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LatAm Chile Economy

Today, Chile is one of the most developed countries in Latin America and is expected to continue to grow in terms of quality of life, education, and health, to become a developed country by 2015. The economy is booming. GDP growth has averaged 5% in the last five years due to efficient exchange and interest rate management, focused on attracting foreign investment and on infrastructure.

On a cautionary note, Chile’s economy is still dependent on the mining of minerals. Copper provides 20% of the GDP and 60% of the exports, of which 40% goes to China, making Chile heavily dependent on demand from China being maintained. At present however, the strong economic performance is creating a sense of optimism; people save money for a rainy day and invest in education, one of the pillars of the country’s development.

Salaries are growing (+5.9%) – way above inflation (1.7%), and above GDP growth (5%) – while unemployment (6.2%) is rapidly decreasing, especially in the greater Santiago area (1%). These factors are generating a strong increase in private spending (+9%). Chileans are traveling abroad for tourism (+11%), buying more cars (+12%) and spending a lot more on clothing (+30%), according to the National Institute for Statistics.

The growth has boosted consumption. On the FMCG front, there is little room for markets to expand since the population growth rate is below 1% and consumption is already high. Growth is due mostly to a new range of more sophisticated products, for example, the health and wellbeing product sector has been one of the main drivers of the economy, with many new products focusing on a healthier lifestyle. Consumption of premium products is also on the rise, with lower income households that had previously only aspired to them, now actually able to afford them.

Strong economic growth and investment in the retail industry has had a big impact on the way in which Chileans shop. Proximity to hypermarkets, more disposable income and less time to spend on FMCG shopping trips have changed the way Chilean women conduct their shopping missions. They are significantly increasing the amount of products they purchase on each trip, reducing the frequency of purchase (-16%), while buying bigger pack sizes across more categories in the same trip (+11%).

The retail structure is also in continuous development. Chile already has the biggest concentration of modern trade in Latin America (around 87%) with discounters and wholesalers bringing a new dynamic to this market, and also helping to boost private labels alongside the big players such as Walmart and Falabella. Cencosud, Chile’s biggest retailer, is increasing its presence in other countries in Latin America too (Peru, Colombia) and gaining the confidence of consumers there due to its high levels of service delivery.

As Chile’s economy continues to expand, the future looks bright: unemployment and inflation rates are low, so is poverty, and there is a lot of investment in education. With these strengths and others – such as the increase in tourism – people are now able to invest in consumption of high-end manufactured products and services. They are dedicating more time to themselves by traveling more and buying more clothes, while optimizing their FMCG shopping trips in order to save time.

Vinicius Da Silva

Managing Director of Kantar Worldpanel?responsible for Chile, Colombia, Ecuador and Venezuela