Peso weakens further.  The exchange rate weakened further in October depreciating to 572 pesos per US$ by end of the month from 565 pesos per US$ at the end of September.  However, unlike in September, when the currency lost ground due to domestic concerns, in October the peso suffered some contagion effects from the Argentina turmoil.  Since the end of March, when the peso reached a temporary high, the peso has depreciated some 12.3% against the US$.  Given the low inflation difference to the United States, the peso may seem undervalued.  However, taking the 1999 year-end exchange rate as a reference value, the peso has depreciated a much less impressive 7.7%. 

Trade Deficit in September.  In September, the trade balance entered negative territory and registered the highest deficit since October 1998.  The deterioration was prompted by a drop in exports, which declined 4.6% compared to September 1999 after a 40.3% year-over-year increase in August.  Non-copper exports were the main driver behind the slack performance, dropping 15.8%, while copper exports also slumped 5.3%.  Imports, on the other hand, increased 9.0% over September 1999, driven by healthy growth in capital goods (+27.9), consumer goods (+5.7%) and intermediate goods (+3.6%) imports.  Despite the September export downturn, the annual trade surplus remained at US$ 1.5 billion and exports continue to outpace imports, with the annual average growing at 18.1% versus 15.7% for imports. 

Note:  The above text is an abridged version of the LatinFocus Consensus Forecast briefing on Chile and includes information available up to 12 November.  For more details please click here.

For five-year forecasts, please click here.