Good and happy Sunday! This week marked one month since Russia’s invasion of Ukraine, the worst crisis Europe has experienced since World War II, one that has become a severe blow to the world’s economy and with an immediate impact on world inflation. Since the invasion began last month, wheat prices have risen by 21%, barley by 33% and some fertilizers by 40%.
Fears are growing that wheat shortages and rising food prices will create social unrest in many emerging economies and Chile would be no exception. The other unintended consequence is that the inflationary jump is putting pressure on central banks around the world to raise rates and that effort is going to put a brake on growth, cause the cost of financing to skyrocket and reduce liquidity globally.
In this edition of El Semanal. Deglobalization, a reality and a new threat to the Chilean economy; the deployment of Siches and Marcel to the heart of Sanhattan and big business; the controversial Civil Registry contract about to change hands again; three questions to Jéssica López and the role of the State and the private sector in solving the water crisis in Chile; and the gender gap extends to Uber.
Before starting, I remind you that these are the last days of the “Back to School” offer of El Semanal. We want you to join the community or invite friends, colleagues or family to join. There is an increasingly complex world and we help you understand it with this special offer.
1
1- CHILE AND DEGLOBALIZATION
What happened?. Former Finance Minister Rodrigo Valdés said it this week in an interview in La Mesa de El Mostrador: the new government, of President Gabriel Boric, will face the beginning of an era of “deglobalization.” But it is something that has been discussed for months both in academic circles and among global analysts and this week it became a headline around the world.
It was because of a letter from Larry Fink, CEO of BlackRock, the world’s largest fund manager and one of those who manages part of the AFP money abroad. In the letter the influential executive said that “the Russian invasion of Ukraine puts an end to globalization.” He added that “the reorientation of supply chains will be inherently inflationary.”
And why it’s important for Chile. The growth of the last 30 years was based on an international opening, on taking advantage of globalization and inserting the Chilean economy into the global one. Total exports in 2021 (including copper) totaled US$ 89.95 billion, 32.9% more than in 2020, breaking an all-time high. Exports account for almost a third of Chile’s GDP. A less globalized economy hits Chile’s growth engine when it already faces challenges of growth, debt and a new government that came to La Moneda with a reformist agenda that requires financing.
If you want to continue reading you have to join the El Semanal community, here a good opportunity with this special offer.
2
2- THE MOST COVETED CONTRACT OF THE CIVIL REGISTRY IS SOLD
What happened?. After all, the French giant Thales will keep the lucrative contract of the Civil Registry to issue identity cards and passports. Sources familiar with the operation confirm to this media that Thales – which came third in the controversial tender in partnership with Sonda – is about to close the purchase of Idemia, the company that kept what is considered one of the largest loot in the Chilean State, for US $ 4,600 million.
It should be remembered that Idemia was the incumbent and kept the contract after the offer of the Chinese Aisino, which won in the first instance, was annulled by the Government of Sebastián Piñera due to technical problems and under pressure from the United States. Aisino was awarded the tender for US$ 205 million, Idemia came second and Thales/Sonda third.
If you want to continue reading you have to join the El Semanal community, here a good opportunity with this special offer.
3
3- SICHES AND MARCEL GO OUT TO CONQUER THE ENTREPRENEURS
The Government deploys its ministers from Sanhattan to Casa Piedra: The Minister of the Interior in Icare and the Minister of Finance at the W Hotel. It was last Thursday and there was a lot of expectation.
The participation of Izkia Siches in the business meeting was the most controversial. He described the judicial system as classist and took direct aim at AFP: “Most likely in that look of ‘it’s my money’ no pension system of the future can sustain. If there are some who believe that to the extent that citizens believe that ‘it is my money’ and there are no social security systems we will get ahead … that is, it is futile, it does not work, and it is also profoundly false.” The minister called on businessmen to join the government’s transformative agenda.
