Itaú BBA - CHILE – Copper exports led to another wide trade surplus in October

Macro Latam

< Back

CHILE – Copper exports led to another wide trade surplus in October

November 9, 2020

The economic reopening and significant stimuli in place should moderate the trade surpluses ahead

The trade balance came in at a USD 1.2 billion surplus in October, a significant improvement from the USD 286 million deficit recorded one year ago, as mining exports remain robust and oil and capital imports still weak. The trade surplus was broadly in line with both the Bloomberg market consensus and our forecast of USD 1.3 billion. As a result, the rolling 12-month trade surplus increased to USD 13.9 billion, above the USD 9.6 billion recorded at the close of 2Q20 and more than triple the surplus recorded in 2019. At the margin, our own seasonal adjustment shows the trade balance surplus at USD 16.3 billion, wider than the USD 15.3 billion in 3Q20, but a moderation from the cycle peak of USD 19.1 billion in the quarter ending in July as consumer and energy imports show a recovery. Going forward, with China’s recovery consolidating, mining exports will likely remain upbeat, but a recovery of internal demand with the reopening of the economy and significant stimuli in place (including the withdrawals from pension funds) should moderate the trade surpluses.   

Mining sales was a key export driver in October. Total exports grew 12.9% YoY in the month, up from the 3.7% increase in September. Part of the annual improvement can be attributed to a lower base of comparison given trade disruptions during the social unrest last year. Mining shipments expanded 24.5% (11.3% in September), while agricultural goods rose 31.7% YoY, compared to a 3.7% drop previously. Meanwhile, industrial exports moderated their decline to 4.3% (6.6% in September). In the quarter ended in October, exports posted the first annual increase (+1.4% YoY; 2% down in 3Q20) since late 2018. At the margin, exports increased 7.6% qoq/saar.
Meanwhile, imports remain far below previous year’s levels, but there is a recovery at the margin. Total imports dropped 14.5%, similar to the 12.6% drop in September, but milder than the trough in May (37.2% down). Energy imports declined 37.9% YoY (33.1% drop previously), while durable consumer goods imports fell 13.9% (in line with September). Capital imports dropped 15.6% (10.5% previously), the eleventh consecutive decline. In the quarter ending in October, imports shrunk 16.7% YoY, a mild improvement from 3Q20 (-18.5%). At the margin, imports accelerated 37.1% qoq/saar, recovering from the 50.8% decline in 2Q20. 
Overall, the significant trade surplus underway this year would lead to a balanced current account (3.9% deficit last year), while the anticipated domestic demand recovery (given the reopening of the economy and stimulus in place) would result in a current account deficit next year of 2% of GDP.

Miguel Ricaurte
Vittorio Peretti 

< Back