Chile’s economy should still grow by about 4.0 per cent this year and add jobs even as a worsening global economic outlook takes its toll on the world’s top copper producer, President Sebastian Pinera told Reuters.
The South American country’s export-driven economy is losing steam in tandem with the global slowdown and Europe’s debt woes, prompting the central bank to cut is key lending rate for the first time in more than two years at its January meeting.
Mr. Pinera’s forecast for this year’s expansion, which matches a target being sought in regional powerhouse Brazil, reflects Chilean officials’ increasingly modest expectations for this year’s economic activity.
Finance Minister Felipe Larrain had put 2012’s growth target at 5.0 per cent, but earlier this month said the country now hoped to expand above 4.0 per cent this year. That compares to an estimated 6.2 per cent last year.
“In 2012, we’re going to have to face an economic crisis from developed countries … We’re convinced our economy is well prepared,” Mr. Pinera said in an exclusive telephone interview late on Thursday.
“Our expectations for Chile are that it will keep growing around 4.0 per cent during the year,” said Mr. Pinera, a conservative billionaire who took office in 2010 and has been hurt by months of rowdy protests by students and environmentalists.
They took to the streets last year to demand greater distribution of the economic spoils amid record prices for copper. Weakening demand for the metal or a sharper economic slowdown could add to the president’s difficulties.
Recent opinion polls have shown Mr. Pinera is the least popular president since General Augusto Pinochet, whose dictatorship ran from 1973-1990. Mr. Pinera’s approval ratings ended 2011 at 34 per cent, according to pollster Adimark.
As elsewhere in resource-rich Latin America, Chile’s small and open economy has been boosted by domestic consumption and demand from top metals-consumer China.
Chile is, however, heavily dependent on copper exports and prices at the London Metal Exchange clocked their first annual fall in three years in 2011 on fears of easing demand from China and global jitters.
Recent data has shown a weaker trade surplus, lower export revenue and slowing domestic demand, prompting this month’s surprise rate cut.
Chile’s exports, which also include fruits, wood pulp, salmon and wine, fell about 17 per cent last month as copper revenue dipped.
Former businessman Mr. Pinera said the country had the policy tools necessary to counter any sharper deterioration in global conditions.
“We have a contingency plan to face the crisis that is particularly geared towards sustaining our capacity for economic growth and job creation,” he said.
“Fortunately, our country’s fiscal and external accounts are solid and balanced, and (Chile) is therefore prepared to develop healthy and sustainable anti-cyclical economic policies this year.”
Economic analysts agree the country is better equipped to resist economic turbulence than it was in the run-up to the 2008 financial crisis, in part due to more trade with fellow emerging-market nations that are performing better than developed countries.
The Organization for Economic Co-operation and Development said earlier this month that Chile should register growth of 4.0 per cent this year and 5.0 per cent in 2013 as long as the global economy picks up.
Keeping Chileans in work will be key to limiting any potential political damage from the slowing economy and Mr. Pinera was optimistic that growth forecasts would mean further job creation – albeit at a slower pace.
“We’re nearing levels of full employment,” he said. “(We’ll) continue to create jobs this year, perhaps not at the same intensity as last year, but still creating jobs.”