When Felipe Larrain takes over as Chile’s finance minister in March, he will be charged with creating one million jobs and speeding up the country’s recovery from the 2009 global financial crisis. Unlike most countries, Chile reported positive growth in 2009 and Larrain aims to keep the country’s economy on pace in 2010.
Larrain has said that he will reverse a longer term slowdown in Chile’s annual growth rate, which he blames on declining productivity, and help the country’s new president-elect, Sebastian Pinera, fulfill his campaign promise to increase employment. Larrain said that reviving economic growth is the administration’s main challenge. He has publicly said that creating 1 million jobs is feasible with growth of 6 percent a year. Larrain recently told reporters that “this country needs to regain its capacity to grow” and that his goal is to “double the growth rate.”
Recent estimates from J.P. Morgan, the investment bank, have forecast 5% growth for Chile in 2010.
However, even as he claims to want to kickstart the country’s economy into action, Larrain is not expected to make any radical changes to Chile’s highly respected economic policy framework. For example, he is expected to maintain the government’s long-standing “structural balance rule,” which requires saving excess revenue during boom years for use when the economy slows, Alejandro Puente, an economist at Banco Bilbao Vizcaya Argentaria SA in Santiago, recently told reporters.
Larrain will step into office a year after his processor, the Columbia University educated Andres Velasco, and Michelle Bachelet, then Chile’s president tapped US$4 billion of copper savings last year for tax cuts and extra spending to blunt the global economic crisis.
In a recent interview with Latin American Lens, Marpin Binghim, an economist and independent management consultant who specializes in Latin America, explained that “Chile is the most outstanding country in Latin America in terms of macro-economic policy management in the last twenty years.” Binghim added that “even though there is a global crisis, Chile has been able to tap into its rainy-day fund and smooth output, avoiding a major downturn.”
“Larrain’s appointment is a sign of continuity,” Ricardo Hausmann, director of the Center for International Development at Harvard University, told a reporter from Bloomberg in a telephone interview. In all likelihood, Chile’s nascent recovery will gather strength in 2010, and under the direction of Larrain, should fully recover by the year’s end.
