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Even Peru has issues with productivity and lack of domestic entrepreneurship that could prevent it from fulfilling Links of London huge potential. That said, considering all these factors, we believe that over the long term Peru still offers the greatest potential for commercial banking sector expansion in the region. Chile Banking Sector Outlook Banking Sector To Underpin Growth We maintain a very positive outlook for the Chilean banking sector as the industry came through the effects of the global financial crisis and February ’s devastating earthquake with impressive resilience. A shift in the orientation of Links of London Dice Charm growth from an export to domestic demandfocused economy should keep longterm demand for Chilean commodities high, which will boost domestic economic activity, in turn bolstering credit growth and providing scope for the expansion in the scale and profitability of the banking sector. Many of our previously identified key views for the industry have started to play out and our core outloo is optimistic, with the Chilean banking sector remaining a regional favourite of ours. Loan growth will continue to tick up on the back of a robust commercial sector, ongoing reconstruction efforts following February ’s Links of London Disc Charm and strong domestic consumption. We have previously warned about the ramifications of a potential Chinese slowdown for the Chilean export sector, and in turn the commercial banking sector through lower demand for credit see our online service, July , ‘Banking Sector Well Poised To Support Recovery’. However, should the Chinese economy be successful in switching towards greater domestic consumption, this would keep demand for Chilean exports strong, boding well for growth and the banking industry in particular. There is a significant correlation between economic activity levels as measured by Links of London Dome Jade Charm monthly IMACEC indicator in Chile and the rate of credit growth in the banking sector, as commercial loans represent around of all credit extended. Loan growth tends to lag increases in economic activity by months see chart above, suggesting that credit is set to rise further in the short term following the rapid uptick in the IMACEC in Q.