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UPDATE 2-Chile peso rise worrying; no inflows tax-President
October 18, 2010 / 9:23 PM / 7 years ago

UPDATE 2-Chile peso rise worrying; no inflows tax-President

* Pinera rules out Brazil-type taxes on investment inflows

* Wants to expand trade liberalisation with EU

(updates with later speech, paragraphs 9-12)

By Sujata Rao

LONDON, Oct 18 (Reuters) - Chile is worried about the rapid strengthening of its currency but is not planning Brazil-type taxes on investment inflows, the country’s President Sebastian Pinera said on Monday.

“We are very much concerned,” Pinera told reporters on the sidelines of a conference in London. “Of course we are worried because the peso has appreciated a lot in the past two months ... there are some sectors which are suffering a lot.”

“But at the same time we are going through a phase of very high copper prices and very good terms of trade. And Chile is growing faster than the rest of the world, therefore it’s normal to see the peso appreciate,” he added.

Chile, the world's top copper producer, has seen its peso CLP= strengthen 15 percent since June to two-year highs against the dollar. Huge doses of monetary and fiscal stimulus in the United States and the prospect of more to come is also prompting investors to put their cash into emerging markets.

The peso’s appreciation has fuelled speculation Chile will be the next emerging economy to impose curbs on overseas flows.

Asked if Chile planned measures like Brazil’s tax on foreign investment in local bond markets, Pinera said: “No.”

“We are thinking of other measures ... like strengthening the openness of the capital account. That will allow more Chilean investment to go abroad and it will put some pressure on demand for forex and that will improve our exchange rate.”


Pinera, on a European tour planned well before last week’s dramatic rescue of 33 trapped miners, pledged to tighten mine safety in Chile, even if it meant extra costs for owners [ID:nLDE69H1JA].

Speaking later at the London School of Economics, Pinera said Chile wanted to invoke an “evolving clause” in a 2002 agreement with Europe to further liberalise trade.

“I hope that Europe will also be ready for that and we will have the support of Spain and England and I hope that before the end of this week we will get the support of France and Germany,” said Pinera, who goes on to visit Paris and Berlin after London.

He was met by a small group of chanting demonstrators protesting Chile’s use of anti-terror laws against indigenous Mapuche villagers.

Chile and Britain released a joint communique pledging to strengthen cooperation in renewable energy and to increase trade and investment. In the communique, Britain gave its backing for Chile to negotiate an “open skies” aviation liberalisation agreement with the EU.

Earlier Pinera told an investment conference his country’s economy would expand this year by at least six percent -- higher than the finance ministry’s projection of 5.1 percent growth.

“Last year our economy went down one percent. This year we grow 6 percent or more,” he said.

Pinera said that while the economy is recovering well from last year’s slump and February’s earthquake, the country needed growth rates of 6 percent at least to eliminate poverty.

Pinera said doubling Chile’s power generation capacity was key to accelerating economic growth.

Asked about a figure of $30-35 billion cited by analysts for investment in power generation capacity, he said:

“In that area. It’s absolutely necessary, otherwise energy will put a brake on our development,” adding that Chile would focus on hydro-electric and other renewable power sources.

Additional reporting by Adrian Croft; Editing by Andrew Hay

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