LatinNews Daily - 25 March 2021

* International credit ratings agency Standard & Poor’s (S&P) has lowered its long-term foreign currency sovereign credit rating for Chile from ‘A+’ to ‘A’ with a ‘stable’ outlook. In a note, S&P said that the downgrade follows from its consideration that Chile’s finances have been weakened by the economic impact of the coronavirus (Covid-19) pandemic. S&P points out that Chile’s low debt burden and monetary flexibility allowed it to adopt countercyclical fiscal policies to mitigate the negative effects of the pandemic and spark an economic recovery. However, in S&P’s view “Chile’s public finances are likely to stabilise at a structurally weaker level after the impact of the pandemic recedes and the economy grows at its trend level, with fiscal deficits moderately higher than we had expected persisting over the next two to three years because of spending pressures”. The ratings downgrade comes after the government led by President Sebastián Piñera announced the creation of a new fund for the financing of emergency pandemic spending. It also comes as Chile’s congress is currently debating introducing a 3% royalty tax on copper production, Chile’s main export; and an initiative that would allow individuals to make a third withdrawal from their pension pots so as to provide them with additional emergency financial support.   

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