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Chile in ‘afterglow’ of copper boom, Nomura exec says

Keywords: Tags  copper boom, Nomura, Tony Volpon, Society for Mining Metallurgy and Exploration, mining finance, Andrea Hotter

NEW YORK — The Chilean peso is benefiting from the "afterglow" of the commodity boom due to the country’s strong mining investment cycle, according to a Nomura Securities International Inc. executive.

The peso would usually have weakened, given its close correlation to copper prices, which have been falling, but this has not happened, Tony Volpon, head of emerging markets research Americas at Nomura, told delegates at the Society for Mining, Metallurgy and Exploration’s mining finance conference in New York. "Chile has a very strong foreign direct investment (FDI) cycle in mining that is generating strong capital inflows and it has allowed the currency to remain very strong even though the copper price is falling."

But there are questions over how long this "afterglow" can last, given the backdrop of an environment in which copper prices are stable to falling. "While Chile is benefiting from the strong FDI cycle currently, over the next couple of years investments look set to fall, which will have implications for the country’s currency and its balance of payments," Volpon said.

He is not concerned about the fate of Chile, the world’s biggest copper producer, though. "Chile is still very market friendly and has room to adjust to the changing dynamics," he said.

Volpon also is positive about mining growth in Colombia, Mexico and Peru, but is negative on the prospects for Argentina and Venezuela, where populist government policies have focused on boosting consumption. "Argentina and Venezuela will see macro-economic stresses now that the commodity boom is tapering off," he said.

"If we think forward in this less-healthy environment, there has to be some kind of change. It might be forced by the market, or it could be driven by politics," he added, pointing to Argentine elections set for October.

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