The mining boom accelerates the Chilean economy

Published on 11 June 2018

The prices of metals are on the side of the Chilean economy, which begins to recover after years complicated by mining strikes and contractionary reforms...

2018 seems to go a step beyond the breaking point of the global economy after ending a period of successive financial crises that began in 2008. Not only has it reached higher growth rates compared to recent years (even they were lower than the inflation rates and did not manage to generate a real expansion of the economies of some countries), but the world has reached its potential growth, and goes for more.

Much of the momentum comes from China's growth, which although it does not advance at the rate close to 10% observed a decade ago, has managed to maintain a good pace and expands its GDP above 6%. In this way, industrial metals have clearly benefited in the last two years, when cooling fears were overcome in the Asian country, and a sustained upward trend was restored in response to market fundamentals.

On the other hand, gold has also managed to maintain a good performance because the political uncertainty does not end up disappearing, even in spite of the improvement in the economy of the United States. In response, countries dependent on mineral exports have benefited, and could end up even better if these trends continue.

This is the case of Chile, where copper generates 40% of exports, to which are added other metals such as iron, gold, silver, molybdenum (byproduct of copper) and lithium. On this last one, we recently explained the impulse coming from the technological industry. Given that all these products have good market prospects, it is expected that the Chilean economy will benefit. Below are two tables with the top ten products exported from Chile to China and the United States, their two most important destinations, with a combined weight of 43% in the value of their shipments.

As can be seen, beyond salmon and products derived from the forest industry, Chile depends mainly on mining. The recovery of the economy of the United States and the Chinese stability allow to assure a good growth throughout the next years.

Not even the commercial tension between both countries will be able to truncate this advance. The fundamentals of the rise in prices are based on the expansion of the Chinese economy given the boost of domestic demand, specifically consumption and investment in infrastructure. Meanwhile, the consolidation of the US labor market and the dependence of its economy on the export of raw materials and intermediate goods to China based on oil and grains, assure that there are still many advantages to be taken advantage of by Chile.

For more information about Chilean exports, you can access the Veritrade portal Solicite su prueba aquí: https://bit.ly/2JtKjRk

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