In recent weeks, we have witnessed how the inability of Chinese company Evergrande to pay its debts has affected the global financial market, sowing uncertainty and fear among investors, who are afraid that another bubble will burst, triggering a global economic crisis like the one in 2008 with the collapse of Lehman Brothers.

Who is Evergrande?

Evergrande is a Chinese real estate company founded in 1996 and is currently one of the largest companies in the world in terms of revenue, which has allowed it to be part of the Global 500. It is currently the second largest real estate company in China with more than 1,300 projects in around 300 cities throughout China. Its business strategy is very broad and includes, in addition to real estate projects, participation in the construction of amusement parks and electric car factories, and it even owns a Chinese first division soccer team.

In recent decades, China has experienced a boom in the real estate industry, growth that has been financed largely through loans to real estate companies, which, in order to carry out projects, have incurred unsustainable levels of debt, as in the case of Evergrande.

Evergrande's liabilities currently total more than $300 billion, which, to give you an idea, is three times Chile's public debt and represents approximately 2% of the Asian country's GDP. This debt now threatens its existence and could lead to bankruptcy.

Due to the size of this company and its level of debt, fears have arisen about what might happen in the financial systems, with experts warning that it could not only happen in China, but could also cause a domino effect throughout the global financial market, triggering a crisis similar to that of 2008 with the real estate bubble that burst in the United States and the subsequent collapse of Lehman Brothers. This fear is heightened by the fact that Evergrande's numerous creditors include global financial giants such as BlackRock, UBS, and Ashmore.

Today, all eyes are on how the Chinese government will respond to this situation, although in recent days it was announced that the state-owned commercial bank Shengjing Bank will acquire 19.9% of Evergrande's shares for a total amount of approximately USD 1.5 billion, which will reduce the company's liquidity problem.

But how does the crisis affecting this global giant impact our country?

The economies hardest hit in South America are estimated to be Chile, Peru, and Brazil, with the latter being less affected due to the diversification of its exports and buyers, given that the other two are mono-exporters of raw materials used in construction, such as copper and iron, and have China as their main buyer.

According to the Financiero newspaper, construction activity accounts for 22% of China's total demand for copper, so the almost immediate consequence of this situation coming to light was a drop in the price of copper of around 3.07% in value, the biggest drop in the last month, as the possible closure of this company puts a significant brake on the purchase of metals for construction, such as copper.

Another industry affected by this news was iron, a metal whose price fell by 11.5%, dropping below $100 per ton. In Chile, one of the main companies is CAP, the world's largest steel producer, whose main buyer is China. This drop had an impact, causing the company's value to fall and thus affecting the entire Chilean financial market. This was reflected in a rise in the dollar, which increased by $3.79 pesos on the day the news of Evergrande's debts broke. Added to the pressures generated by the fourth withdrawal of pension funds, this has pushed the exchange rate above 800 pesos, a record high in recent years.

In the coming days, the Chinese government is expected to continue making announcements to resolve this problem in some way, which would calm the financial markets, thus ruling out a possible crisis like the one in 2008, and restoring investor confidence in the markets, stabilizing commodity prices such as copper and iron, and strengthening Chile's exchange rate position.