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'Social Tsunami' Slams a Top Latin American Economy – The Wall Street Journal

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The burned ruins of a Walmart supermarket that was set on fire during protests and looting in Arica, Chile.


Photo:

Marcela Bruna for The Wall Street Journal

ARICA, Chile—The

Walmart

store here in the country’s remote northern desert would normally be packed full of shoppers buying toys and food for the holidays.

Instead, what’s left this week are charred, twisted metal beams and busted up concrete in the aftermath of nationwide, antigovernment unrest that has caused the sharpest economic contraction in a decade in one of Latin America’s most prosperous nations. The store, which helped anchor businesses in the neighborhood, was one of 18 of Walmart’s stores in Chile—part of the Lider chain—destroyed by the looting that has accompanied two months of mass protests.

“It looks like a war zone,” said

César Martínez,

whose company was contracted to clear debris after the store was sacked and torched, leaving one person dead, in November. “Thirty days ago, this place was selling bread. It’s madness.”

Few expect a quick recovery in this country of 18 million people. The unrest has paralyzed Chile’s economy, which contracted 3.4% in October, the worst showing since the 2009 global financial crisis. The central bank cut its outlook for next year’s growth to between 0.5% and 1.5%, after previously projecting a 2.75% to 3.75% expansion. Economic output will hit just 1% this year, down from 4% in 2018.

While protests have dissipated with Christmas approaching, the economic fallout is just beginning, experts say. Chile is now embroiled in political uncertainty after the government agreed to hold a referendum in April on a new constitution. Leftist activists seek to overturn the nation’s free-market economic model in favor of one they would like to be more equitable and offer more social support.

César Martinez worked on the site of the fire that gutted the Walmart in Arica.


Photo:

Marcela Bruna for The Wall Street Journal

That is having an impact on business plans in what had been a stable Latin American nation. A December poll by Cadem found that 85% of business leaders have put investments on hold. About 61% of executives are pessimistic about Chile’s future as they brace for a recession and higher unemployment.

“This is a social tsunami. It will create a more permanent damage to the economy,” said

Ricardo Escobar,

a former head of Chile’s tax agency whose law firm in the capital, Santiago, works with business owners. “They will not invest until they see a clear future.”

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The chaos began Oct. 18 in Santiago when the biggest protests in a generation erupted over an increase in subway fares and quickly expanded to a range of grievances, from anger over meager pensions to shoddy health care and schools. The government backed down on the fares. Most protests were peaceful, but violent groups wreaked havoc, prompting President

Sebastián Piñera

to cancel an international summit that would have brought thousands of foreigners to the capital, including President

Trump.

Hotels were set on fire, restaurants were vandalized and subway stations were destroyed, causing $370 million in damage to the modern and efficient metro. The Santiago city center was trashed, with graffiti-covered walls reading “organize your rage.”

The demonstrations quickly spread across this 2,600-mile-long sliver of a country. In picturesque towns in southern Patagonia, banks and public property were vandalized. Here in Arica, Chile’s northernmost city some 1,300 miles from Santiago, protesters tore the heads off sculptures honoring war heroes, and tourism collapsed.

A looted supermarket in Santiago, on Nov. 28.


Photo:

claudio reyes/Agence France-Presse/Getty Images

In total, the government says 14,800 businesses were damaged and 100,000 jobs were lost across the country in the past two months as business and consumer confidence tanked.

“No one escaped this,” said

Manuel Melero,

president of the National Chamber of Commerce. “These are billions of dollars in losses.”

In response, Mr. Piñera, a center-right 70-year-old former businessman, has announced a $5.5 billion stimulus package to rebuild infrastructure and help small businesses. The boost in public spending is expected to drive the fiscal deficit to 4.4% of GDP in 2020, one of the biggest since Chile’s return to democracy 30 years ago.

The central bank is stepping up interventions to support the peso after it depreciated to a historic low. It could sell as much as $20 billion, according to the central bank, including a quarter of its reserves.

