Aug Market Monitor


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This issue, available in English, Dutch, and German (French, Italian, and Spanish will follow soon) - includes coverage of the current business and insolvency environment of the following countries:

The Netherlands – spotlighting on the metals and retail sectors
Ireland – spotlighting on the construction and retail sectors
The Expected Default Frequency for all the major Western economies again decreased slightly in June. This may suggest that the perception of risk has declined. However, at best it can only be described as a gradual reversal of the spike that followed Lehman´s failure last year.

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Aug Market Monitor

  1. 1. marketmonitor adapting to the challenging economic environment August 2009 The immediate outlook for key markets and sectors Every month, Atradius brings you an up to the minute snapshot report on a range of export markets and key trade sectors. Our underwriters have a specialist view of the world economy – and the industries that make that economy tick - that you won’t find in the general press coverage of events, so we hope that you will find our summary reviews a useful addition to your Atradius credit insurance. Even more importantly, our underwriters use their expertise and experience to look to the future. In each edition of Atradius Market Monitor you’ll find our outlook for a number of key market economies. In this issue… …we feature the following markets: The Netherlands – with a spotlight on the metals and retail sectors Ireland – with a spotlight on the construction and retail sectors USA Belgium Poland Singapore Chile 1
  2. 2. Expected default in Western Europe and USA One of the most important factors that any business needs to know is the trend of insolvencies in their markets. The following Expected Default Frequency (EDF) chart is based on listed companies in the markets referred to, and the likelihood of default across all sectors within the next year. In this context, default is defined as a failure to make a scheduled payment, or the initiation of bankruptcy proceedings. Probability of default is calculated from three factors: market value of a company’s assets, its volatility and its current capital structure. As a guide, the probability of one firm in a hundred defaulting on payment is shown as 1%. Source: Atradius Economic Research and KMV Credit Monitor The rebound in equity prices and a significant reduction of stock market volatility have translated into lower model-generated corporate default forecasts. EDFs have fallen back significantly in recent months, in both North America and Europe. The median corporate EDF in the U.S. pool is now back below 220 basis points, after peaking at around 440 basis points in the first quarter of 2009. Despite this, it is worth bearing in mind that it is still well above its long term level. The same holds true for the recent EDF developments across European markets. While generally decreasing, the current EDF levels remain in line with readings from late 2008, indicating elevated default risk among listed companies. In summary, the recent development of EDFs may suggest that the perception of risk has declined. However, at best it can only be described as a gradual reversal of the spike that followed Lehman‘s failure last year. On the following pages, we assess the impact of expected default in key markets 2
  3. 3. The Netherlands Mixed signals for the economy In Q1 of 2009 the Dutch economy contracted by 4.5% year-on-year: the latest episode in a saga of economic contraction for the Netherlands. However, the first tentative signs of economic stabilisation are slowly becoming visible, although it is still too early to say confidently that a real recovery will follow. Producer confidence is gradually becoming less negative - from an all time low of -34 index points in March to -14.8 in July. Consumer confidence has also bounced back from its low of -34 in March with an improvement to -24 in June, though levelling off in July. Although export decline continued into April, in May we saw the downturn start to ease. The decrease in export volume of 13-15% in the first four months improved to a decrease of 10% in May. Expressed in value, the decrease is still a sizeable 21%, and both exports and imports have shown a comparable reduction. The unemployment rate rose in June to 4.8%, compared to 4% a year ago. Government arrangements for temporary and part-time unemployment, designed to support business, have been extended until the end of the year. This has led to a lower official unemployment picture, which does not reflect the actual situation. Along with a number of banks, the Dutch government also supports business through its ‘TASK’ (Tijdelijke Aanvullende Steun Kredietverzekering) scheme, making it possible to insure larger transactions through top- up credit limits. All the credit insurers operating in the Netherlands are participating in the scheme. Recently, a number of listed companies have successfully raised additional financing through considerable rights issues to reduce their debt levels and increase working capital. This move has improved their likelihood of surviving the current economic crisis. Insolvency numbers levelling off? In Q2 of 2009 the number of business to business debt collection cases in the Netherlands was still on the rise. Compared to the same period last year, the number has increased by 54%, according to Atradius Collections. Even compared to the first quarter of this year, the increase is considerable, at 9.4%. Nevertheless, the average value of debts placed for collection has dropped by 15% compared to last year, probably because of the fall in trading activity and the lower average invoice value. Although the number of corporate insolvencies has doubled, year-on-year, in the first half of 2009, we are seeing a stabilisation, following three quarters in which the numbers rose. A levelling off or even an 3
