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Chile Investment ?��Ǩ�� One to Watch

By Obelisk on 21 January 2010

The triumph of centre-right Sebastian Piñera in Chile's latest presidential elections confirms the country's solid democracy. The victory was well received by investors and the Chile investment potential remains high.

After two decades of centre-left rule under the Concertación party, Chile voted for a change. Piñera, one of Chile's richest men, won the elections by a narrow 51.6%. Billionaire Piñera was responsible for introducing the first credit card company into Chile and his assets include a 26% stake in Chile's national airline, LAN and the Colo-Colo football team, national champions.

Piñera's victory was applauded in investment markets - the Chile Ipsa stock market soared the day after polling - and his government is expected to be heavily pro-market. This is good news for investment in South America since along with Brazil; Chile currently represents one of the best emerging markets for investment in the continent.

Chile shares many other similarities with Brazil. Both are South America's top-performing economies. Brazil and Chile both experienced a slight contraction in economic growth in 2009, but both are poised for high GDP increases this year. Chile is expected to achieve between 4.5% and 5.5% with expectations for Brazil slightly higher.

Chile has an impressive track record of reducing the gap between rich and poor. Chile has dramatically brought its poverty level down from 39% in 1990 to 14% in 2006. Brazil has also seen similar success in narrowing social inequality.

In addition, Chile and Brazil share similar recipes for economic survival during global downturn. To alleviate the effects of recession, the Brazilian and Chilean governments have both made major public investment. In the case of Chile, this investment is to the tune of US$4 billion in tax cuts and public spending. Chile boasts massive copper reserves and prudent government management of these have tided the country well over the last year.

In its emerging markets classification, Barclays Capital ranks Chile as the second most advanced, behind Singapore but ahead of the four BRIC economies (Brazil, Russia, India and China). Chile is also a brand-new member of the Organisation for Economic Co-operation and Development (OECD). Membership of this prestigious organisation was recently awarded to Chile which is the only South American member of the OECD to date.

However, when it comes to real estate, Brazil, China and India are considerably ahead of Chile. The latest A.T. Kearney Real Estate Opportunity Index ranks Chile in 29th position. In 5th place, Brazil property investment potential is considerably higher and Brazil is the only Latin American country in the top ten.

When Piñera is invested in March as the next president of Chile, he will inherit a recovered economy with a promising future. His election pledges include the creation of 1 million jobs over his 4-year term and annual GDP growth of 6%. Although challenging, these pledges are certainly attainable given Chile's huge investment potential and buoyant domestic consumer market.

At Obelisk, we believe that for property investment, Brazil and Chile are the rising stars in Latin America. Both enjoy stable and consolidated democracies and strong economies, essential ingredients when considering investment in emerging markets.

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