Economists say Chile is in a strong position to recover. It has little debt and its copper mines, by far the world’s biggest, weren’t affected by the turmoil. Officials say they are working to address protester demands, including increasing pensions, that would reduce high inequality.

“There is a social agreement to make Chile a more-just country,” Economy Minister

Lucas Palacios

told The Wall Street Journal. “The process to overcome this crisis that began on Oct. 18 is starting to bear fruit.”

Stores that were set on fire by antigovernment protesters in Santiago, on Oct. 29.


Photo:

Rodrigo Abd/Associated Press

The stimulus package is aimed at helping people like

Hector Soto,

whose pharmacy in southern Santiago was ransacked. The 33-year-old father of two was at home when looters stole nearly all the merchandise, even a digital scale.

“That left a mark on us,” said Mr. Soto, who has reopened but said sales are half of what they would normally be. “What really hurt was the level of destruction, the capacity to do damage.”

A December poll by COES, a Santiago-based think tank, said 65% of Chileans support the continuation of protests. The poll found that 89% of Chileans planned to back a new constitution. The protests have weakened, but political analysts expect a strengthened resumption in March, the end of the Southern Hemisphere’s summer break and before an April referendum on whether to replace a constitution drafted during the Pinochet dictatorship.

Politicians will struggle to maintain order as leaders across the political spectrum have lost much of their legitimacy during the crisis, analysts say. Mr. Piñera’s approval rating fell to 13%.

“This process is not finished,” said Marta Lagos, a pollster and political analyst. “There is not one single soul who can unify everyone to help Chile get out of this crisis.”

The uncertainty in Chile’s economy weighs on

Rodrigo Hevia,

whose business, supplying  restaurants with imported liquor, has suffered so much he has laid off workers. The 27-year-old and his wife have decided to hold off on buying a home and having children.

“We’re going to have to wait a bit because nothing is clear,” he said. “I’m not sure if my business is going to make it through next year.”

Alejandra Godoy lives next to the Walmart that was destroyed in Arica.


Photo:

Marcela Bruna for The Wall Street Journal

People are grappling with similar anxiety in Arica.

Alejandra Godoy

said she has barely worked at her beauty salon, located behind the destroyed Walmart. At night, she still hears people scavenging metal and anything else of value.

“Clients don’t want to come here because they’re scared,” said Ms. Godoy, whose neighborhood now plans to buy a community alarm system and security cameras.

Write to Ryan Dube at ryan.dube@dowjones.com

Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Why falling immigration isn't that bad for the economy during COVID-19 – Yahoo Canada Finance

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COVID-19 travel restrictions have put a big dent in immigration, widely seen as something the economy relies on, but the negative effects aren’t as bad as they might seem.

The latest government numbers show 13,645 fewer permanent residents came to Canada in July, down 63 per cent from the same month last year. April and June were similarly weak periods, making the likelihood of reaching the federal government’s target of 341,000 less likely.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.” data-reactid=”18″>For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada.&nbsp;” data-reactid=”19″>“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada

“So, even a complete shutdown of immigration would (roughly) shave 1 percentage point from growth (or a bit less). Not small by any means, but that compares with what could be a 6 per cent drop in GDP (OECD said -5.8 per cent for this year, we are looking at -5.5 per cent).”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.” data-reactid=”21″>Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.

“Overall, given the realities of COVID and the now-soft demand for labour, the cool down in immigration by itself will not be particularly harmful — and certainly less so than it would have been say a year ago.” said Porter.

Long term effects without immigration

Pedro Antunes, the Conference Board of Canada’s chief economist, also thinks the effects are mitigated in the short-term but that doesn’t mean the economy will be totally unscathed.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.” data-reactid=”25″>“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.

However, he believes it’s more important to look at the long term repercussions of reduced immigration.

“Canada’s underlying capacity is dependent on private and public investment, adoption of technology and the number of workers (and the skills of those workers). We know from our prior research that without immigration, our labour force would be flat or declining (since exiting baby-boomers outnumber school leavers),” said Antunes.