  4. 4. improvement is not inconceivable, as ‘de-stocking’ tails off and companies begin to restock, albeit on a lower level. Insolvencies in the NL (quarterly) 2500 2000 1500 1000 500 0 Q2 1998 Q4 1998 Q2 1999 Q4 1999 Q2 2000 Q4 2000 Q2 2001 Q4 2001 Q2 2002 Q4 2002 Q2 2003 Q4 2003 Q2 2004 Q4 2004 Q2 2005 Q4 2005 Q2 2006 Q4 2006 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Total Sole proprietorships Limited companies Source: Statistics Netherlands Looking at insolvency levels by sector, while industry and trade show a slight improvement, there has been a marked rise in the number of insolvencies in the financial and business services sectors in Q2 of 2009. Insolvencies in the construction sector are high and will remain so until the end of the year. Sales of new and existing houses have dropped dramatically. ‘Starter’ houses, for first time buyers, still appear marketable, but sales at the luxury end of the market have fallen by over 50%. 4
  5. 5. Spotlight on industries in The Netherlands Metals How has the economic downturn impacted the metals industry? The metal trade and the related recycling industry have felt the full effects of the recession in the last twelve months – especially stock keeping companies in this sector. Massive price decreases and amortization of stock, while sales virtually collapsed, have put many businesses in the metals sector under huge pressure - to the extent that quite a number of them cannot survive. The metal recycling business has also seen the sales price of recycled metal plunge from an all time high – with decreases of over 50% as the norm. What is the current trend in payment delays, payment default and insolvencies? Prices and margins are under pressure and therefore many companies are struggling to pay outstanding invoices. In Q2 of 2009 Atradius Collections noted an increase of 44% in the number of debt collection cases and a 72% rise in the value of debt collections year-on-year in this sector. Corporate insolvencies in the industry increased by 155% in the first five months of 2009 compared to the first five months of 2008. However, on the positive side, the number of insolvencies in Q2 of 2009 is lower than in the previous quarter. What is Atradius’ short term (6 months outlook) for the metals industry? After twelve months of severe downturn, we see signs of a recovery in the next 6 to 12 months, albeit at a low level, due to a gradual rise of commodity prices and stabilisation of sales volumes. Contracts have been finalised, and stock has been reduced to a level more appropriate to lower production and the necessity to create working capital. With lower prices and production levels, companies need less financing of stock and accounts receivables, which in turn improves their overall financial situation. The absolute priority now is cost reduction to adapt to lower gross margins. A crucial factor will be whether the agreed and signed sales and supply contracts are actually concluded successfully. In view of the long lead times of these contracts - sometimes over a year - many companies could still face trouble. Moreover, even if the vendor strikes what is considered a ‘good price’, there is no guarantee that this will translate into a ‘good deal’: the risk of non-payment currently remains high. 5
  6. 6. Spotlight on industries in The Netherlands Retail How has the economic downturn impacted the retail sector? The beginning of 2009 was still promising for the retail sector, with increased consumer sentiment. Consumer prices had stabilised, inflation had decreased and wages had risen as a result of central agreements made in 2007 and early 2008, when labour unions and companies still equated compensation to the high(er) inflation level prevailing at that time. The temporary and part-time unemployment arrangements put in place by the government have ensured that wage levels and incomes have remained stable. However, in the meantime, consumers have become increasingly worried about the future due to the rising fear of job losses. Reorganisations already announced by many companies in various sectors have made consumers reluctant to spend over recent months. As a result, consumption has fallen and private savings have increased. In the first 5 months of 2009, the Central Bureau of Statistics reports that 13 billion euro have been saved compared to 6 billion euro in the same period of 2008. These developments have put the retail business under pressure. Consumption of consumer durables decreased sharply by 11% in May 2009 compared to May 2008. Overall consumption decreased by 3.6% in May 2009 year-on-year. Even food sales have decreased - down 2-3%. What is the current trend in payment delays, payment default and insolvencies? The number of bankruptcies in the retail sector increased by almost 100% in the first 5 months of 2009 compared to the same period in 2008, and there are still no signs of stabilisation. This negative development affects the whole retail chain, with the exception of discounters, who take advantage of consumers´ increasing price consciousness. What is Atradius’ short term (6 months outlook) for the retail sector? We expect no real improvement in the situation in the coming months. However, discounters and those retail stores that have anticipated the new environment and adjusted their corporate policies accordingly will benefit from the recession. Suppliers need to be very cautious if terms of payment are exceeded and/or tacitly extended by, say, 30 days. This is usually a serious sign of liquidity problems. 6
