Itaú BBA - CHILE - Large trade surplus in 1Q18

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CHILE - Large trade surplus in 1Q18

April 9, 2018

We expect the current account deficit to remain contained this year

Chile recorded the largest trade surplus in the first quarter of a year since 2011, hinting that the current account deficit will remain low. In March, the trade balance recorded a USD 792 million surplus, just below the Bloomberg market consensus of USD 850 million and our USD 825 million forecast. The resulting trade surplus in 1Q18 was USD 3.2 billion, larger than the USD 1.1 billion in 1Q17 and the largest since the USD 4.2 billion in 1Q11. Elevated mining exports, mainly aided by price, are the principal driver of the trade improvement along with firm global growth. The 12-month rolling trade surplus increased to USD 10.1 billion, from USD 7.9 billion in 2017 and USD 5.4 billion in 2016. Our seasonally adjusted series shows that, at the margin, the trade balance surplus is still high at USD 9.8 billion (annualized) in the quarter (USD 12.1 billion in 4Q17). 

Mining and agriculture drove exports in the first quarter of 2018. Total exports gained 24.3% year over year in 1Q18 (from 17.2% in 4Q17), with mining exports gaining 32.1% (30.8% in 4Q17). A low base of comparison due to the extensive labor strike in 1Q17 favors mining export growth, but higher prices are also playing a role. Agriculture exports rose 31.1% year over year, recovering from the 23.9% drop in 4Q17, boosted by fruit exports. Industrial exports are also performing well, growing 12.9% in the quarter (5.4% in 4Q17), lifted by paper and chemical products. At the margin, exports grew 8.1% qoq/saar, from 11.2% in 4Q17, with an acceleration of agriculture and industrial exports unable to fully offset lowing mining exports. 

Import growth is good news for the internal demand recovery expectation. In 1Q18, total imports rose 11.5% (11.7% in 4Q17). Consumer imports are still performing well, up 13% in 1Q18 (14.1% in 4Q17), led by semi-durable goods imports, while durable imports are still robust (11% versus 12% in 4Q17). Energy imports increased 11.7% as international fuel prices stay high, but it was a slowdown from the 25.6% in 4Q17. Meanwhile, capital goods imports increased 2.1% (4.5% in 4Q17), with machinery and equipment imports up 4.1% (8.1% previously), in line with a recovery in investment. At the margin, imports increased 26.1% qoq/saar, a similar pace recorded in 4Q17. Accelerating consumption goods have offset slowing energy import growth.

We expect the current account deficit to remain contained this year. A gradual recovery of internal demand and robust copper exports support our view of a 1.2% of GDP current account deficit this year (1.5% last year).


Miguel Ricaurte
Vittorio Peretti


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