Mario Marcel was in charge of clearing doubts and building bridges with the investment sector. He was the guest of honor at the seminar organized by BTG Pactual Chile at the W Hotel, in the heart of the El Golf neighborhood, the nerve center of the financial industry. It was the return to face-to-face seminars after two years of pandemic. The head of the Treasury called for the recovery of the capital market, called for calm and said that risk perceptions have been moderating in recent months. The controversy was generated by Juan Guillermo Agüero, who warned that a fifth withdrawal would be a lethal blow to the Chilean financial market. Marcel reiterated that a new withdrawal is not part of the government’s agenda.
If you want to continue reading you have to join the El Semanal community, here a good opportunity with this special offer.
4
4- GRAPHIC OF THE DAY: INEQUALITY AND SPORT
Inequality in Chile extends to the practice of physical activity and/or sport. According to an article by the @inta_uchile published by Yachay Data, 81.3% of the adult population in Chile is physically inactive (data as of 2016). As expected, the younger the group, the more active it is when it comes to doing sports.
If you want to continue reading you have to join the El Semanal community, here a good opportunity with this special offer.
A message from the AFP Association
AFP contributors reach all-time high
Almost 6 million people contributed to their pension in January 2022. The figure is the highest since the creation of the pension system 40 years ago.
Compared to January 2021, contributors have increased by 7.6%. Of these, 184,063 are men and 210,055 women.
These figures reveal that formal employment, according to the register of contributors for pensions, has gradually recovered from the negative effects of the pandemic. This is due to the lifting of the most restrictive mobility measures, the increase in the capacity allowed with a mobility pass, the gradual opening of gardens and schools, the end of the curfew, and the vaccination campaign.
The complete information can be found in this link or in the image of the graph
5
5- THREE QUESTIONS TO JÉSSICA LÓPEZ: “NATIONALIZING HEALTH CARE DOES NOT SOLVE THE PROBLEM”
Jessica López is the executive president of the National Association of Health Services Companies (ANDESS). In this brief interview, and taking advantage of the fact that the week that ends we celebrate World Water Day and the new Government enacted the new Water Code, we asked him about the water crisis, the debate on water in the Constitutional Convention and the myths that still exist about the industry.
López – who is rumored as a candidate to return to BancoEstado, but as president – says she strongly disagrees with the idea of nationalizing the sector, describes the role that the State should have in developing a national water strategy and warns that the threat of climate change is a reality in Chile and is here to stay. “Our estimate is that $10 billion of investment will be required between 2020 and 2040 to tackle climate change and continue to supply the population.”
What is the water reality, and do we really have to worry about what is coming in the coming months?
-The reality is that the country accumulates 13 years of drought. According to data from the General Directorate of Water of the Ministry of Public Works (DGA), 2021 was the fourth driest year on record and Santiago presented 70% less rainfall than a normal year. The rapid advance of climate change and the increase in water needs – due to population growth and economic activities – added to scientific projections, lead us to talk about water scarcity and crises. We must recognize that we are facing a climate crisis with visible and permanent effects on water availability, and act accordingly.
Faced with this reality, the health sector has worked intensively to achieve water security. Over the past 20 years, the sanitation industry has invested nine billion dollars in infrastructure to clean up urban wastewater and ensure the supply and quality of drinking water for 16 million people in cities. After 13 years of drought, we found that services have remained normal and we have had no restrictions.
The clearest example is that, even in the pandemic and the restrictions it imposed, we are prepared, no one. in urban areas it has lacked drinking water. This is because the industry plans its investments with a medium and long-term perspective. The decisions taken five and ten years ago have allowed us to ensure that there are no restrictions or rationing. These investments made have made it possible to avoid complex situations, just as an example, in the Valparaíso Region rationing would have been available since 2017 without the works that have been carried out.
In recent years the situation has become even more complex and it has become necessary to reach agreements with other users of the basins, in particular farmers, and in some cases with the help of the DGA, to ensure human consumption in cities. The future challenge, and I do not mean the coming months but the coming decades, is of such magnitude that overcoming it requires the effort of all actors – the State, companies and civil society. This is a country challenge, not a sector-specific one.
-What are the main myths about the reality of water in Chile and three advances that have been made that people out there do not take into account?
If you want to continue reading you have to join the El Semanal community, here a good opportunity with this special offer.
