15 January 2009

Chile Needs ‘Actively Expansive’ Fiscal Policy, Velasco Says

By Nathan Gill
     Jan. 15 (Bloomberg) -- Chile’s Finance Minister Andres Velasco comments on fiscal policy during times of financial crisis. Velasco spoke today at a conference in Santiago.

On Chile’s fiscal policy:
     “Fiscal policy, depending on the circumstance, should be austere and contract demand levels, and in other circumstances it should be actively expansive to stimulate demand. This is exactly what we have done in Chile on both sides of the cycle. Today we need a fiscal policy that is actively expansive. We all agree on this.”

On the difference between the current financial crisis and earlier economic crises in Chile:
     “Differently than what has occurred in other times of crisis in Chile and Latin America, we can significantly alleviate the affects the crisis has on economic activity, on families and on labor. This time we did our homework on time. We saved at the right time. We did many other things on time. We built institutions like an autonomous, credible central bank. We created credible, rule-based, transparent fiscal funds by law.”

On how he prefers to describe the global financial crisis:
     “To describe the crisis many people like to use weather metaphors. Is it a storm, is it a hurricane? I prefer sport metaphors. The question is not whether we are protected from the crisis, but whether we are prepared for it. Did we go to the gym, did we go running in the mornings, are we in good enough physical and mental shape to face this rigorous test?”