  7. 7. Ireland Still a gloomy picture Ireland's economy shrank at a dramatic rate in the first quarter of this year, with GDP declining by 8.5% compared to the same period in 2008, according to the latest figures from the Central Statistics Office for Ireland. The seasonally adjusted estimates show that, compared to the previous quarter, GDP fell by 1.5% in Q1 of 2009. In the first three months of 2009 consumer spending was more than 9% lower than in the same period in 2008, while capital investment plummeted by 34%. Industrial production dropped 10.5%, including a fall of 31.4% in construction output. According to the tsb/ESRI index average, national house prices continued to fall in May: by 1.3% compared to April and 10.9% year-on-year. Figures from property website indicate that the asking price for houses has dropped by almost 15% in H1 of 2009. New cars sales continue to fall. 47,000 were sold in the first half of 2009 compared to 124,000 in the same period in 2008. Industry experts predict a total of 57,000 for the year: the lowest since 1987. In line with this severe deterioration in the Irish business environment, insolvencies have continued to rise sharply in the first half of 2009. Up to June we have seen 702 firms fail - just short of the total of 773 for the whole of 2008, with construction, services, retail and hospitality the most affected sectors. Source: Insolvency Journal Further deterioration on the horizon There seems to be no sign of recovery in the short-term. The International Monetary Fund (IMF) expects GDP to contract by 8.5% this year and a further 3% in 2010. Recent data on housing starts, retail sales and 7
  8. 8. the purchasing manager’s index, project a further decline in the second half of the year. As the budget deficit could reach between 10-12% in 2009, fiscal consolidation is of paramount importance, although such austerity measures will no doubt prove unpopular. The continuing fall in construction activity will fuel higher unemployment, projected to reach 12% by the end of the year and 15.5% in 2010. Combined with lower wages and a high degree of uncertainty, this will severely affect consumption. The IMF estimates that losses faced by banks through to the end of 2010 may reach € 35 billion, or about 20% of GDP. But the government has provided massive support to stabilise the financial system through blanket guarantees and recapitalisation. In April it announced the setting up of the National Asset Management Agency (NAMA) to fundamentally restructure the banking sector. If the current insolvency trend continues, this year we can expect an 82% increase on 2008 and a staggering 287% on the 2007 figure. The latest 2009 figure of 65 receiverships to May has now exceeded the total of 57 in 2008, indicating a stricter approach by banks to recover debt from companies. 8
  9. 9. Spotlight on industries in Ireland Construction How has the economic downturn impacted the construction industry? All indicators point to continuing difficulties within this sector. We have seen a significant decline in new build housing, as the over-supply of recent years is proving difficult to shift due to the shortage of bank credit and a lack of consumer demand. The shortage of credit and over-supply is also spilling over into the commercial sector. The Construction Industry Confederation (CIF) fears that infrastructure projects identified in the National Development Plan will not be proceeding at the rate envisaged: primarily because of the deteriorated state of public finances. What is the current trend in payment delays, payment default and insolvencies? Construction accounted for 31% (211 in number) of all insolvencies in H1 of 2009 (See chart below). Our clients continue to report delays in payment in the construction sector, although at a slower rate – evidence of a contraction in the sector. We are seeing evidence of banks appointing receivers to development companies and developers seeking protection from creditors by looking to the courts to appoint examiners. These events will have knock-on effects across the sector, so we can expect to see further increases in the number of insolvencies. Source: Insolvency Journal What is Atradius’ short term (6 months outlook) for the construction industry? We predict a difficult next 6 months for this sector. Most activity relies on bank finance – and, because of the difficulties that many developers are in, banks will be reluctant to lend to or refinance these businesses. The Repair Maintenance and Improvement sector (RMI) has not seen the increases anticipated, as consumers are holding off on capital expenditures at present because of uncertainty over employment and disposable income (with higher taxes since April 2009). The CIF estimates that only between € 500 million and €1 billion worth of new public building and infrastructure projects will start during 2009 as the government has again cut the public capital programme in its April 2009 budget revision in order to trim public finances. It is estimated that up to 100,000 jobs will be lost over the next 12 months as a result of various projects being delayed. 9
