The Belgian export credit agency ONDD has downgraded Chile, Thailand and Kazakhstan for medium and long-term political risk cover. The agency has also reduced the available coverage capacity for medium and long-term transactions for all three countries.
According to a report issued by the agency, the Chilean economy’s main weaknesses include the small portion manufactured goods take up in exports, combined with the strong dependency on copper and the large portion fuels take up in imports.
“Its current account plunged into deficit in 2008 after the copper price collapsed and imports rose significantly. It is expected to remain in deficit in the coming years. In addition, uncertainty remains on how debt, fiscal policy and copper price will evolve. A copper price rise exceeding current expectations will certainly have a positive impact on the country’s current revenue and therefore the accumulation of foreign exchange reserves as well. Such a rise, however, will only exacerbate Chile’s copper vulnerability and deteriorate competitiveness for other exports,” the report said.
The agency’s reasons for Thailand’s downgrading were due to ongoing instability.
"Thailand is a polarised country, both from a political and a socioeconomic point of view," ONDD said.
"Political uncertainty and the risk of new political violence are affecting the investment climate and private consumption, further deepening the severe recession Thailand is in for the first time since the Asian crisis."
Commenting on Kazakhstan’s downgrade, the agency noted that in Kazakhstan, the global crisis is mainly making itself felt through the banking crisis, apart from the energy price slump.
“The clean-up of the banking system is therefore currently the biggest challenge. Kazakh banks have been overactive during the past few years, contracting high foreign debts to fund their expansion.
“Without a general exit strategy for the banking sector, the entire Kazakh economy could face long-term paralysis.”
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