Chile feels global turbulence, economy solid: President Pinera
SANTIAGO (Reuters) - World No. 1 copper producer Chile is feeling the impact of global financial turbulence via lower international prices for the metal, but the economy should still grow by 4.0 percent or more this year, President Sebastian Pinera said on Friday.
Everyone will be affected by fallout from Europe's brewing crisis, and Chile's government is ready to activate an economic contingency plan if liquidity is squeezed, Pinera told the Reuters Latin America Investment Summit.
"Fortunately, amid this backdrop of recessions, instability, slowdowns, the Chilean economy is healthy ... We're continuing to grow with strength. We estimate growth this year of 4 percent or more," Pinera said in an interview at his presidential palace in Santiago.
"We are affected by what is happening in the rest of the world, particularly an economy like Chile's, which is very open and very integrated," Pinera said. "We have seen a significant fall in the price of copper ... Despite this, the economy continues to advance solidly and with great strength."
Pinera, a conservative billionaire who took power in early 2010, forecast in January in an interview with Reuters that the economy would expand by about 4.0 percent.
Chile's small, export-dependent economy is bracing for a slowdown in global demand, especially from its top trade partner and No. 1 copper consumer, China.
The central bank forecasts the economy will expand between 4.0 percent and 5.0 percent this year, slowing from last year's 6.0 percent growth, in tandem with the global economy.
Chile and Peru are best placed in Latin America to withstand a downturn in the global economy and a drop in commodity prices, while Argentina and Venezuela are the most vulnerable to any turmoil, a senior official from Fitch Ratings said on Friday.
The Andean neighbors have rainy day savings funds for counter-cyclical spending, and the fiscal flexibility to cope with a potential drop in capital in-flows, sharply lower prices for metals and volatile foreign exchange rates, Fitch said.
The government drew up its emergency plan last year to mitigate the impact of Europe's growing crisis, which included plans to issue $6 billion in debt locally.
Officials said earlier this year the government could tap sovereign wealth fund savings if necessary, which total around $20 billion.
The contingency plan is aimed at protecting liquidity, jobs and fostering investment, but details are scant. Finance Minister Felipe Larrain said on Thursday the government was not yet planning to implement it.
"I am conscious of the difficulties in the world economy and conscious that Chile is not immune nor isolated in this situation, and so it will affect us," Pinera said.
"We're ready to face a potential slowdown or weakening in job-creating capacity."
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(Reporting by Antonio de la Jara and Simon Gardner; Editing by Alexandra Ulmer, Gary Hill)
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