Good. Today, I can’t start this edition with a “Happy Thursday”. There is more to worry about than to celebrate. Over the past 48 hours, we’ve had numbers that confirm the biggest fears about the economy: 12-month inflation hit its highest level in nearly 30 years, real wages fell to before the explosion and the Central Bank raised the interest rate again. and predicts a 0.5% GDP contraction in 2023, translating into a moderate recession.

  • To this, we must add that the World Bank has warned that the world economy is heading towards a “stagflation” similar to that of the 1970s, including Chile. He predicts that our country’s growth will slow to 1.7% in 2022 and 0.8% in 2023. In addition, he warns that the war in Ukraine will lead to higher inflation and tighter financial conditions.

“Developing economies will need to balance the need to ensure fiscal sustainability with the need to mitigate the effects of multiple crises on the poorest citizens.”

  • The local stock market reacted with losses to high inflation and higher interest rates. Red numbers in global markets also played a role in the fall. Of course, the weight had a positive session.

  • Before starting with what brings us together, I want to invite you to share or join El Semanal, and El Semanal Exprés, so that our community continues to grow. Subscribe to this edition or to El Semanal’s “Pildora”, which is the open, edited version of this newsletter, and which is sent out early on Mondays and mid-morning on Thursdays. Thanks a lot.

1

1- THE PERFECT STORM AND WORST SCENARIO

What happened. A battery of economic figures released over the past 48 hours has confirmed the complex economic scenario facing the government: on Wednesday, the INE reported that inflation in May had reached 11.5% per year and that prices increased by 1.2% in one month. Almost at the same time, the Central Bank presented the June Monetary Policy Report (IPoM), in which it raised its projections for inflation, as well as growth for this year, but left open the possibility of a recession. 2023.

  • Inflation figures were released less than 24 hours after the Central Bank raised the monetary policy rate (MPR) by 75 basis points, leaving it at 9%. The entity said that further rate adjustments “will be required”, albeit to a lesser extent. In the market, they are already betting on an MPR of 10% and inflation that would exceed 13% before starting to fall.

The collapse of real wages. To the IPoM, inflation figures and rising rates, it should be added that it was learned on Tuesday that real wages had registered their largest drop in almost 30 years and were below the levels of ‘before the social epidemic, that is to say that they fell back for more than two years.

If you want to continue reading, subscribe to El Semanal and join our community.

of them

2- THE GLOBAL SCENARIO, EQUAL OR MORE COMPLEX

What happened. The World Bank has warned that global growth will be stifled by inflation and the war in Ukraine. He warned of the risks of stagflation for the global economy and the threat of a food supply problem. The World Bank has also lowered its growth forecast for Chile. He said it would now rise 1.7% from 1.9% forecast in April.

  • The reasons: the withdrawal of the fiscal stimulus, the fall in real wages driven by strong inflationary pressures and the tightening of financial conditions (Chile is more indebted and it will be more expensive to finance this debt).

If you want to continue reading, subscribe to El Semanal and join our community.

3

3- THE POLITICAL IMPACT: THE GOVERNMENT TAKES ACKNOWLEDGMENT

What happened. Alarms went off within the government. President Gabriel Boric and Finance Minister Mario Marcel came out to give positive signs amid the flurry of bad economic news.

  • From Los Angeles, where he is taking part in the Summit of the Americas, the president sought to instill confidence in foreign investors and the private sector. He assured the region’s CEOs that Chile had “the right environment to promote prosperity in business” and guaranteed that “legal certainty, respect for treaties, independence of powers, are principles that we will defend “.

  • Marcel promises to redouble his efforts to stimulate investment and a fiscal policy responsible for the economic scenario projected by the Report, which confirms the projections of private economists: we will enter a technical recession at the end of this year or the beginning of next.

In La Moneda, there are growing fears that inflation and a slowing economy will generate social unrest in the second half, just as the new Constitution is passed and tax and pension reforms are discussed in Congress, where the government does not have a majority.

If you want to continue reading, subscribe to El Semanal and join our community.

4

4- WITHOUT TACOS OR LINKS, EXPRESS

–The discomfort of mining with weak government presence in the world’s largest mining and exploration event. This is the PDAC conference in Canada. At the end of this bulletin, the official Chilean delegation was limited to the Under-Secretary of Mines, Willy Kracht, his chief of staff, and one or two people from Cochilco. There will not even be an official “stand”, as in the past. Yes, there will be a strong presence of private Chilean mining companies. A senior industry source questions the government’s decision not to participate or to participate minimally and reveals that even steps had to be taken to convince the undersecretary to attend.

If you want to continue reading, subscribe to El Semanal and join our community.

– Sanhattan’s favorite team hits the market: Universidad Católica is looking to be the first Chilean football club to place bonds. Cruzados SADP will issue a bond of up to $24 million in UF debt with a coupon of 5.65% in the local market. In March of this year, Cruzados announced a capital raise to raise $13 million to finance the new stadium in San Carlos de Apoquindo.

– The privatization of the Brazilian company Eletrobras is entering its home stretch and is attracting investment funds and Chilean family offices. It’s a deal that aims to raise around US$6 trillion, making it one of the biggest in the world this year. Eletrobras is the largest electricity company in Latin America. The book of offers closed this Wednesday and today, Thursday, the new shares begin to be traded on the exchange. The Brazilian state will retain 45%.

  • Strong demand despite Lula’s threat. The operation is led by BTG Pactual, Bank of America, Goldman Sachs, Itaú, JP Morgan and Banco Bradesco, among others. At least two Chilean bankers are involved in the transaction. One of them reveals that demand greatly exceeds supply. at least 2 family offices and 3 Chilean funds had the chance to participate. Investors have had to weigh threats to reverse the privatization of Eletrobras by advisers to Brazil’s main presidential candidate in the October elections, former President Lula da Silva.


Here we are this week. Before concluding, remember that if you have any comments or information to share with us, write to me at ivan@elmostrador.cl or on my networks.


#bogeyman #arrived #annual #inflation #hits #highest #level #years #real #wages #fall #preexplosion #levels #economy #heads #recession

Leave a Reply

Your email address will not be published.