Peso continues to weaken. In June, the peso lost further ground against the US$ ending the month at 539 peso to the US$, up from 525 pesos to the US$ at the end of May.  The weakening of the currency was prompted by domestic as much as international developments.  On the domestic side, the slower than expected economic recovery lessens the likelihood of an interest rate hike by the Central Bank in the near future.  On the international level, the concerns about possibility of further interest rate hikes by the Federal Reserve Board linger.  As a consequence, capital inflows remained subdued, prompting some peso depreciation. 

Strong increases in May exports and imports.  In May, exports increased a whopping 35.8% compared to the same month the year before, reaching US$ 1.8 billion.  Imports experienced a similar expansion growing by 34.8% to reach US$ 1.6 billion for the same month.  As a consequence of stronger export growth, the trade balance registered a US$ 180 million surplus.  While the increase in exports was fairly level among the various product groups, imports presented a mixed picture.  On the one hand, consumer and intermediate goods mushroomed by 54.3% and 41.7% respectively.  On the other hand, capital goods imports remained almost flat (+2.6%), reflecting a sluggish recovery of investment activity.  Although May was the third consecutive month were capital goods imports rose, the levels still remain below the levels seen in 1998 and raise doubts about the viability of the projected rates of economic growth, given that firms do not appear to be investing at levels needed to generate a strong recovery.  

Note:  The above text is an abridged version of the LatinFocus Consensus Forecast briefing on Chile.  For more details please click here.

For five-year forecasts, please click here.