6
6- NO CLEATS OR TIES
– Security sounds the alarm about regulatory risks to the forestry sector. The main affected would be CMPC, of the Matte Group, and Celulosa Arauco/Copec, of the Angelini. In a report for its clients, the broker said that it is necessary to begin to take into account the possible effects that the regulatory changes that come from the Constitutional Convention or the current Government would have on the operation of both companies. And that to that we must add projections of lower prices for pulp for this year.
If you want to continue reading you have to join the El Semanal community, here a good opportunity with this special offer.
Chile is making news for good reasons. On Wall Street this week several investment banks stressed that the country is at the forefront of green finance. It should be remembered that Chile recently issued its first sovereign bonds linked to sustainability under a new local regulatory framework. It was a $20 billion 20-year issue and became the first sustainability bond ever issued.
Wall Street sets the agenda. During the week that ends, the SEC – the financial regulator of the United States – proposed a new regulation that requires a strict disclosure of the risks of climate change and the emissions of companies that are traded on the stock exchange. They are sweeping changes to rules that would require companies to disclose risks related to climate and greenhouse gas emissions and for investors to compare data between firms. Until now, companies did so voluntarily or under pressure from shareholders and investors.
If you want to continue reading you have to join the El Semanal community, here a good opportunity with this special offer.
The gender gap extends even to Uber. A recent study by John List, a business consultant and academic at the University of Chicago, reveals that male Uber drivers earn 7% more per hour than female drivers.
Among the reasons:
Men, on average, prefer to drive faster.
Women tend to avoid driving in places they perceive as riskier, such as areas around bars and in high-crime neighborhoods.
7
7- AGENDA OF THE WEEK: VERY LOADED!
Source: Central Bank of Chile
-Monetary Policy Meeting, Monetary Policy Report (IPoM) of March and the Imacec of February, in addition to the debut in the Senate of Rosanna Costa as president of the Central Bank. And this is just the tip of the iceberg of a week full of reports, figures, presentations and seminars that will have the attention of the market and analysts monopolized.
On Tuesday, the Central Bank Council (BC) is likely to raise the Monetary Policy Rate (MPR) dramatically again, to continue combating inflationary pressures. In the market it is estimated that it will be a historic rise of 200 basis points, to take it to 7.5%. That same day, the BC will publish the Bank Credit Survey of the 1st quarter and all the attention will be on mortgage loans, consumption and delinquency.
On Wednesday Rosanna Costa presents the March IPoM to Congress. In the market they assume that in the document the Council of the Central Bank will reduce its growth projections, while increasing those of inflation. Analysts consulted monthly by the BC estimate that the CPI will increase by 1.2% this month and 7.4% over the next 12 months, moving further away from the Bank’s target of 3%. That same day, the INE will publish the employment figures for February.
The March IPoM will be the first opportunity for the market to see the calculations the agency is making about the macroeconomic implications of the war in Ukraine and whether it is considering accelerating the pace of rate hikes.
It will be Costa’s debut as president of the Central Bank, presenting the IPoM to the Senate Finance Committee. A Communist senator will be present there for the first time in 40 years and there could be hard crosses during the hearing. The president of the issuing entity will then face the media in a press conference to delve into the document. On Thursday, Costa will go to Icare to continue explaining the report, and on Friday he will participate in a virtual conference organized by LarrainVial.
If you want to continue reading you have to join the El Semanal community, here a good opportunity with this special offer.
8
8- RECOMMENDATION OF THE WEEK: A TALK WITH ALBERTO MAYOL
The author of El derrumbe del modelo was the protagonist of a new edition of El Taller de El Semanal. Mayol, a sociologist and political analyst who is now living in Spain, made a diagnosis of the causes of social unrest and the challenges facing the government of Gabriel Boric with the arrival of the new cycle. (For those who do not remember, here is an interview we did with him in the middle of the Piñera 1 boom, in June 2021, in which he said: “The Chilean model is over”).)
He pointed out that a bad Constitution is just as dangerous for governability as a rejection of the new Magna Carta, along with warning that the economic reality and the issue of security will force Boric to make very difficult decisions. In addition, he said that in Chile social inequality is a bigger and more complex problem than economic inequality.
To see the full workshop, click here or on the image
