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Moody's Investors Service has upgraded Chile's government bond ratings to Aa3 from A1 to reflect the country's demonstrated economic and financial resilience even in the face of major adverse shocks, including February''s historic earthquake. The government's strong fiscal position and favorable debt profile were also cited for the upgrade.

Moody's also upgraded Chile's foreign currency bond ceiling to Aa1 from Aa2 and the foreign currency deposit ceiling to Aa3 from A1. The Aaa local currency bank and bond deposit ceilings remain unchanged. The outlook is stable on all the ratings.

"Years of solid macroeconomic policies, including a structural fiscal surplus rule meant to smooth government revenues and expenditures, positioned Chile well to deal with the global economic crisis and the financial aftermath of the earthquake," said Moody's Vice President Gabriel Torres. International reserves and fiscal savings are almost $40 billion, compared with about $12 billion total government debt.

He said fiscal savings by themselves would be enough to cover the government''s estimated $8.4 billion in post-earthquake financing needs, but the new center-right administration has chosen to rely mainly on a combination of taxation and new debt issuance, and keep most of the fiscal savings for future use.

"The Chilean government''s strong financial position stands out when compared with similarly rated sovereigns," said Torres. "The average debt-to-GDP ratio for Aa-rated sovereigns was 36% last year, but only 6% for Chile."

Similarly, Chile's debt-to-revenue ratio of 25% compares favorably with the Aa median of 88%.

"Greater fiscal flexibility combined with a solid institutional framework more than compensate for Chile's main relative weakness, a level of economic development lower than all other Aa-rated countries," said Torres. "Chile's $14,500 per capita GDP, adjusted for international comparisons, is less than half the $34,000 average for Aa-rated Countries."

The last change in Chile's ratings was on March 23, 2009 when Moody's assigned a positive outlook to Chile's ratings.