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Weekly Report - 16 April 2014 (WR-14-15)

TRACKING TRENDS

CHILE | Economic activity starts to pick up. Chile’s central bank reported last week that economic activity in the country as measured by its monthly economic activity index (Imacec), which accounts for 91% of all goods and services included in the measurement of GDP, increased by 2.9% year-on-year in February.
The Imacec February figure was much higher than the 1.4% figure observed in January and even surpassed local market expectations. Local analysts had projected that the February Imacec figure would be 2.4%, as the economy continues to gather pace following a weak end to last year, when the Chilean economy grew by just 4.1% after years posting average growth rates of around 5%. In fact, the Imacec February result is the strongest monthly result since September 2013. The accompanying central bank report even pointed out that the seasonally adjusted February Imacec figure was 0.2% higher than in the previous month and 2.5% higher than in February 2013.
According to the central bank, the positive February result was primarily driven by increased dynamism in the mining and commercial retail sectors. Should the Imacec continue to exhibit similar positive results, this might lead the central bank to revise its decision, announced last month during its first monetary policy report of the year, to cut its official 2014 growth forecast from 3.75%-4.75% to 3%-4%.
In what should be a further boost for the local economy, the national state-owned copper mining company (Codelco) revealed, also on 7 April, that thanks to its ‘brownfield’ exploration efforts in the last four years the firm has identified new copper deposits believed to hold over 1.8bn tonnes of copper.

URUGUAY | Early success for economy ministry. The economy & finance minister, Mario Bergara, maintains that the urgent measures he adopted last month to contain inflation have been “successful” after encouraging figures for March. Inflation reached 0.58% in March, a significant fall from the 1.66% recorded in February and 2.44% in January. It brings 12-month inflation to 9.73%, dropping back from 9.82% and the brink of 10%, a psychological threshold which, if breached, would also oblige the government of President José Mujica to re-negotiate mid- and long-term salary accords with trade unions.
Bergara announced reductions in value-added tax (VAT) for fruit and vegetables; compelled communications and power public utilities to reduce electricity tariffs and telephone bills; fuel prices were frozen and big stores also agreed to freeze, or even reduce, the price of products in the basic basket of goods.
There was further good news. The employment rate in March reached its highest level since records began nearly 30 years ago, according to the national statistics institute (INE), climbing from 60.5% of the economically active population to 61.1%, or some 1.66m people. National unemployment also rose slightly, from 6.7% to 7%, but the biggest concern for government policymakers is not the number of Uruguayans in jobs but the number of Uruguayans per se.
Raúl Sendic, widely tipped to be chosen by former president Tabaré Vázquez (2005-2010) as his running mate after June’s primary elections in the ruling left-wing Frente Amplio (FA), called for the creation of policies to create “greater procreation among the middle class”. Sendic, the son of Raúl Sendic Antonaccio, one of the founding members of the Movimiento de Liberación Nacional-Tupamaros (MLN-T) guerrilla group, said that the low birth rate was one of the most serious challenges facing Uruguay. Sendic was president of the state petroleum company, Administración Nacional de Combustibles, Alcoholes y Portland (Ancap), for five years until last October when he resigned to run as a senate candidate for his Compromiso Frenteamplista faction of the FA.

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