Chile Long-Term Foreign And Local Currency Ratings Raised To ‘AA-’ And ‘AA+’, Outlook Stable
December 27, 2012 Standard & Poor's
The resilience of the Chilean economy continues to strengthen, improving the government's capacity for countercyclical policies in the face of an external downturn. The government was able to pass a fiscal reform through congress to finance higher spending needs in education without eroding its fiscal structure. We have raised our long-term foreign and local currency ratings on Chile to 'AA-' and 'AA+', respectively. The stable outlook balances the challenges of managing further demands for public spending on education and other social programs within the framework of the fiscal rules. We also expect the government to continue making gradual progress on microeconomic reforms to bolster the long-term competitiveness of the economy.
NEW YORK (Standard & Poor's) Dec. 26, 2012--Standard & Poor's Ratings Services said today that it raised its long-term foreign and local currency ratings on the Republic of Chile to 'AA-' and 'AA+' from 'A+' and 'AA', respectively. The outlook on the long-term ratings is stable. Standard & Poor's also raised its short-term foreign currency rating to 'A-1+' from 'A-1' and affirmed its 'A-1+' short-term local currency sovereign credit rating on Chile. We also revised our transfer and convertibility assessment for Chile to 'AA+' from 'AA'. "The upgrade reflects the growing resilience of the Chilean economy that in turn continues to improve the government's capacity for countercyclical policies in the face of an external downturn," said Standard & Poor's credit analyst Roberto Sifon-Arevalo. We expect GDP to grow about 6% in 2012 and 5.2% in 2013, supported by strong domestic demand and still high copper prices. This should bring GDP per capita in 2012 and 2013 to about $15,800 and $16,700, respectively. Whereas this is still low in comparison with some other similarly rated sovereigns, it underlines the positive economic trends that Chile has experienced in the last decade with per capita GDP more than doubling its 2005 level. This economic performance has had a positive impact on Chile's fiscal performance. The general government balance has averaged a surplus of 2.7% of GDP during the past eight years. As a result, the government was also able to build up strong external assets that are expected to close 2012 at 10% of GDP or roughly equivalent to the government's gross debt. This low government debt burden also supports the ratings. We expect the government to carry little net debt over the medium term. RELATED CRITERIA AND RESEARCH Sovereign Government Rating Methodology And Assumptions, June 30, 2011 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Company — Chile
Full nameRepublic of Chile