25 November 2008

Chile’s Congress Approves 2009 Budget With Surplus (Update1)

By Nathan Gill
     Nov. 25 (Bloomberg) -- Chile’s congress approved a $5.6 billion budget for next year that will increase spending on infrastructure and boost housing subsidies to help stimulate the economy during a global recession.
     Government outlays will increase 5.7 percent, led by social services and pensions, which account for 69 percent of the budget. Public investment will rise 8.8 percent.
     The budget will provide “an injection of vitamins into the economy,” Finance Minister Andres Velasco said in an e-mailed statement today.
     The government assumes the price of copper, Chile’s biggest export, will average $1.99 a pound over the next 10 years, and aims for budget surpluses equal to 0.5 percent of spending. Copper futures closed at $1.65 today, and the metal’s price has fallen 43 percent since the budget was presented to congress on Sept. 30.
     “The long-term price of copper is too high,” Pedro Tuesta, an economist at 4Cast Inc. in Washington, said today in an interview. “They have to reduce that and revise the budget, otherwise they may incur a bigger deficit than they want.”
     Velasco said yesterday that the lower price of copper will have an effect on the budget surplus, but not on Chile’s ability to invest.