Fitch to Rate Chile's Proposed 2020 Global Bonds 'A'

NEW YORK--(BUSINESS WIRE)--Fitch Rating expects to assign an 'A' rating to Chile's proposed USD1 billion global bonds due 2020 and to the USD500 million equivalent of CLP-denominated bonds due 2020 as the currency of settlement is specified as USD. The ratings are in line with Chile's long-term foreign currency Issuer Default Rating (IDR) of 'A', which has a Stable Outlook. The proceeds will go toward general budgetary purposes, including financing of the public reconstruction plan following the devastating earthquake and tsunami in February 2010.

The issuance of these bonds marks the first time the Chilean government has tapped international capital markets since 2004.

'Even with the expected increase in public indebtedness, Chile's public sector balance sheet remains among the strongest in the 'A' category,' says Theresa Paiz Fredel, Senior Director in Fitch's sovereign group.

A prudent macroeconomic policy framework, comparatively stronger institutions, sizeable fiscal stabilization assets, and low public and external debt ratios relative to 'A' category medians support Chile's ratings. These strengths continue to offset credit risks related to higher commodity dependence and lower GDP per capita than similarly rated peers.

Strong domestic demand in recent months has helped the Chilean economy to rebound from the earthquake related contraction in March. Fitch expects real GDP growth to reach at least 4.3% in 2010 and 5.5% in 2011 as reconstruction work gains momentum in the second half of this year.

Evidence that Chile's credit metrics continue to hold up relative to peers during reconstruction could be positive for creditworthiness. Beyond the reconstruction period, Fitch will look for growth- and competitiveness-enhancing reforms to tackle underlying structural weaknesses, such as social inequity and lower GDP per head at market exchange rates, which currently constrain Chile to the 'A' category. On the other hand, while not Fitch's base case scenario, a noteworthy deterioration of monetary or fiscal policy credibility could put downward pressure on Chile's sovereign ratings.

Applicable criteria available at www.fitchratings.com:

--'Sovereign Rating Methodology', dated Oct. 16, 2009.

Additional information is available at www.fitchratings.com.

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