Chile’s foreign debt increases; current account deficit stands at 3.5% of GDP

RIO DE JANEIRO, BRAZIL – Chile’s foreign debt increased by US$ 19.025 billion during the third quarter compared to the previous one, reaching a total of US$ 233.155 billion, which is equivalent to 81.3% of the Gross Domestic Product (GDP).

As explained in this morning’s Central Bank report, the increase was led by non-financial companies and the government, which increased their foreign commitments by US$6.918 billion and US$6.396 billion, respectively, due to bond issues.

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The banking sector increased its debt by US$3.058 billion and the Central Bank in particular by US$2.338 billion, due to loans and SDR allocations, respectively.

The debt of related companies and other financial companies increased by US$388 million and US$84 million, respectively, as a result of loans received.

In addition, the current account recorded a negative balance of US$6.504 billion during the third quarter. This brought the accumulated balance for the year to a negative balance equivalent to 3.5% of GDP.

The economy’s financing needs were due to the net payment of income abroad and, to a lesser extent, to the deficit in the balance of trade in goods and services. The latter was explained by a deficit in the services component that was not offset by the surplus in the goods component.

CAPITAL MOVEMENTS

From the perspective of the financial account, net capital inflows of US$ 7.487 billion were recorded, mainly associated with the issuance of bonds and withdrawals from sovereign wealth funds by the government. Also noteworthy were bond issues by non-financial companies. In contrast, there was an increase in assets associated with the Central Bank’s international reserves.

In the area of direct investment, net capital outflows of US$1.665 billion were recorded, associated with capital from residents abroad. The latter amounted to US$1.875 billion and was mainly composed of capital contributions and reinvested earnings.

In turn, direct investment in Chile totaled US$209 million, explained by loans contracted by non-financial companies with their related parties abroad.

The portfolio investment category recorded net capital inflows of US$15.71 billion as a result of an increase in liabilities of US$16.54 billion, led by government bond issues, followed by non-financial companies and, finally, banks.

On the asset side, there were net outflows of US$830 million as a result of investment in equity securities by other financial companies and non-financial companies. The latter was partially offset by the return from abroad of government fixed-income investments.

With information from Diario Financiero