  10. 10. Spotlight on industries in Ireland Retail How has the economic downturn impacted the retail industry? Retail sales decreased by 16.5% year-on-year in Q2 of 2009: the 16th consecutive month of decline. In the same period, grocery sales fell by 10.6%, supporting the view that all except the major operators are struggling. Clothing and footwear were worst hit, with sales declines reaching 25.7% in menswear and 20.5% in footwear. Difficulties affecting this sector range from rents through to consumer sentiment: foot traffic and spending in all major centres is down as a result of rising unemployment and increased personal taxation. During 2008, as the UK pound weakened against the euro, we have seen large numbers of consumers travel to Northern Ireland to benefit from the lower prices in retail outlets there. This continued in early 2009 as Irish VAT rose while the UK lowered theirs. Torlach Denihan, Director of Retail Ireland, estimates that this ‘trade’ will take around 3% of total consumer spend out of the economy. In an effort to counteract this, large retailers like TESCO, Dunnes Stores and Supervalu have reduced prices by up to 22%. This reduction, coupled with cross border trade, has placed enormous pressure on independent traders. What is the current trend in payment delays, payment default and insolvencies? Retail accounted for 101 (14% of all) insolvencies in H1 of 2009 (see chart on previous page). Major operators to fail this year included Golden Discs, Chartbusters, Sasha, Land of Leather and Zavvi. What is Atradius’ short term (6 months outlook) for the retail industry? There is very little to be positive about in this sector. We estimate that, if the current levels of spending continue for the remainder of 2009, we will see up to 25,000 additional job losses. The only hopeful sign is that the rate of deterioration in the retail industry is slowing, with a fall of just 12% in June. 10
  11. 11. USA Positive signs are emerging… There are some tentative and quite positive signs that, while the US is not yet out of recession, it is at least certainly approaching that point. Fiscal stimulus has ensured some stabilisation of growth estimates in recent months. Consensus Forecasts has revised its forecast upwards and currently predicts GDP contraction of 2.8% in 2009 and a reasonably strong recovery in 2010 with 1.9% growth. A US government incentive scheme, which offers attractive rebates to consumers trading in older fuel inefficient vehicles for more efficient new cars, has provided a short term boost: with almost 250,000 new vehicles sold in the last couple of months. While this level of sales is unlikely to be sustained, it has nonetheless provided some short-term relief to the troubled industry and, more importantly, has helped nurture a more confident consumer outlook. The backlog of new home inventories has fallen from ten to eight months, and sales of existing homes are increasing as consumers take advantage of ‘buyers’ market’ prices and competitive mortgage rates. Factory orders increased by around half a percentage point in June, following a 1.1% increase in May, marking the fourth increase in five months, and indicating that the ailing manufacturing sector is showing signs of recovery. This June, improvement was largely driven by a 2.7% rise in orders for non-durable goods. …but many challenges lay ahead Despite these positive signs, there are still many challenges ahead, as persistent concerns about the economic outlook, corporate and personal creditworthiness, and bank capital adequacy, continue to limit growth in lending to US firms and household borrowers. Companies with deteriorating balance sheet strength will clearly face more challenges in obtaining finance, while those who do obtain finance will face increasing difficulties in complying with loan covenants and/or achieving extended or increased levels of credit. Many small businesses, and especially those that need to tap into seasonal lines to facilitate inventory growth, obtain essential working capital and employ seasonal labour, will continue to fall by the wayside in the second half of 2009 as the essential credit they require will just not be available. This will ensure a continuing rise in insolvencies, a trend that will unfortunately detract from some of the positive elements we are beginning to witness. US insolvencies have increased rapidly, at a rate of 50% a year, and 2009 should see the number of business insolvencies exceed 90,000. Despite a major decrease in recent months, it is worth bearing in mind that the median corporate Expected Default Frequency is still well above its long term level (see chart page 2). Insolvencies and rising job losses will unfortunately continue beyond the end of the recession. A specific concern is a possible Chapter 11 filing of CIT, which provides or facilitates essential liquidity to over a million small businesses. A filing would be problematic and would further exacerbate the shortage of available capital. Many small regional banks, facing the spectre of defaults within their commercial real- estate loan portfolios, will further tighten their attitudes and will be unable or unwilling to step up and fill this potential void. 11
