Chile: To suffer from earthquake - forest products industry hit hardest

SAO PAULO, Mär. 22, 2010 (RISI) - The strong earthquake experienced by Chile on February 27th threatened many sectors of the country's economy and interrupted the supply of goods to international markets. Although Chile is mostly known as the largest copper producer in the world, it is also a major exporter of other raw materials such as grapes, seafood and forest products.

Due to lack of water and electricity and structural damage caused by the 8.8-magnitude quake, operations have been interrupted in the entire Chilean pulp and paper industry. Indeed, infrastructure problems and disruptions in the roads, railways and ports will be the major obstacles for an economy that is so reliant on exports of its natural resources.

After a 1.9% contraction in GDP in 2009, the Chilean Central Bank was forecasting a recovery of 4.5-5.5% during 2010. Even though the earthquake will negatively impact GDP growth in the first half of the year, a surge in economic activity based on the country's reconstruction efforts is expected starting in the third quarter. According to the Central Bank's monthly report released March 8th, GDP growth is now estimated to be limited to 4.5% in 2010.