Copper price fall bad news for Chile, but not disaster
By Rosalba O'Brien SANTIAGO, Jan 15 (Reuters) - Chile, the world's number one copper producer, is relatively sanguine about the recent price collapse in the base metal which accounts for over half its exports, and economists say they do not see the country being plunged into economic crisis. Copper, which lost around 15 percent of its value in 2014, fell over 5 percent on Wednesday, as traders remained jittery over global growth after a recent drop in the price of oil. Nowhere is more dependent on copper sales than Chile. In 2014, they were responsible for just over half the country's $77 billion worth of exports, snapped up largely by China, where it is used in construction. As Chinese property developers have become more hesitant about slinging up buildings, on the other side of the Pacific Chile has felt the impact. Economic growth in the South American country slowed sharply last year, the Chilean peso weakened 13 percent and the stock market also slipped. But, while admitting that a collapse in the copper price could hurt Chile, economists say the country is well-managed and do not expect a Venezuela-style commodities-related crisis or major hit to government spending. "The economy will have to adjust. The peso will have to depreciate more. It means we will have to accept low growth rates and to a large extent that's the end of the story," said Alberto Ramos, co-head of Latin America economic research at Goldman Sachs. Meanwhile, Finance Minister Alberto Arenas largely shrugged off Wednesday's slide and said the government would not change its estimate for copper of around $3 a pound in 2015. Copper was trading at around $2.60 on Thursday. "We're still keeping the forecasts on the copper price, what is true is that we are going to be permanently monitoring, which is the right thing to do for the country's public finances," he said. Those public finances remain fairly healthy, key for President Michelle Bachelet's government, which is pressing forward with a reform drive despite the slowdown and does not want to renege on its promises to increase public spending. Chile's coffers include $14.8 billion (as of November) stashed away in a sovereign wealth fund. As a country that imports practically all its hydrocarbons, Chile has benefited from the recent collapse in the oil price. That has helped to cool inflation and put more pesos in people's, and miners' pockets. But it does not balance out the estimated $60 million lost in income for every cent the copper price slides, according to figures from mining association SONAMI. So the government may be tapping that savings fund soon. "That's precisely the role of the sovereign wealth fund, you save during the good years to use in years like this one," said Ramos. (Editing by Simon Gardner and Diane Craft)
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