This is one example the use of surplus resources properly, the Chilean economy paese all its problems, has dared to investors lñogrado positively establishing itself as the largest economy to the long-term perspective.
This is indicative that the economic policy of a country is independent of its political structure, no matter whether the political orientation of the country is left or right, what matters is that the legal, social and economic are defined , mostly free and open to global changes.
A closed economy can in no way to consolidate its growth, much less make against the internal porblem.
Perhaps many governments should take the example of Chile and to start thinking about saving resources long term rather than spending as a means to maintain an ideology in power.
then transcribe the full article from Bloomberg:
Bloomberg
Santiago Chile's economy is contracting, its exports will plummet, unemployment is rising. That did not dissuade Moody's Investors Service to become the first country to investment grade year to receive a higher credit rating.
The $ 22 billion of savings from the country in wealth funds routed him to recover more quickly from the global credit crisis than other countries with similar ratings, Moody's said on Monday in raising Chile's foreign debt to A1 from A2 with a positive outlook.
While other Latin American governments spent their commodity earnings over the past five years, President Michelle Bachelet extracted copper export earnings record and placed in SWFs. Is now opening a piggy bank that is the envy of governments without money, turning $ 4 billion in tax breaks and cash distributions in the cyclical economy of $ 154 billion.
"No one else compares to Chile" analyst Mauro Leos said Moody's in a telephone interview from New York. "Like other parties, are being hit hard. But the work he did in advance, you can go from a surplus of 5% to a deficit of 5% without additional borrowing. "
Increased Moody's rating, the higher copper prices in four months and the overall rise in the shares Monday fueled the greatest advances of Chile's IPSA index in two weeks.
In a sign of how the credit crunch is realigning the impressions of risk, one hour after the upgrading of Chile, Moody's lowered the rank of General Electric Co. two levels to Aa2 from Aaa, the first decline in more than four decades.
Although Chile was relatively good news on Monday, the economy is headed for its worst performance in a decade.
The value of overseas sales fell 42% in the 12 months to February as the price of copper, its main export, fell 60%. The economy contracted in November, December and January, and growth in the fourth quarter was 0.2%, the worst quarterly performance since 1999.
To stimulate the economy, Bachelet is using $ 4 billion of revenue from copper in a fund of $ 19,500 million to cover tax abatements, distribution money to poor and subsidies that will add one percentage point to growth, according to estimates by the Ministry of Finance.
is unlikely to dent the extra expense in the accounts of the country. In the unlikely event that copper prices fall another 40%, the funds, including pension savings, should end the year with assets valued at 10% of gross domestic product, said Leos.
"Chile is unique," said Luis Arcentales, Chile economist for Morgan Stanley in New York. "As the crisis deepens, we see that relatively Chile is getting better." It also helps strengthen the economy one of the most active central banks in the world. The directors of the Chilean central bank reduced interest rates by 6 percentage points this year, the biggest cut in the region.
Andrés Velasco, Minister of Finance, who in April will run in a marathon with the president of Banco de Chile, José de Gregorio, said the rise of Moody's rating is recognition of the government's policy of saving windfall. "Not many countries, rich or poor, big or small, that have reduced the gross government debt to minimal levels, which have capitalized on their central banks, accumulated gross assets of 15% or 16% of GDP and hence can undertake the kind of anti-cyclical policies are enforced, "Velasco said Tuesday in a telephone interview.
Chile spending as a percentage of GDP fell 4.1 percentage points from 2002 to 2007 even though tax revenues increased by 6.4 percentage points, making it the country with the highest savings rate in Latin America, according to a study based on data from United Nations MB Associados, Brazil. Investors have rewarded the government for its persistence. Credit default swaps on debt of Chile on Monday fell 10 basis points to 240 basis points, the lowest since Feb. 3, according to CMA DataVision, meaning would cost $ 240 billion to protect a five-year moratorium on $ 10 million Chilean bonds. Chilean debt is considered as the safest in Latin America.
credit default swaps, which are used to protect against losses or speculate on a borrower's ability to repay its debt, pay the nominal value if a borrower fails to make a title change underlying value or the cash equivalent . In another reversal of regional trends, where the crisis is undermining the support even of popular leaders, Bachelet's popularity increased to 58.5% last month, the highest since April 2006.
A year ago his approval rating was around 46%. "People have begun to notice that there is a reward when they do things seriously," said Velasco.
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