Chile Freight Transport Report Q1 2010

Chile was planning to award US$4bn in public works projects through to 2011, the country's public works minister, Sergio Bitar, said in August. Following years of fiscal prudence, Chile has amassed sufficient public funds to support infrastructure investment in the current climate. Bitar announced a plan for infrastructure projects up to 2011 that foresees US$1bn of projects in 2009, the same in 2010, and US$2bn in 2011. The projects will be in addition to those already planned for these years, and therefore could bring the amount invested in infrastructure in 2010 to U$2.6bn, which will include the construction of 1,000km of highways, according to Bitar, as quoted by EFE. A number of flagship infrastructure projects in the country will be included in the plans. One example is the Intra-Oceanic Corridor that will create a trade corridor linking Brazil's Atlantic port of Santos with Chile's Pacific coast ports of Iquique and Arica. The project is expected to create 3,800km of paved roads, with 400km of this passing through Chile. According to EFE, Brazil has completed its section of the route, and Chile and Bolivia are close to finishing theirs. The first phase of the project is due to be completed in 2010. Another high-priority project is the US$3bn freight rail tunnel through the Andes, at the Los Libertadores pass, which will link Chile and Argentina. Investment will also go into other projects, including the creation of a series of dams and a 2,000km road network. Prudent fiscal policy in recent years has enabled Chile to accumulate an impressive budget surplus, which for 2008 was 9.2% of GDP. Consequently, Chile has been able to draw on state coffers to ease the impact of the global economic slowdown on the country. Infrastructure spending has been a key element of this: in January's stimulus package, US$700mn was allocated for infrastructure spending in 2009. However, employing reserves to prop up the country's economy will cause it to enter into a fiscal deficit of -3.4% of GDP in 2009, according to estimates.

Chile has been suffering from the impact of the world recession, but a reasonably strong recovery is now in sight. According to our latest projections, after contracting by 1.1% in 2009, the Chilean economy is set to grow by 1.5% in 2010 and 3.2% in 2011.

In terms of specific transport modes, we have made few major changes to our predictions this quarter. We have re-set our shipping forecasts to link them to future trade (which is more volatile than GDP). This helps capture what we see as the very sharp fall in shipping volumes in 2009. Rail freight is set to grow by an annual average of 3.7% in the forecast period, with planned infrastructure investments boding well for the longer term. We are maintaining an earlier reduction in our pipeline throughput projection for the next few years, in view of the continuing trans-Andean gas supply problems from neighbouring Argentina, and Chile’s commitment to reduce its dependence on natural gas piped overland from the region in favour of greater use of liquefied natural gas (LNG) brought in by tankers from overseas suppliers. The net effect of these changes is that we now expect average annual growth in freight turnover across all modes, measured in million tonne-kilometres, to reach 257% in 2010-2014, faster than growth in the preceding five-year period (which averaged 4.4% per annum).

According to our latest estimates, transport and communications GDP will have fallen by 0.3% in 2009, less steeply than GDP, which we see contracting by 1.1%. For the 2010-2014 forecast period we expect the transport and communications sector to continue outpacing the economy as a whole. It will achieve average annual growth of 3.7%, versus 3.3% for overall GDP. The total value of transport and communications GDP will rise to US$21.2bn in nominal terms by 2014, representing 8.2% of Chile’s GDP. The transport and communications sector employed an estimated 529,900 people, or 8.6% of the labour force in 2008. We see this rising to 568,800, and 8.7% of the total, by 2014.

In terms of freight carried – and looking to the 2010-2014 five-year forecast period as a whole – the report’s view is that Chile’s fundamentally healthy and export-oriented economy will return to a stable growth path after the setbacks of this year, helping the freight sector with it. We project that freight carried will rise at an annual average of 5.7%, ahead of the economy as a whole (3.3%). Within that total, maritime freight will lead (7.3% average annual growth), followed by airfreight (4.6% growth per annum), road (4.2%) and rail freight (3.7%).