  12. 12. Belgium No real signs of improvement The Belgian business environment has shown no real signs of improvement since our last analysis in May. In Q2 of 2009, GDP continued to contract: by 0.4% compared to the previous quarter. For the whole of 2009 GDP will contract by 4.0%-4.5%. The fiscal deficit is forecast to increase even further: to about 6% of GDP. Nevertheless, consumer trust has improved for the fourth month in a row in June, and business confidence has reached its highest level since November 2008, mainly in manufacturing and wholesale. Since our last report, we have seen continued deterioration of companies´ payment behaviour, with even more companies paying their invoices more than 90 days late. According to Graydon, 5,037 companies became insolvent in the first half of 2009, a 17.33% increase year-on-year. The main victims were Construction (24.12%), transport (18.99%), restaurants and cafés (16.22%), telecom, IT, textiles, paper and printing, and wholesale. If there is any hint of good news it is that in June, for the first time in seven months no monthly insolvency records were broken. Naturally, the rising number of insolvencies has led to an increase in unemployment: up by 57,000 in the first six months of 2009, to a total of 443,574. There is no doubt that unemployment will reach half a million by the end of the year. A new law on restructuring for companies facing financial difficulties came into force on April 1, allowing troubled companies the breathing space of a suspension of payment by voluntary judicial reorganisation. All claims against this company are then frozen, and forced execution proceedings and bankruptcy prevented. Already this year, 122 companies have been granted this temporary respite, compared to 78 for the whole of 2008 under the previous procedure for composition of payments. The impact on the number of insolvencies has yet to be seen, but we expect an improvement in recovery in the medium term. Difficult times ahead for some sectors The coming months will be a difficult time, with ongoing deterioration in payment behaviour and a further increase in insolvencies. The Belgian Expected Default Frequency remains above its long-term level, indicating high default risk among listed companies (see chart page 2). We estimate that construction in particular will face tough times, not helped by the annual four week holiday period - with no activity, no invoicing, and a lack of treasury in September. The metals sector has suffered severely since the last quarter of 2008, and we expect this to become one of the worst casualties of insolvencies and payment defaults for the rest of 2009. Transport, paper and textile will also remain in a critical state, while we see deterioration in the consumer durables sector because of a lack of consumption. More optimistically, we note that agriculture and food remain robust for the time being. 12
  13. 13. Poland Poland less affected than other Eastern European states Compared to the sharp deterioration in all other Central and Eastern European markets, Poland’s economy still seems to be in reasonable shape. Consensus Forecasts currently predict GDP growth of 0.1% this year and 1.7% in 2010. Robust domestic consumption is the main driver of this development, as unemployment has continued to decrease over the last couple of years, and both households and companies are in general less indebted than in other countries. Exports are currently decreasing less than imports, and the sharp depreciation of the zloty since the end of 2008 has helped exporters succeed in price sensitive segments and markets, partly compensating for an overall decrease in foreign demand. But the volatility of the Polish currency has also had some negative consequences for the business environment. Many businesses are still suffering from the currency plunge, as this has effectively increased the burden of their foreign currency liabilities and of speculative hedging instruments. In addition, many Polish companies that have taken large bank loans now face tough negotiations over repayment terms when prolonging or rolling over the loan. It is evident that staying within covenants is a challenge for many firms. Payment morale is deteriorating The number of corporate insolvencies increased by nearly 50% year-on-year in the first half of 2009, with a significantly greater dynamic in the second quarter. This trend is likely to continue over the next few months. The main trigger for liquidity problems is the overall deteriorating payment morale across all sectors. We are seeing above-average payment delays in steel/metals, information and communication technologies (ICT), textiles and paper industries. As a result, there is a higher risk of defaults in these sectors, at least in the short term. However, even in otherwise stable sectors like food/food retail, wholesale and pharmaceuticals we see businesses in serious trouble. That said, there are also examples of healthy companies in deteriorating sectors, so carefully examining the individual risk situation of each company is the key in the current situation, with a special focus on warning signs like high indebtedness, exposure to foreign exchange risks and recent over-investment in fixed assets. The third quarter will be decisive for the further development of the Polish economy this year. Worrying trends are the rising unemployment rate - 8.2% at the end of June - and decreasing capital expenditure investment. Business opportunities do exist in areas related to infrastructural projects supported by EU funds, as well as in construction projects for the Euro 2012 European Football Championships. We expect that, despite the problem sectors, flexible and well managed businesses that have already taken steps to cut costs and generate working assets will overcome the current downturn and emerge in much stronger shape. 13
