Itaú BBA - CHILE – Significant trade surplus in 3Q20

Macro Latam

< Back

CHILE – Significant trade surplus in 3Q20

October 7, 2020

Improving consumer import dynamics is containing the surplus widening.

Despite recovering imports and a milder energy drag as the global oil price recovery consolidates, upbeat mining exports led to another large trade surplus in September. The trade balance came in at USD 886 million (above our USD 750 million call), significantly larger than the USD 30 million surplus last year, leading to a 3Q20 surplus of USD 3.0 billion (USD 0.2 billion last year). As a result, the rolling 12-month trade surplus rose to USD 12.4 billion, from USD 9.6 billion as of June and USD 4.2 billion in 2019. At the margin, our own seasonal adjustment shows the trade balance surplus is wider, at USD 15.2 billion, but improving consumer import dynamics has contained the surplus widening, which peaked at USD 18.9 billion in the quarter ending in July.

High copper prices are supporting mining exports. Total exports grew 3.7 YoY in September (10.8% drop in August), boosted by a double-digit rise of mining exports. Meanwhile, the drag from manufactured exports moderated to 6.6% (13.1% in August), an indication of some global demand recovery. During the third quarter of 2020, exports fell 2% YoY, similar to the outcome in 2Q20, as mining gains of 6.3% (5.9% in 2Q20) partially offset double-digit drops of agriculture and manufacturing sales abroad. At the margin, exports increased 7.6% qoq/saar, compared to the 4.9% drop in 2Q20.

After imports shrunk by a fifth in August, the eighth consecutive double-digit drop in September of 12.6% YoY fall was the mildest since January (-37.2% peak in May). Recovering consumer goods imports and a softer energy drag are supporting the improvement. Energy imports declined 33.1% YoY (55.6% drop in August), and consumer goods imports fell 9.8% (27.2% in August). Meanwhile, capital imports dropped at a steady pace of 10.5%, indicative that investment climate remains murky. In the third quarter, imports shrunk 18.5% YoY, less than the 27.2% decline in 2Q20. At the margin, imports increased 43.1% qoq/saar, a notable turnaround from the 50.4% drop in 2Q20 amid improving consumption and global oil price dynamics. The speed of the labor market recovery would be a key determinant as to the robustness of the consumption recovery, although the possible materialization of a second pension fund withdrawal would be an additional tailwind. Domestic uncertainty during the constitutional reform process would likely keep investment dynamics contained, spilling over to weak capital goods imports.

The significant shock to domestic demand will likely lead to a broadly balanced current account this year (vs. a 3.9% deficit last year). Going forward, the anticipated recovery would result in some widening of the current account deficit next year to 2% of GDP.

Miguel Ricaurte
Vittorio Peretti 

< Back