Chile: Industrial Output Disappointing; Activity Indicators Robust

by Bertrand Delgado and Juan Lorenzo Maldonado for Roubini Global Economics, April st, 2011.

Industrial output stayed in negative territory in February; contracting 1.1% m/m (-0.5% m/m in January). On a yearly basis, industrial production decelerated sharply to 1.9% y/y (3.4% y/y 3MMA), surprising the consensus (4.5% y/y) and RGE (3.8% y/y) on the downside. Disappointing results in consumer (-1.9% y/y) and intermediate (3.4% y/y)—accounting for 97% of the index—pressed down.

Meanwhile, additional activity indicators continue to reflect a strong performance—with the exception of mining, which fell 4% y/y due to a copper contraction of 6.7% y/y. Electricity generation gained 2.1% y/y, as hydroelectric generation was affected by severe droughts. Construction licenses continued on a strong path with a 38% y/y increase led by housing projects, which accumulated over 50% of total permits. Finally, retail sales expanded 16.7% y/y, stronger than January’s 15.8% y/y, but fell slightly short of its 17.8% y/y 3MMA. Supermarket sales accelerated to 10.7% y/y from a 7.6% y/y 3MMA. (continue reading… )

 

How to become politics-proof

by The Economist, March 31st, 2011.

Businesses can get cover against some, but not all, political upheavals.

Regime change has an awkward way of turning useful political contacts into liabilities. Just ask Ahmed Ezz, an Egyptian steel magnate and friend of Gamal Mubarak, son of the country’s ousted president, when you next visit his jail cell. But businesses face political risk even in the absence of the kind of turmoil rocking the Middle East. Governments nationalise assets: in recent years, Congo has taken several mines from their private owners. They change the rules unexpectedly, making it harder to do business, as Research in Motion, the maker of the BlackBerry, found when some governments demanded access to users’ messages. They can enforce the law in the most draconian fashion against firms that displease them, as Russia’s Yukos found.

A survey last year by the World Bank’s Multilateral Investment Guarantee Agency (MIGA) found that political risk was the biggest deterrent for investors in developing countries over the longer term, ranked ahead of economic instability and bad infrastructure. What can they do about it?

Private insurers, national export-credit agencies and multilateral bodies like MIGA offer businesses cover against political shocks. But which firms they will insure, and on what terms, varies. National agencies, such as America’s Overseas Private Investment Corporation, tend to sell cover only to companies from their home country. Private insurers can be more risk-averse than multilateral agencies. (continue reading… )