NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns an 'A+' rating to Chile's global bonds due in 2022 and 2042 for a combined amount of US$1.5 billion. The ratings are in line with Chile's long-term foreign currency Issuer Default Rating (IDR) of 'A+', which has a Stable Outlook. The government is re-entering international capital markets with the objective of developing its external yield curve and for pre-financing purposes.
Chile's sovereign ratings are supported by years of prudent fiscal management, an effective and credible monetary regime anchored by a freely floating currency, and an economic model based on competitive markets. These strengths counterbalance high commodity dependence, low per capita income and human development indicators that are weaker than 'A' category peers.
A moderate slowdown is expected in 2012 as export demand softens and international financial conditions remain volatile. Fitch considers that Chile is well-prepared to contain the negative effects stemming from the unfavourable and volatile international financial conditions due to its strong fiscal balance sheet and its credible macroeconomic policy framework. Attaining faster growth in the medium term requires reforms to accelerate productivity growth after years of under performance.
A fiscal rule based on structural balances has been key in reducing economic volatility, increasing public savings, maintaining a competitive exchange rate, and building important fiscal cushions. Fitch considers that the changes made to the fiscal rule in 2011 have bolstered fiscal transparency and institutionality. The government aims to bring down the structural deficit from 1.1% of GDP in 2011 to 1% in 2014.
Chile has little public debt, with gross and net public debt indicators among the strongest in the 'A' category. Sizeable resources in Chile's stabilization funds also bolster fiscal flexibility. Central government debt could reach 12.6% of GDP in 2012 from 9.2% in 2010. Fitch believes that Chile's debt indicators are likely to remain superior to the 'A' median even under less favourable economic conditions.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Sovereign Rating Methodology' (Aug. 13, 2012).
Applicable Criteria and Related Research:
Sovereign Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685737
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Source: Fitch Ratings