Economic review Even before the first case of Covid was recorded, at the beginning of March 2020, Chile’s economy had been disrupted by an idiosyncratic shock: Chile’s worst political unrest in decades. The violent protests, which began during the last quarter of 2019, provided the context against which discussions about the economy were set. “Chile’s response to the pandemic was proactive and multi-faceted,” said Andrés Pérez, international finance coordinator at Chile’s Ministry of Finance. The government moved to defend the country’s physical, economic and financial well-being with a stimulus package that saw the healthcare system’s budget increase, measures implemented to protect workers against loss of income, and the introduction of tax measures to support small and medium-sized enterprises (SMEs). The Ministry of Finance, the central bank, and financial regulators, combined to ensure the flow of credit to companies and consumers. The central bank reduced interest rates and increased its bond purchase programme, while structural changes were initiated to foster greater growth, mainly by enhancing competition. Those measures have made a positive impact, with Scotiabank projecting a strong recovery for the economy in 2021 of 7.5%. “We see a strong rebound in consumption and investment, fuelled by a benign interest rate environment, the strong price of copper, and a continued accommodative monetary policy and stimulus in terms of fiscal policy,” said Stephen Guthrie, senior vice president and head of wholesale banking at Scotiabank Chile. That said, unemployment is running at relatively high levels of more than 10%, so there is still quite a way to go before employment returns to pre-crisis levels. “And demand for commercial credit is very weak, especially in the corporate and higher-end segments of the market,” said Guthrie. Where there is growth, it is in the sector falling under the government’s guarantee programme. Demand for consumer credit is also weak, which is put down to the amount of liquidity in the market. Consumer liquidity is a function, once again, of government support programmes, as well as the controversial government-sanctioned three rounds of withdrawals from pension funds. Mortgages are recovering but, overall, demand for loan assets remains relatively subdued. The experience of the corporate world can be split into two periods: 2020 and 2021. Electricity demand from regulated clients – residential customers and small businesses – declined. This drop in demand was tempered by stable consumption levels from large industrial and mining companies, something that was not only positive for revenues in the energy industry but an indication of better times for the overall economy. “The authorities did a very good job with the different plans that were implemented,” said Eduardo Milligan, CFO of Engie Energia Chile, the power utility and locally listed unit of Engie Group. “Not all countries in our region were able to mitigate the impact on economic activity due to the crisis in this way.” Weaker levels of energy consumption in the first half of the year reflected the slowdown in the domestic economy, but sectors reliant on international trade also had to contend with a global economic slump. They experienced huge swings in demand for their products. Celulosa Arauco y Constitución, Latin America’s largest forestry, pulp and wood products company and the second largest global producer of all pulp, wood pulp, and wood panels, is a good example of the volatility faced by companies reliant on the global economy. It sells 85% of its output on the international market. “The trend last year was very difficult,” said the company’s CFO, Gianfranco Truffello. “Demand for our wood products collapsed at the start of the pandemic and we had around two months whe
