Analysts' View: Chile quake to hit econ, help keep rates low

(Reuters) - A huge magnitude-8.8 earthquake struck Chile early on Saturday, killing at least 147 people, forcing major copper mines to suspend operations and damaging roads and bridges.

Following are analysts' comments on the implications the earthquake could have on Chile's economy and financial markets.

NICK CHAMIE, GLOBAL HEAD OF EMERGING MARKETS RESEARCH, RBC

CAPITAL MARKETS IN TORONTO

"There will be widespread and deep impact on Chile's economy and financial markets.

"In the immediate future it's quite likely the Chilean peso will weaken sharply as economic activity will be impaired due to the effects of the earthquake on the industrial and agricultural sectors in the region hardest hit.

"It's likely the central bank will keep liquidity and monetary conditions extremely loose in the near future in order to support the government's efforts to stabilize the economy and financial system.

"There will be a large fiscal cost to the government in its rebuilding efforts, as well for businesses and individuals. However, the government's solid savings position should allow it to absorb these costs without significant effect on its fiscal health.

"Over the longer-term, the reconstruction effort should provide a boost to economic activity though this will be spread out over several years."

ALBERTO RAMOS, SENIOR ECONOMIST AT GOLDMAN SACHS IN NEW

YORK

"In terms of activity, this will create serious disruptions for a few weeks which will impact real GDP during the first quarter and likely also in the second quarter. After that we will see an extra bounce on activity anchored on the reconstruction effort.

"This will have a moderate effect on the peso. The fact that they can bring in onshore some of the saved funds will help stabilize the peso.

"On monetary policy, the central bank was on track to start normalizing monetary policy sometime late in the second quarter of 2010. Depending on the impact on the economy, they can keep the current stimulative stance for a while longer.

"In the short term, the retail and most services sectors will be heavily impacted, in the medium-term the construction and materials sectors will benefit.

"The Chileans fortunately have the best managed economy in the hemisphere and will be able to deal with this terrible adversity.

"This will imply extra fiscal spending in 2010 to finance reconstruction efforts. Fortunately they have a solid fiscal situation and savings abroad that can be marshaled to finance the required increase in spending."

CURTIS MEWBOURNE, PORTFOLIO MANAGER IN NEWPORT BEACH FOR

THE PIMCO EMERGING MARKETS BOND FUND

"Preliminary reports don't indicate any major damage to mining industry, which is largest sector of economy at about 20 percent of GDP and 50 percent of exports. Also the population of Chile is highly urban, with about 50 percent of the entire country living in greater Santiago, which was 200 miles from the epicenter of the quake. So we expect the direct economic impact of the earthquake to be limited, with the major risks coming from the yet unknown impact of tsunamis.

"As the priority shifts from the urgent humanitarian needs to reconstruction, the strong state of government finances in Chile will facilitate these efforts. We continue to monitor the situation in the Pacific, as several other EM countries are on Tsunami alert -- Indonesia and the Philippines."

(Reporting by Jason Lange, Manuela Badawy and Jennifer Ablan; Editing by Xavier Briand)