Concerns are growing in Chile that it could be the first country in resource-rich South America to feel the impact of the slowdown in China and the US’s escalating trade war with Beijing, with a fall in copper prices already putting pressure on the economic agenda of President Sebastián Piñera.
As the world’s leading copper producer, and one of South America’s most open economies, Chile is particularly vulnerable to a drop in copper prices, which last week touched its lowest level of the year on worries over China’s economic growth. The metal accounts for more than 43 per cent of Chile’s exports.
The challenges faced by Chile are a warning signal for other commodity exporters in the region, economists said, especially given the metal’s reputation for predicting turning points in the global economy.
“[Copper] could be something of a canary in the coal mine,” said Carlos Végh, World Bank chief economist for Latin America and the Caribbean. “If there are fundamentals in the world economy that cause commodity prices to fall in the near future, then it may well be that copper is proving to be the first victim.”
China’s long economic boom was an important motor of growth for Latin America for many years. Now a Chinese slowdown and the knock-on effects from US tariffs on China’s growth could further dampen the Asian giant’s demand for South American exports.
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