SMEs Credit

With the data obtained yesterday on inflation and growth in Chile is there to worry about inflation and not so much by the growth in the Chilean economy? Actually, what to say about is that it is starting to slowly see a weakening of inflationary pressures. Inflation, although it is high, does not represent a growing concern. The inflationary dynamics will be reduced slowly, so newly for mid-2010 is the same may return to the bands preset by the Central Bank. And while the rate of economic growth obtained in September has been positive, the international financial crisis will produce a decline in the Chilean economy on several fronts such as the outer front (requires less product) in the coming months and the largest credit restriction that limits demand. Taking note of this situation, last Tuesday, the Bachelet’s Government launched a plan of assistance focused on promoting SMEs and facilitating access to housing, with a budget estimated at US $1,150 million. The Minister of Finance of Chile, Andres Velasco, said about this plan: there is an additional indirect impact very important, but difficult to quantify, which occurs when small businesses have more working capital, are more engaged, at the same time families have higher incomes, spend more and that is giving an injection of dynamism to our economy on employment and demand. What opportunities arise in the Chilean economy? The first thing we should say to analyze the prospects for the different economic sectors in Chile is that it was exceeded the period of energy narrowness in the country and with good prospects for 2009 (although it will continue with energy saving initiatives), which limits a risk factor for companies.

Given that the economic stimulus announced by the Chilean Government plan will benefit families middle class, the same will remain, at least in part, safe from the effects of the crisis. This is why, can be expected that this will increase the consumption of this segment of the population and thereby companies linked to the sector benefited will be. The increase in the level of consumption to have solid foundations, is of relevance it to return confidence and calm in the Chilean economy. Why will be key economic growth is maintained at acceptable levels and begin to observe a break in the inflationary trend. While the budget referred to in the economic stimulus package is not large, it may be beneficial for the real estate sector, which may experience a recovery after the sharp fall experienced so far (the fall in the sale of houses and apartments has been 24% in relation to 2007).

Clear improvement of the real estate sector will depend also on what happens in the credit market and the expectations of the applicants who have limited purchases of goods durable. As a result of the crisis, the banking sector restricted the credit in general and real estate credit in particular. This has generated a significant negative effect on the companies in the sector. The positive side of the case is that, as we comentaramos in a news of the week Chilean banks earn in the midst of the crisis, the Chilean banking system is in good health, achieving even utilities in the midst of the crisis, and is able to regenerate financing immediately. The return of calm in the Chilean economy appears as the key element so that it can maintain growth. The tranquility in the markets release credit and encourage the private sector to consume and invest.