Chile is no longer the least risky country in Latin America

RIO DE JANEIRO, BRAZIL – Chilean financial markets have been under intense pressure in 2021, in an unusual scenario marked by political elections.

This year constituents and governors were elected, and now the country is on the verge of presidential elections. The favorites are representatives of the extremes of the political spectrum.

Read also: Check out our coverage on Chile

Against this backdrop, there were withdrawals of pension funds (more than US$50 billion), a significant increase in public spending, and a general deterioration of the fiscal accounts. All these factors, in turn, have altered the value of the dollar – which has become misaligned with copper – and the performance of the stock market, which has not been able to emulate Wall Street’s historical highs.

But it has also influenced the country’s risk. The five-year Credit Default Swap (CDS), which is used to measure the risk of non-payment for Chilean sovereign paper, is today at its highest level since June 2020.

According to Bloomberg, CDS touched 90 points this morning, above Peru’s 89.9 and Panama’s 89. Yes, Chile is no longer the least risky country in the region.

This week alone, the instrument has risen 12.21 points (15.7%), which is very similar to the behavior shown by the dollar.

In the year, Chile’s country risk measured with these CDS has jumped 101.3%. And the question remains, what will happen on Monday after the elections?

LATIN AMERICAN COUNTRIES

5-year CDS, in points:

• Ecuador 651.2
• Brazil 239.8
• Colombia 183.1
• Uruguay 111.2
• Chile 90.2
• Peru 89.9
• Panama 89.0

Source: Bloomberg