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| Copper ore: Strong world demand for copper, its key export, has put Chile on course for high economic growth. But investors are worrying about a price fall. |
Celebrated as Latin America's success story, Chile has cut a path to prosperity that other impoverished, turbulent nations in the region can only envy. While Argentina recovers painfully from its debt default, the world's biggest, and Mexico and Brazil struggle to reform their economies, Chile looks ever closer to leaving behind its emerging-market status and becoming a developed economy. Its budget surplus hit its highest level in eight years in 2004, rising to 2.2% of GDP, and economic growth was almost 6%, the highest in seven years. At the same time, Chile's trade surplus has widened significantly and its country risk continues to diminish.
Inflation was 2.4% in 2004 and is expected to rise only slightly this year. "Chile stands out from Latin America's volatility and it can be a model for other countries to follow," says Therese Feng of ratings agency Fitch.
Low yield
But despite Chile's model position, its debt is increasingly unattractive to bondholders wanting above-average returns from the markets.