (%) Inflation (%) CACC ($bn) Growth (%) Inflation (%) CACC ($bn) Growth (%) Inflation(%) CACC ($bn)
2013 4.8 1.7 -12.10 5.5 2.2 -9.10 4.2 1.5 -8.30
2014-2018 4.9 3.1 -10.30 5.3 3.2 -8.80 4.0 3.8 -6.10

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