By Rodrigo Campos
NEW YORK (Reuters) – Chile’s Finance Minister Mario Marcel told Reuters on Thursday that Chile estimates it will issue a total of $12 billion in debt next year, with the largest budget increases in social protection, science and technology.
“So we are halving (the issuance), which reflects the fact that we will have an aggregate balance that will be much stronger than what people think we will have,” Marcel said, adding that most of it will be to refinance the outstanding issues.
The minister expressed confidence that Chile will soon have an impact on inflation, which is hitting double digits.
“We are particularly confident in terms of curbing inflation earlier than other countries,” he said, citing an early and consistent tightening of monetary policy that began in mid-July 2021.
Annuity and PESO
Like many other currencies, the Chilean peso has been under pressure due to the strength of the dollar, as it broke through the 1,000 pesos per dollar mark for the first time last July.
It currently sits at 944 pesos to the dollar, down about 10% so far this year.
Marcel said that between 100 and 150 pesos in the stock exchange is due to the premium of uncertainty that he says rose in late 2019 when Chileans took to the streets in the largest social protests in decades.
The COVID-19 pandemic and a series of votes in Chile, including a referendum rejecting a new constitution that would have significantly expanded social benefits, have helped keep uncertainty high.
Marcel said clear indications of another moderate constitutional proposal and progress on hoped-for tax and pension reforms will help reduce uncertainty.
The pension reform is expected to be presented to Congress within weeks, aiming among other things to expand basic benefits by about 30% and increase employer contributions by 6%.
“Pension reform should cost in the long run between 4% and 5% of (GDP),” Marcel said.
“It should take at least six years to meet all of this increase so that it does not have an impact on employment.”