Chile could sell bonds due to the drop in liquidity

It is likely that the Chile’s Ministry of Finance returns to the capital markets soon, possibly with the issuance of bonds in hard currency in the second half of January, since its liquid assets reached critical levels at the end of November, according to Banco Itaú Chile.

The Treasury had just $1.1 billion in liquid assets in November, the lowest end-November balance since 2010, while the Treasury Department’s dollar balance fell to US$301 million from US$719 million at the end of October.

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Last year was characterized by persistent poor revenue performance and upward revisions to spending growth, Itaú economists wrote in a note. Andres Perez, Vittorio Perettie Ignacio Martínez, citing figures from the Chilean Budget Directorate. December fiscal data—to be released at the end of January—would have to reflect a material restriction on current spending to compensate for poor revenue performance accumulated.

Chilean investors are reversing course on battered Treasury debt

The accumulated fiscal deficit reached 1.6% of GDP in the first 11 months of 2023, compared to a surplus of 2.4% in the same period of 2022.

Fiscal deficit

Concerns about the fiscal deficit have increased in Chile in the last decade. The country’s debt burden increased to 37.2% of gross domestic product in the second quarter of 2023, more than doubling in 10 years. This year’s budget foresees a fiscal deficit of 1.9% of GDP, below the 2.3% deficit expected for last year. The problem is that many investors are skeptical about whether they will achieve that.

Itaú economists added that even The risk remains that the Government will withdraw money from its Stabilization Fund. The fund’s assets reached 1.6% of GDP at the end of November.

Translated by Bárbara Briceño.

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