Chile Has ‘Strong Foundations’ to Weather Crises, Minister Says
Chile Has ‘Strong Foundations’ to Weather Crises, Minister Says
(Bloomberg) -- Chile’s economy has “strong foundations” that should allow it to weather a local political crisis, a massive drought, the global expansion of the coronavirus and now the collapse in oil prices, said Economy Minister Lucas Palacios.
“Our macroeconomics allow us to implement a fiscal stimulus package of $5.5 billion and at the same time converge to a reasonable fiscal deficit goal in two or three years,” the minister said in an interview on Pauta Bloomberg radio program. “Not all countries can do that.”
By comparison, the U.S., with an economy 68 times the size of Chile’s, has announced a stimulus program of $8.7 billion to counter the effects of the coronavirus while Italy has earmarked $8 billion, he said.
The Chilean peso has lost 11% since the beginning of the year and has had the worst performance of any of the emerging market currencies since the social crisis began in the country on Oct. 18. That month, protests against a subway fare increase morphed into outpourings of discontent over income inequality, pensions, health and education.
Since the beginning of the social crisis, the S&P IPSA has fallen 22%, the worst performance among Latin American markets, and the central bank now expects the economy to expand by just 0.5% to 1.5% this year. The government also agreed to a referendum next month on whether to replace the constitution.
There Are Limits
The government is taking steps to address the complex scenario, most of which are financed through budget reallocations rather than raising spending further.
Everything “has to have limits because otherwise we will generate a fiscal imbalance,” Palacios said. “We cannot be reacting every day to different messages that international markets send us.”
He acknowledged concern about Chilean exports, particularly fruit, which constitute about 9% of the country’s shipments. “We have been looking for other destinations to carry our products and diversify beyond China,” he said.
Palacios said the government will present a bill to Congress to modernize the National Statistics Institute, known as INE, by the end of March.
INE has been questioned after several controversies and errors in the delivery of data, the last one being a correction of the January inflation data.
“We are finishing the final details,” he said. “We want a stronger INE, that will be fully autonomous from a technical point of view.”
Reporter on the original story: Valentina Fuentes in Santiago at vfuentes8@bloomberg.net
Editors responsible for the original story: Eduardo Thomson at ethomson1@bloomberg.net, Carlos Manuel Rodriguez
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