Itaú BBA - CHILE – Mining exports remain robust in November

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CHILE – Mining exports remain robust in November

December 7, 2020

Imports remain weak as uncertainty restricts investments and the energy drag persists.

Another large trade surplus was registered in November, as robust copper sales amid Chinese economic strength and elevated prices drive gains. Nevertheless, manufacturing exports also grew in the month. Although dynamism of consumer goods imports continues to improve, large and broadly steady drags from fuels and capital goods have contained import growth. The trade balance came in at USD 1.6 billion surplus in November, a significant improvement from the USD 58 million surplus recorded one year ago, and above our USD 1.3 billion call. As a result, the rolling 12-month trade surplus increased to USD 16.9 billion, above the USD 13.9 billion recorded at the close of 3Q20 and quadrupling the surplus recorded in 2019. At the margin, our own seasonal adjustment shows the trade balance surplus at USD 19.4 billion in the quarter ended in November, wider than the USD 16.9 billion in 3Q20, but below the cycle peak of USD 22.8 billion in the quarter ending in July. Going forward, the copper market dynamics support Chilean exports. Nevertheless, as the domestic demand recovery consolidates amid the significant monetary and fiscal support measures, import gains would contain the size of the trade surplus. 

Mining sales continue to drive exports. Total exports grew 15.0% YoY in the month of November, up from the 12.9% increase in October. While part of the annual improvement can be attributed to a lower base of comparison given trade disruptions during the social unrest last year, mining exports continue to increase at the margin to reach the highest level since July. Mining shipments expanded 24.2%, in line with October´s result, while agricultural goods rose 10.8% YoY (31.7% previously). Meanwhile, industrial exports rose 1.4% YoY, the first annual increase since June. In the quarter ended in November, exports increased 11.5% YoY (0.9% down in 3Q20), amid a double-digit boost from mining and agricultural sales. At the margin, exports increased 24.1% qoq/saar (3.5% drop in 3Q20).

Meanwhile, imports remain weak as uncertainty restricts investments and the energy drag persists. Total imports dropped 13.4% YoY, similar to the drop in October, but milder than the trough in May (37.2% down). Energy imports nearly halved from last year (37.9% drop previously), while capital imports dropped 18.2% (15.6% previously). Meanwhile, the annual drop of consumer goods imports moderated to 1.6% YoY (9.6% previously) as durable goods imports returned to growth for the first time since February last year. In the quarter ending in November, imports shrunk 13.2% YoY, a mild improvement from 3Q20 (-17.8%) as consumer goods imports fell by 6.6% (milder than the 20.6% drop in 3Q20). At the margin, imports increased 34.2% qoq/saar, moderating from the 45.4% gain in 3Q20 as energy and capital goods imports decelerate. With the second pension withdrawal to start this month, imports are likely to recover further.

The significantly large trade surpluses recorded during the pandemic have led to a swift correction of Chile’s external imbalances. As a result, we expect a near balanced current account this year (3.9% deficit last year). Yet, with the anticipation of a domestic demand recovery and increasing income deficit, some widening of the CAD to around 2% of GDP is likely in 2021.

Miguel Ricaurte
Vittorio Peretti

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