Jose Berber-Lopez from RBS’ Emerging Markets team lays out how Chile will finance its reconstruction post-earthquakes.
Here’s the breakdown:
- Finance Minister Larrain will soon announce how the reconstruction efforts will be financed. There are important asset price implications based on the combinations of financing options.
- Locals are now working with a lower assumption about the total reconstruction cost of USD10bn but Finance Minister Felipe Larrain reinforced that the total cost is closer to USD30bn.
- Our initial analysis is that Chile will issue USD1bn in the external capital markets, accept a USD0.5bn loan from the IADB, tap the stabilisation fund for USD1bn and issue at least USD2.5bn in the domestic debt markets to sterilize these inflows.