Consistently with the volatility we have been seeing and the risks inherent to the international economy, our baseline scenario assumes that in the coming quarters international financial conditions will be, on average, less favorable than they were in the past two months. Our growth outlook for the world economy and our trading partners changes little from March: 3.2 and 3.0 percent, respectively, for the 2016–2017 average. Still, there is a significant revision to expected US growth: 1.9 percent in 2016 (2.3 percent in March). This estimate inputs the low output figure of the first quarter, which has to do both with the drop in energy investment and the weak external sector. In any case, aside from one-time data, services and labor indicators show a recovering trend and the baseline scenario foresees the economy resuming higher growth in 2017. It also estimates that the Chinese economy will be able to carry on with its adjustment process without seriously compromising its growth rates. But this process will not be free of difficulties. The terms of trade will drop again in 2016, although not as sharply as we assumed in the last Report, owing mainly to the evolution of non-copper export prices. Considering its trajectory of the past few months, the baseline scenario assumes that the copper price will average $ and $ per pound in 2016 and 2017, respectively. For oil, our forecast for the same two years is raised to $ and $ per barrel the Brent-WTI average (table 2).

Several factors contributed to the deterioration of the macroeconomic environment in 1982. External interest rates rose, the availability of external credit decreased, and terms of trade worsened in the wake of the escalation of oil prices. This put enormous pressure on the Chilean peso—which had been under a fixed exchange rate scheme since 1979—. This regime broke down dramatically and spread to almost all business sectors, given large FX exposures, and heavily leveraged financial conglomerates. All these factors interacted with one another to become an outright banking crisis. But, whatever the causes of the crisis, unsustainable debt was mostly explained by internal vulnerabilities: inappropriate regulation, weak supervision, and lack of attention to excessive credit growth, leveraged on a fixed exchange rate scheme. Although the first aid took the form of “emergency loans” by the Central Bank to commercial banks, during the following year conditions deteriorated rapidly enough to lead to the intervention of 11 banking institutions. Another 8 were added in 1983, including the two largest banks in the system. In all, the intervened institutions represented 60% of total credit. All directors and executives of these institutions were, removed from their posts, and replaced by provisional administrators. Measures to fight the crisis aimed at the liquidation of non-viable banking entities, improvement of balance sheets of viable entities through the purchase of deteriorated portfolios, and the reduction of financial burden of bank borrowers through debt reprogramming and preferential exchange rates. In 1985, this extended to the recapitalization of the intervened banks, through the so-called “popular capitalism” program.