Skip to main content

Chile Reduces Estimate for This Year’s Budget Deficit

By Sebastian Boyd and Nathan Gill
Oct. 7 (Bloomberg) -- Chile’s budget deficit will be smaller this year than earlier forecast as rising copper prices trimmed the projected shortfall in tax revenue.

This year’s budget deficit will be about 3.6 percent of gross domestic product as government income falls 22 percent short of initial projections, budget director Alberto Arenas told lawmakers today in Valparaiso. The government in June forecast a gap of 4.1 percent and a tax shortfall of 24 percent.

The outlook for Chile’s public finances is improving on the back of higher-than-forecast copper prices and early signs of economic recovery. Gross domestic product will probably shrink 1.6 percent this year, Arenas said, a number at the optimistic end of the central bank’s 1.5 percent to 2 percent September forecast.

“We’re estimating a deficit for this year of 3.1 trillion pesos, around 3.6 percent of GDP,” Arenas said. “Last June, we estimated a deficit of 4.1 percent of GDP, so what we’re estimating today is better.”

Chile’s economy was battered this year after the global economic slowdown lowered prices for copper exports and a salmon virus crippled fish farms. Activity expanded in August from July for the fourth straight month, the central bank said on Oct. 5, cutting the year-on-year decline to 0.1 percent.

Economic Crisis

Lower-than-forecast commodity prices cut revenue from the state-owned copper company, Codelco, and from privately owned mines’ royalties, while a slowing economy eroded tax collection, the budget office said. Copper is Chile’s leading export, and Codelco is the world’s largest copper mining company.

“The decline in forecast government revenue is mostly due to the effects of the international economic crisis,” Arenas’s budget office said in a report distributed today. “The biggest effects are due to lower-than-budgeted prices for copper and molybdenum.”

The government’s budget forecasts match the market consensus and the projected deficit shouldn’t affect the country negatively, Cesar Perez, the managing director of Santiago-based brokerage Celfin Capital SA, said today.

“The budget is in line with reality,” Perez said in a telephone interview from Santiago. The budget deficit “won’t affect our credit quality and much less our sovereign spreads. There’s a lot of credibility in Chile’s financial system and its fiscal management.”

The government cut its forecast for this year’s average copper price in June to $1.92 a pound from the $2.90 per pound it forecast last October. The metal has since appreciated again and Arenas today forecast the average price for 2009 would be $2.27 a pound.

Chile’s government will run a deficit equivalent to 1.1 percent of gross domestic product next year as the economy grows 5 percent, Finance Minister Andres Velasco said Oct. 1.

The government expects consumer prices to fall 0.8 percent this year, Arenas said.

Comments

Popular posts from this blog

Moving to the Suburbs: Reducciones in Recent Latin American Historiography

In 1503, the Spanish monarchy issued its first decree for the resettlement of indigenous groups in the Caribbean so that they would “live together” and “not remain or wander separated from each other in the backcountry.”[1]

As the European conquest spread to North, Central, and South America, these new settlements – known as reducciones and congregaciones in Spanish and descimentos in Portuguese – became sites of forced labor, evangelism, experimental agricultural, and refuge. Through a series of imperial policies decreed over the next decades and centuries of colonial rule, Spanish and Portuguese officials attempted to reshape the New World, including its human and natural landscapes. How colonial historians explain this process and indigenous peoples’ reactions to it is the focus of this essay.

In a review of the recent historiography of reducciones, several trends emerge that signal a shift in our understanding of the practice. As this paper will show, one common element is that …

77-Year-Old Wall Street Favorite to Face Fujimori in Peru Runoff

By Nathan Gill and John Quigley April 12, 2016 (Bloomberg) -- The victory by Pedro Pablo Kuczynski, a former finance minister, for second place in Sunday’s Peruvian president elections sets up a showdown between two business-friendly candidates, part of a regional backlash against left-wing politicians.
Kuczynski, a 77-year-old Oxford-trained political economist who’s spent more than 50 years championing debt control and free trade, won 21 percent of vote with 96 percent of the ballots counted, according to the electoral office. He will face Keiko Fujimori, who won 39.8 percent, in a second-round vote on June 5.
Click here to read the full story on Bloomberg News.

Greetings From Gringolandia

Bloomberg Businessweek, March 28 — April 3, 2016
Susan Lamy and her husband, Jean Pierre, owned a successful interior design business in Westport, Conn., but they still worried about how they would make ends meet in retirement. “Just paying for the basic necessities was killing us, and we could see that there was no way that we would ever be able to stop working,” says Lamy. 
The search for an affordable retirement spot led the couple to Cuenca, a Unesco World Heritage site in Ecuador’s southern Andes. They settled there in 2013 and now live in a spacious apartment with a terrace overlooking the Yanuncay River. Lamy says she and her husband enjoy a high standard of living in Cuenca for around $2,500 a month, paid for by their Social Security checks: “This seemed to be the best possibility for having a really terrific life on a fixed income.” 
The combination of a subtropical climate, well-preserved colonial architecture, and low cost of living has made Cuenca a magnet for North Ameri…