“At this stage we don’t see a major impact on the Chilean economy; I think the effects of this coronavirus pandemic are still limited,” finance minister, Ignacio Briones told foreign journalists in Santiago. Chilean exporters to China - chief among them fruit growers, paper firms and miners - had reported delays and logistical problems but no interruption in orders, Briones said. Chile sends around 30% of its exports to China and 50% of its copper.
Copper prices were down Wednesday due to fears of the rapid expansion of the coronavirus. At 0712 GMT, three-month copper on the London Metal Exchange (LME) yielded 0.4% to $ 5,662.50 per ton. The most quoted contract on the Shanghai Futures Exchange (ShFE) lost 0.5% to 45,480 yuan ($ 6,485.28) a ton. Copper prices, used as an indicator of economic health, have been affected as China is the world's largest user of that metal and the main importer of Chilean copper.
Chile’s peso sank by 1.05% (810.70/811 per dollar) on Monday amid fears about the spread of the coronavirus. The American currency ended the session with a rise of CL$5.60 comparing to Friday after a peak of CL$813. This is was highest level since last November 29, when it touched $ 810.00. "If there is a greater expansion of the coronavirus, the currency pair could perfectly show a greater momentum, especially if a new social unrest in Chile creates less local activity in the coming months", said Ricardo Bustamante, Head of Trading Studies at Capitaria.
The coronavirus outbreak in China may be altering the 2020 investment outlook for Latin America, souring sentiment toward regional free market beacons Chile and Brazil, while turning heads and cash toward left-leaning Mexico, according to Goldman Sachs. Bank of America Merrill Lynch’s (BAML) latest monthly survey of 52 Latin American fund managers showed that 56% say slowing growth and commodities demand in China is the biggest risk to the region. On the other hand, 27% say the economic situation in Chile will deteriorate over the next six months.
JPMorgan lowered its growth forecasts for Chile from 1.1% to 0.9% by 2020, an estimate only higher than 0.7% of UBS, and slightly below the midpoint of the Central Bank range (0,5%-1,5%). In addition to the impact of the coronavirus emergency on the Chilean economy, its latest report adds concern about social instability in the country with potential repetition of violent demonstrations in March prior to the plebiscite for a new Constitution.
Chilean Agriculture Minister Antonio Walker confirmed that to date there are already 2,300 containers with Chilean fruit stranded in China as a result of the coronavirus, although the cargo is in good condition. Trade has reactivated after the New Year holidays but is much slower and today 100 containers are opened per day against 200 before. In addition, e-commerce grew between 40% and 50%, because people try not to go out which makes direct sale in markets more difficult.
Export earnings from the current Chilean campaign fruit could fall by $100mn as a result of the coronavirus outbreak in China, according to exporter association Asoex. Port congestion, low demand and a shortage of store and delivery workers are taking toll on demand. Of the estimated 1,500 containers of cherries that remain in the market, just 249 were sold during the first 48 hours since wholesale markets reopened this week, said Asoex president Ronald Bown.
The board of Chile's Central Bank decided to keep the interest rate at 1.75% and was concerned about the possible impact of lower consumption and fiscal expansion on the country's economy. In the minutes of the meeting, board members also suggest closely following a possible weakening of the economy due to the coronavirus outbreak in China which has caused commodity prices, including copper.