“If immigration levels are reduced over a few years (we think 2020 and 2021 at least) the result is a long-lasting impact on our potential (or productive capacity).”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter&nbsp;@jessysbains.” data-reactid=”29″>Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for&nbsp;Apple&nbsp;and&nbsp;Android.” data-reactid=”30″>Download the Yahoo Finance app, available for Apple and Android.

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EU looks to fast 5G, supercomputers to boost virus-hit economy – TheChronicleHerald.ca

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By Foo Yun Chee

BRUSSELS (Reuters) – The European Commission on Friday urged the 27-country bloc to work together to speed up the rollout of fibre and 5G networks to boost the region’s virus-hit economy and secure its technology autonomy.

EU countries should develop a best practices toolbox by March 30 with the aim of cutting cost and red tape, provide timely access to 5G radio spectrum and allow for more cross-border coordination for radio spectrum for 5G services, the EU executive said.

The coronavirus outbreak showed how important internet services and 5G are, European digital chief Margrethe Vestager said.

“We have seen the current crisis highlight the importance of access to very high-speed internet for businesses, public services and citizens, but also to accelerate the pace towards 5G,” she said in a statement. “We must therefore work together towards fast network rollout without any further delays.”

The Commission also proposed a recommendation to boost research and activities to develop new supercomputing technologies.

“Keeping up in the international technological race is a priority, and Europe has both the know-how and the political will to play a leading role,” Internal Market Commissioner Thierry Breton said in a statement.

The Commission is investing 8 billion euros($9.46 billion)in the next generation of supercomputers.

(Reporting by Foo Yun Chee; Editing by Tomasz Janowski)

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Charting the Global Economy: Fed Signals Rates on Hold for Years – BNN

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(Bloomberg) — The Federal Reserve signaled it will keep its benchmark interest rate near zero through 2023 to help the world’s largest economy recover from the coronavirus pandemic.

Cheap borrowing costs are fueling demand for U.S. housing and leaving builders brimming with optimism in the process. In China, retail sales and industrial output are on the mend, while in the U.K., the virus-related shutdowns are having a large negative impact on youth employment.

Here are some of the charts that appeared on Bloomberg this week, offering insight into the latest developments in the global economy:

World

The global economic slump won’t be as sharp as previously feared this year, though the recovery is losing pace and will need support from governments and central banks for some time yet, according to the OECD.

U.S.

The Federal Reserve’s so-called dot plot, which the central bank uses to signal its outlook for the path of interest rates, shows that officials expect no change in policy this year and borrowing costs near zero through 2023.

Homebuilder optimism rose to a record in September, with low mortgage rates driving a housing boom that has boosted the pandemic economy, National Association of Home Builders data show.

Europe

The U.K.’s lockdown hit young workers particularly hard, with employment in the 16-24 age category falling by 156,000. That may reflect the share of young workers in hotels, restaurants and bars, a sector devastated by the pandemic.

Asia

China’s economic recovery from Covid-19 accelerated, spurred by a rebound in consumption as virus restrictions eased and larger-than-expected gains in industrial output. Retail sales rose for the first time this year in August, by 0.5% from a year earlier, while industrial production expanded 5.6%, against a forecast of 5.1%.

Emerging Markets

Scoring 75 emerging-market and frontier economies, Bloomberg Economics finds that Asia leads in getting closer to pre-outbreak norms, with some countries in Africa and Eastern Europe also outperforming. Latin America is still struggling to contain the pandemic, with 18 of the bottom 25 in the ranking in Latin America or the Caribbean.

Saudi Arabia’s crude exports dropped to the lowest since at least 2016 in the second quarter as it led a campaign alongside Russia to curb oil production following a coronavirus-induced price crash. While the effort yielded a stark turnaround in prices in May and June, Saudi revenue from oil sales still plunged almost 62% in the three-month period from a year earlier.

South Africa is among the countries with the highest percentage of smokers globally, with almost one in every three adults lighting up. So when the government banned cigarette sales for about five months of the nation’s Covid-19 lockdown, some 90% found a workaround.

©2020 Bloomberg L.P.

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