  14. 14. Singapore Second quarter growth defies expectations As a result of the current global crisis, Singapore slipped into its worst recession since its independence. But GDP has rebounded strongly at a seasonally-adjusted annualised rate of 20.7% in Q2 of 2009 compared to the previous quarter. That translates into a 3.5% year-on-year decline, according to the Singapore Ministry of Trade and Industry (MTI). MTI figures also indicate that the services sector continues to struggle: declining by 4.8% year-on-year in Q2 of 2009. Both wholesale and retail trade continued to contract, although at a slower rate. Financial services also declined at a slower rate, as the general market sentiment improved. However, the hotel and restaurant sector has been weighed down by a slump in tourism. Construction growth eased to 18.6% year-on-year, down from a 24.4% growth in Q1. But most of Singapore’s growth in the second quarter came from manufacturing, which contracted by just 2.4%, following a 24.1% contraction in the first quarter. Industrial production was driven by a surge in the biomedical sector (in response to the spread of swine flu) and electronics inventory restocking, both of which may not be sustainable. Insolvency figures have remained flat so far in 2009, with no evidence of an increase. Loans to businesses fell for the eighth consecutive month, due to a combination of tighter lending conditions and lower demand as businesses put spending on hold. However, we have noted that the pace of the fall is moderating as the banks risk appetite appears to be returning. Singapore’s three main local banks remain strongly profitable and are well-capitalised to face an anticipated rise in bad debts into next year. Unemployment has increased marginally, from 2.5% to 3.3%, since December 2008. The number of redundancies in Q2 of 2009 (5,500) was less than half that seen in the first quarter. Singapore’s consumer confidence grew in Q2, spurred by renewed consumer optimism and stock market gains. A liquidity-fuelled stock rally has seen Singapore’s stock market capitalisation surge in July to its highest end-of-month value in over a year. Weak recovery susceptible to downside risks The government is estimated to have reserves of over Singapore-$ 500 billion. It has shown its willingness to use public funds to bolster the economy and assist the private sector through a number of programmes announced in the 2009 Budget as part of its Singapore-$ 20.5 billion Resilience Package. Because of the less severe downturn in the first half of the year, the MTI has revised its 2009 GDP forecast to a 4%-6% contraction, an improvement on its 6%-9% contraction forecast in April. Since Singapore’s economy remains heavily dependent on foreign demand, accounting for about 75% of annual economic growth, we are cautiously optimistic about the city state’s outlook until we see a decisive, sustainable recovery in global demand. As long as the global economy continues to be weak, Singapore remains susceptible to downside risks. 14
  15. 15. Chile Still sound economic fundamentals We consider Chile to be one of South America's most stable and prosperous nations, with sound economic fundamentals and a stable political system. The market is relatively free of crime and official corruption, and the banking sector is reasonably strong. These factors should ensure that Chile can cope well with the fall-out from the global crisis, including any impact being felt by downturns in the economies of its South American neighbours. In fact, Chile’s prudent fiscal policy during the ‘years of plenty’ may result in it becoming a safe haven in the region for investors. Chile’s most important sectors are mining and agriculture and it is the world’s largest copper producer, with copper mining accounting for almost 50% of GDP. As a result, the country is very vulnerable to fluctuations in the price of copper. It has prospered in recent years from the demand for copper from developing countries such as China. However, 2009 will be the first year of economic contraction for Chile since 1999, as the demand and price of copper has deteriorated sharply since mid-2008. That said, Chile’s central bank has been a leader in the region in cutting interest rates, and the government has provided comprehensive fiscal stimulus for the economy, profiting from its decision to save much of the copper windfall. Consensus Forecasts estimates that GDP will decrease by 0.9% this year and rebound growing 3.4% in 2010. Although there has been a small increase in payment delays, this is not typical, and we believe it to be a direct result of the global economic crisis. Financial information is generally available and Chilean companies are usually very open to providing information when it is requested by our agencies. Well placed to weather the downturn despite some risks Chile is a market which should be well-placed to weather the current global downturn. However, there are some downside risks. The dependence on copper means that Chile will continue to be vulnerable if the global economic downturn is prolonged: economic recovery in Chile is very much tied to a resurgence in commodity prices. Much will also depend on how successfully Chile’s neighbours survive the economic downturn, as trade between Chile and its neighbours has been another factor underpinning its economic growth in recent years. 15
  16. 16. Atradius Copyright. While we have made every attempt to ensure that the information contained in this report has been obtained from reliable sources, Atradius is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this document is provided ’as is’, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied. In no event will Atradius, its related partnerships or corporations, or the partners, agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this report or for any consequential, special or similar damages, even if advised of the possibility of such damages. 16