Chile Forum

Chile's economy being heavily dependent on the price of copper, I found this article interesting: http://www.zealllc.com/2009/cupanic.htm It doesn't specifically reference Chile but you can see the price of copper will probably recover back into the trend channel and on up. Market swings aside, having natural resourses is an ace-in-the-hole.

The gist of it:

"All over the world people are still building and consuming, and the global population is still growing. Global demand for copper will remain high relative to history."

" I don’t know exactly where this puts the copper price going forward, but I bet it will be a lot closer to pre-panic levels than its panic lows. Consider the economies of its largest consumers, China and the US. Despite all the sound and fury in this past year encompassing a stock panic, US real GDP is only down 3.9% year-over-year. I realize housing has been hit particularly hard, but still US copper demand can’t have plummeted too far when our economy is still trucking along at 96% of Q2 2008’s pre-panic levels."

"And Chinese GDP is actually growing despite the panic! In the year ending Q2 2009 that obviously straddled the stock panic, Chinese GDP actually grew by an amazing 7.1%! Chinese copper imports this year have risen to records in some months. Given the state of the world economy, copper demand (and hence prices) is likely to be far closer to pre-panic levels than the panic lows going forward."

Here's a graph from the article.

Chuck J 3.0 wrote:Chile's economy being heavily dependent on the price of copper, [...]

"And Chinese GDP is actually growing despite the panic! In the year ending Q2 2009 that obviously straddled the stock panic, Chinese GDP actually grew by an amazing 7.1%! Chinese copper imports this year have risen to records in some months. Given the state of the world economy, copper demand (and hence prices) is likely to be far closer to pre-panic levels than the panic lows going forward."

Is the growth in China's GDP real, or is it more like the "growth" we saw last year that was fueled by the Olympics mania? The Chinese government has pumped huge amounts of liquidity into the domestic economy to avert a crash. I think a lot of this money went into speculative investments, and the run up in commodities prices is the result of this speculation and not from real demand.

GJJIM wrote:

Chuck J 3.0 wrote:Chile's economy being heavily dependent on the price of copper, [...]

"And Chinese GDP is actually growing despite the panic! In the year ending Q2 2009 that obviously straddled the stock panic, Chinese GDP actually grew by an amazing 7.1%! Chinese copper imports this year have risen to records in some months. Given the state of the world economy, copper demand (and hence prices) is likely to be far closer to pre-panic levels than the panic lows going forward."

Is the growth in China's GDP real, or is it more like the "growth" we saw last year that was fueled by the Olympics mania? The Chinese government has pumped huge amounts of liquidity into the domestic economy to avert a crash. I think a lot of this money went into speculative investments, and the run up in commodities prices is the result of this speculation and not from real demand.

Ryokan, a Zen master, lived the simplest kind of life in a little hut at the foot of a mountain. One evening, a thief visited the hut only to discover that there was nothing to steal.

Ryokan returned and caught him. "You may have come a long way to visit me," he told the prowler, "and you should not return empty-handed. Please take my clothes as a gift."

The thief was bewildered. He took the clothes and slunk away.

Ryokan sat naked, watching the moon. "Poor fellow," he mused, "I wish I could give him this beautiful moon."

Here is the thing I seen in China. China's growth is as real as they want it to be. By that I mean, it is still a command economy on the Macro level. China has basically decided that only a small percentage of the population will participate in the development because it lacks the resources to allow everyone at one time to join the development. So, for example if China would like to up its GDP, all it has to do is let say another 100 million people participate in whatever aspect of the economy. The demand is there is China, it is an issue of supply. They for example can not afford to have another 100 million people owning cars, or having heat in their house, go to the University. So, for now it is real on some level, but crippled on purpose by central government policy. I believe if there is going to be real political instability again, it will grow out of that inequality more than people's desire to be free. Democracy will be just a symptom of economic demand.

admin wrote:. . . . if there is going to be real political instability again [in China], it will grow out of that inequality more than people's desire to be free. Democracy will be just a symptom of economic demand.

Beautifully cogent; and perhaps applicable beyond Chinese shores.

The Chinese government is very aware of it. When I was there they where running small test elections in the rural areas, and broadcasting the U.S. presidential debates. They know they will have to deal with it sooner or later, and party officials openly talk about the eventual change to democracy and how communism was a mistake (just not their mistake).

