The Chilean government is preparing measures to increase productivity and is willing to increase aid to low-income families in the face of an economic recovery that will not begin before May, Finance Minister Mario Marcel said in an interview.
“We will continue to work to anticipate the requests or particularly complex times for low-income families”Said the Secretary of State of Washington, where he participates in the annual meetings of the World Bank and the International Monetary Fund. “We have the will and we have, within our budget, the ability to reallocate and mobilize resources in that direction“.
The Cambridge University economist is trying to pull one of Latin America’s richest nations out of a deep recession, without fueling annual inflation that exceeds the target by more than four times. This year, Marcel cut public spending and recently announced a modest 4.2% increase in spending above inflation for next year.
The government will come up with proposals to improve productivity in the coming weeks, Marcel said, without giving details.
The Central Bank expects a contraction of up to 1.5% of GDP for the next year due to the decrease in domestic demand and investments. This is a remarkable turnaround after a record growth of 11.7% in 2021 fueled by stimuli.
mining royalty
Financial markets applauded Marcel’s appointment in January, saying it would bring economic moderation and fiscal responsibility to President Gabriel Boric’s leftist government. He had already been praised in previous posts, as president of the Central Bank and director of the budget.
In the first few months at the helm of the Treasury portfolio, Marcel became the main architect of Boric’s stellar economic plan, a tax reform that plans to raise taxes on the rich to increase the financing of services such as health and pensions. He also took the initiative to present the plan to lawmakers.
Next week, the government will present changes to its proposals for royalty including reducing the sales tax component, changing income tax brackets, and introducing depreciation as a factor in the latter, he said.
“We will present a proposal that will generate a relatively similar raise for the long-term copper price we are currently working with. and taking into account the production prospects and costs of the sector ”, explained Marcel.
moderate constitution
But the Chilean outlook is not without its challenges, as highlighted Wednesday when the central bank made its 11th interest rate hike and said it was the end of its tightening cycle. While policymakers noted that inflation data was worse than expected and consumer price projections remain above target, they also noted slowing consumption, job creation and bank lending. .
Lawmakers are in the midst of negotiations on how to proceed with changes to the country’s constitution after a new Magna Carta was rejected in a plebiscite last month. Any sign of slow progress in the constitutional process, coupled with a weak economy, could threaten to revive the social unrest that erupted in 2019.
Although talks are ongoing, there are signs that the process will be leaner and better structured than last year’s Constitutional Convention, making it easier to reach agreements, Marcel said.
“Everything seems to indicate that the process is moving towards something that will generate a result, a new constitutional proposal that is much more moderate.“, She said.
