translated from Spanish: Moody’s maintains stable Chilean note despite growth risks

The risk rating agency Moody’s considered this sea Despite certain risks to growth, Chile is “very prepared to face shocks,” and maintained its credit rating perspective as “stable,” at A1 for the country.
At the Inside LatAm conference in Santiago, Moody’s was favorable to Chile’s credit situation by considering that it has a large “institutional and fiscal strength”, although it raised its government debt and there are risks in the growth perspective, which This agency forecasts 3.6% for 2019.
Moody’s changed in July last year the credit perspective note of the South American country and degraded from Aa3 (negative) to A1 (Stable), as previously made by other financial institutions, such as Fitch ratings and S&P Global ratings.
“The accumulation of financial mattresses make the Chilean government is very well prepared to face clashes but it is also true that has lost its status as a net creditor,” said Efe Ariane Ortiz, senior analyst at Moody’s for the government of Chile.
The Cabinet of Sebastián Piñera received in 2018 as a blow the change in the credit memo, as at that time Chile had a great acceleration in its growth, culminating in 2018 with an expansion of GDP of 4.0%.
Despite indications of short-term improvements in economic and fiscal perspectives, Moody’s “does not anticipate recovering Chile’s credit strength in previous years,” owing to the fiscal deterioration experienced between 2014 and 2017, a period in which the economy It grew by 1.7% of the annual average.
Ortiz asserted that Chile’s rating could rise if it achieved “more aggressive” fiscal consolidation, which had an impact on reducing debt indicators and perhaps “reporting a fiscal surplus.”
Another factor that could raise the qualification of Chile would be a sustained growth above the potential, which today Moody’s estimates in 3.6%, through improvements in productivity and a lower concentration of the economy in copper.
At present, 50% of Chile’s exports are copper, while 37% are industrial products, 9% are agriculture and fishing, and 4% are other minerals.
Although Moody’s expects a “stable” price for copper in 2019–around $3 a pound–he recommended that Chile diversify into the economy to achieve greater growth.
As for potential obstacles to GDP growth, Moody’s highlighted U.S. tariffs on automotive imports; China-US Trade tensions AMERICA as well as the Brexit in Europe.
“Growth is slowing globally. Especially in advanced economies, such as the European Union, and China. The Asian country has been the fastest growing economy in the last twenty years and now it is slowing down and the rest of the world is sorry, “said the Latin American regional Director of Moody’s, Martin Fernandez in his paper.
“When China sneezes, the rest of the world gets the flu,” Fernandez declared.
As for the country’s indebtedness, this rating agency expects the government to continue to maintain “the deficit by 1.7% (of GDP)” and recommended the establishment of the debt around 27% of the product.
Moody’s stated that, despite Chile’s deteriorating fiscal policy in recent years, its prospects remain above several countries rated as A1 by the agency, as is the case with China, Japan, Saudi Arabia, Israel, the Czech Republic, and Estonia.
“A slightly greater deterioration in fiscal policy would not have a negative impact on the qualification,” Ortiz said, who claimed that only the credit perspective would degrade if there was a large increase in debt and a reduction in Chile’s expected growth .

Original source in Spanish