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What is the Chilean peso (CLP)?

Credit Ratings & Outlook

In the latest credit ratings from December 1970, Moody's gives Chile a Aa3 rating, with a stable outlook. Fitch has a stable outlook with a A+ rating. Finally, S&P last issued a A+ rating, with a positive outlook.

Sovereign credit ratings play an important part in determining a country’s access to international capital markets, and the terms of that access. Sovereign ratings help to foster dramatic growth, stability, and efficiency of international and domestic markets.

Central Bank Rate

The current central bank interest rate is 5.00%. This is the same as 2011, which was 5.25%.

GDP

In 2010 the total GDP was $212,740,792,703 in US Dollars, while the per capita GDP was $12,431. It grew by 5.20% over the previous year.

Unemployment

The latest unemployment rate for 2012 is 6.40%.

Consumer Price Index

The latest consumer price index for 2010 is 101.41.

Political Structure

The current head of the government is President Sebastián Piñera, who is also the head of state (in an executive role).

Currency Details

The Chilean peso (CLP), the official currency of Chile, replaced the escudo in 1975 (which replaced the old peso in 1960.) Since 1998 Chile’s many external shocks has caused the peso to depreciate against the USD. These shocks include the 1997-98 Asian economic crisis, the economic turmoil in Argentina, the collapse of the global commodity markets resulting in falling copper prices, the banking and currency collapse in Uruguay, and the devaluation of the Brazilian real in 1999. However, the Chilean peso has very gradually depreciated acting as a shock absorber through all these external pressures. Also, the banking sector is highly controlled, which also provides stability to the economy. Presently, a floating exchange rate is in place after the previous crawling exchange peg (to the USD) was removed in 1999. This was in response to the Asian financial crisis and the collapse of copper prices during that time.

As of September 1, 2005, the 500-dram banknote will no longer be accepted.

Travel Notes

When traveling to Chile, money should be exchanged for pesos before arriving.

What does it look like?

Political Structure

The Chilean government is divided into three independent branches: the executive, the judiciary and the legislative branches. The head of the executive branch is the President of the Republic. The Supreme Court constitutes the judiciary branch. Finally, the legislative branch is bicameral, composed of a Senate and a 120-member Chamber of Deputies. The Senate is comprised of 38 elected members that represent the 19 districts of Chile, 9 institutional senators, and senators-for-life who are former presidents who served at least 6 consecutive years in that role .

Prominent Figures

Ricardo Lagos was elected President of Chile on January 16, 2000 and his term will last until March 11, 2006. Chilean laws do not allow for a president to run for re-election at the end of his term. The Governor of Banco Central de Chile, Chile’s central bank, is Vittorio Corbo.

Unique Characteristics

Chile obtains most of its energy from petroleum, natural gas, hydroelectric power and coal, making oil a central part of the country’s operations. For this reason, the Chilean peso is highly affected by oil price activity. Recent high oil prices have depreciated the value of the peso. In order to tackle these problems, mainly keeping prices under control, the Chilean government employs a supervisory system, which ensures electricity companies a fair return. However, oil production has suffered a steady decline due to high economic growth along with a rising demand for energy. With the import bill doubling and oil reserves declining, Chile turns to other countries like Argentina to help meet its need for refined oil.

The Chilean peso is also sensitive to copper, the country’s top export. As prices for copper rise, the Chilean peso travels alongside, rising as well. An increase in copper prices translates into inflows for Chile, while on the contrary when copper prices fall, Chile experiences a pull on the trade balance into deficit.

Key Economic Factors Consumer Price Index:

The CPI is the official measurement of inflation that shows the change in price levels for given periods of time consumed by households. The components of the CPI that include health, education and clothing prices usually show less substantial changes, signifying that the increases in inflation are results of high oil prices.

Gross Domestic Product

Chile’s economy is a solid one, characterized best by strong export growth, increasing investment, and healthy domestic demand. Copper is Chile’s top export, constituting 45% of total exports. The surging price of copper is, hence, the main contributor to the country’s ongoing prosperity. Holding second and third place in export constituents are salmon and wood pulp, which grew by 23% and 42% respectively in 2004. Consumption activity has improved markedly as has the demand for Chilean products, both domestic and foreign. One remaining dark spot of the Chilean economy is the still high unemployment rate. In mid 2005, roughly 7.9% of the labor force remained unemployed.

Industrial Production:

The IP Index is responsible for measuring the production of the Chilean manufacturing industry. The industrial production index can provide a great deal of insight into Chile’s economy because industrial production is responsible for a large percentage of national output. After three months of low IP levels they increased in April by 10% on a year-ago basis. By April, durable and intermediate good production increased. The industry seems to be expanding, as experts believe that should remain strong in the year ahead.

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