I honestly think the Chinese are going about it the right way. Sudden transitions to democracy are payed for with lots and lots of blood. We just need to point to every American attempt to build shake and bake democracies around the World, including the U.S. revolution for that matter. They never go well. The handful of examples in history of slow organic transitions to democracy have stuck and been much more stable in the long run. Perhaps that is the mark of enduring democracies vs. fad democracies. I have here in mind perhaps some of the kingdoms in Europe that have slowly transitioned over generations to their royal families being more figureheads without revolutions. In China, with a 1/5 or better of the World's population, it is an even more delicate issue. Just having people form a line in China can be dangerous, if not handled correctly. Giving a billion plus people the right to vote overnight would mean thousands, if not millions, would die as a direct and indirect result.

admin wrote:. . . . Sudden transitions to democracy are payed for with lots and lots of blood. We just need to point to every American attempt to build shake and bake democracies around the World, including the U.S. revolution for that matter. . . .

We should remember that our own Revolution was a "conservative revolution", one of the few fought in defense of accustomed liberties -- in this instance, "the rights of freeborn Englishmen" -- rather than to gain new freedoms. Conflicts begun to gain new freedoms, sometimes termed "radical revolutions" (the French Revolution of 1789 may be the archetype), are indeed inherently dangerous to political and social institutions, often to obliteration. Conservative revolutions, however, generally preserve such institutions and, after the bloodletting, generally prove stable and lasting.

Clearly, a Chinese revolution fought to emplace a representative democracy would be radical, with effects potentially global.

Looks like the latest $4bn government auction is about to end (unless they extend it again):

http://www.economiaynegocios.cl/noticia ... p?id=68277

James.

An analyst was quoted by EMOL today as predicting that the rate could reach 510 in the near future after the Brazilian government announced a tax on investments a couple of days ago, which seems to be putting a stop to the carry trade from Chilean investors and bringing dollars back into the country:

http://www.economiaynegocios.cl/noticia ... p?id=68613

James.

hello fellas, super newbie here.

800 + comments and a year old, this thread has become a little heavy.

May I ask the topic question again? Maybe even in a couple different ways

1, As of today, Fall 2009, how does the economics of the US, Europe, and the rest of the world affect Chile?
2, What are the lifestyle comparisons, economically, for those of us who can consider visiting or relocating to Chile while living on foreign currencies?
3, And, how has the standard of living in Chile been affected by macro economics trends?

(of course the dollar rallied at the beginning of this thread, now it is undergoing pressure ... but against the Chilean Peso is holding up better than other currencies.)

May I ask the topic question again? Maybe even in a couple different ways

1, As of today, Fall 2009, how does the economics of the US, Europe, and the rest of the world affect Chile?
2, What are the lifestyle comparisons, economically, for those of us who can consider visiting or relocating to Chile while living on foreign currencies?
3, And, how has the standard of living in Chile been affected by macro economics trends?

We just returned from a two-week visit to Chile, Up the coast from Santiago to La Serena, the Elqui Valley, and north to Calama and San Pedro. I know this isn't much time to get any in-depth knowledge, but here are my impressions in answer to your questions:

1) I didn't notice that Chileans are too concerned about the U.S. economy. This may be different in the banking centers of Santiago, but to the average Chilean who deals in pesos it's just not a big concern in their daily lives. In the north, a tour guide told me that among extranjeros, Europeans outnumber North Americans and Asians by 5:1.

2) Chile is not a cheap country, especially for businessmen. Surprisingly, prices for everyday items are not much different than here in the U.S., and for some stuff like paper products, the prices are considerably higher. We didn't look closely at real estate prices but it seems many of the farms north of Algarrobo are being split up and sold, and there was quite a bit of construction activity in an area that to me resembles coastal California in the 1960s. High-rise condo towers are popping up like mushrooms in Santiago and La Serena.

3) The standard of living in Chile seems better than other Latin American countries we've visited. In the large cities it's not unusual for families to own multiple cars, and you see evidence that average people can afford air travel.

Wow, great reading here, thanks everybody will chime back in with my two pesos worth a little later.