World Economy

Chile Rating Downgraded

Chile Rating DowngradedChile Rating Downgraded

Chile’s streak of bad news seems set to continue until the end of the year. With teetering copper prices and a weak recovery, the economy has underperformed throughout 2017. Moreover, a recent sovereign-debt downgrade from Standard & Poor’s is just another body blow for Chilean President Michelle Bachelet, who is now fending off attacks from political rivals.

Chilean sovereign-debt ratings were recently downgraded from AA- to A+. A series of factors are at play in this downgrade. Chief among them is the sluggish recovery from the end of the commodity super-cycle. An anemic investment climate due to weak business confidence has also caused general anxieties about the profitability of Latin America’s most stable economy. With dwindling performance numbers and an unfavorable global investment environment, few expect major gains within the growth of Chilean stock markets, International Banker reported.

This comes as particularly bad news for Chilean clothing retailer Tricot, especially in light of its initial public offering. Hoping to raise $150 million, the company planned to sell up to 120 million shares in the country’s second IPO this year. Looking to expand its operations by 29 stores and increase credit loans by 73%, Tricot seems undeterred by 2017’s feeble performance.

The ailing Chilean economy seems to be turning support away from President Bachelet and garnering former president, billionaire and current presidential candidate Sebastian Pinera a growing body of support. His campaign declares that the stagnation of recent years is predicated on weak fiscal policy from the current government, and that his business-savvy approach is the key to returning the country to consistent growth.

The Chilean economy relies heavily on the copper industry, which accounts for 40% of Chilean exports. The global mining sector has seen some activity in the past year, but none has represented a substantial gain for Chilean copper.


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