Were not singing victory, says Felipe
Larraín. But he has made impressive progress against
If, in his former job as an economics professor at the
Catholic University in Santiago, Chiles finance minister
Felipe Larraín had been asked to mark his countrys
economic performance over the past decade, he would have given
it a could do better. In the decade to 1997, Chile
grew at more than double the world average, he points out, but
has since slipped below it.
With the aim of changing that or, as he puts it,
restarting the economy he worked closely for
two years with Sebastián Piñera, the
centre-rights presidential candidate, to draw up the
economic programme that was a key factor in
Piñeras election, after two decades of government
by the centre-left Concertación coalition.
Our message was not to break away from the past and
Chiles counter-cyclical fiscal policy, but to build on
it, says Larraín.
The Piñera governments goals include average
annual 6% growth over its four-year term, the creation of
200,000 jobs a year and an end to extreme poverty. And
52-year-old Larraín, who like Piñera
holds a PhD in economics from Harvard University, was
looking forward to implementing it. Although Ive
been an adviser to many governments, this is my first
opportunity to do it myself, he says.
But, on February 27, just 12 days before Piñera took
office as president, one of the worlds worst earthquakes
in over a century devastated large swathes of central and
southern Chile, potentially also tumbling the incoming
governments carefully-laid economic plans. We
realized the immediate priorities had changed, but we also
decided we couldnt abandon our goals, says
In other words, the new government would face a double task
rebuilding after the destruction caused by the
earthquake while, at the same time, delivering on its election
promises. Even for a self-confessed workaholic like
Larraín, that has meant some unusual working hours.
The author of 10 books and many academic papers, he admits
to missing the comparative peace of university life and his
seats on company boards. However, he is happy with the way the
finance ministry has met its first key challenge of drawing up
a plan to finance the estimated $8.4 billion, four-year cost of
the governments programme and the $9.3 billion needed to
rebuild public infrastructure.
Rather than relying solely on the sovereign wealth fund that
Chile accumulated during the 200408 boom in the price of
copper, its main export the easy but not the best
answer, says Larraín it devised a
diversified plan that includes tax increases
contrary to what youd expect from a centre-right
government and Chiles two recent successful
placements on the international bond market.
And, recovering more quickly than expected from the
earthquake, the economy is building up a powerful head of
steam, with year-on-year growth in the second quarter reaching
6.5%. That is, however, largely the lagged effect of last
years expansive monetary and fiscal policies, rather than
a merit of the present government, and the international
economy could still play the small, export-led Chilean economy
a bad turn.
Were not singing victory, admits
Larraín. In other words, if he were still a professor,
the mark he would probably give is keep up the good