RIO DE JANEIRO, BRAZIL – Chile will soon need to increase its revenues to deal with growing social discontent. The assessment comes from current Finance Minister Rodrigo Cerda, who will leave office in March when the new government led by Gabriel Boric takes office.
“In the future, we think we will need more tax revenue,” Cerda told Bloomberg TV, adding that he expects lower inflation starting in the second half of this year.
A voracious demand has pushed Chile’s inflation to the highest level since 2008 and triggered aggressive interest rate hikes. “We expect that we will have much lower inflation for the second half of the year,” Cerda said.
The Central Bank reacted with aggressive increases in interest rates to contain rising prices, which are now at 5.5 percent a year.
The University of Chicago-trained economist is one of the leading architects of the emergency stimulus measures that boosted economic growth close to a record 12% last year.
More recently, he has spearheaded a proposal that will improve welfare payments.
Criticism of the economic model adopted by Chile sparked a series of protests in October 2019 that led the country’s current president, Sebastián Piñera, to end his government with record disapproval.
The political class responded to popular dissatisfaction by convening a Constituent Assembly, which began work to write a new charter for the country.
“We hope to have a constitution that focuses on growth,” Cerda said. “In that sense, international investment is quite relevant.”
In March, Cerda will hand over his position to Mario Marcel, who will leave the presidency of the Central Bank to join the Boric government. Investors have praised the name as an indication that the leftist president will maintain fiscal prudence, despite planning a series of economic reforms for the country.
Financial markets now await the replacement at the monetary authority.