Chile’s Boric announces US$3.7 billion in social aid and an increase in the minimum wage

RIO DE JANEIRO, BRAZIL – Chile’s President Gabriel Boric on Thursday announced US$3.7 billion in social aid and a project to raise the minimum wage to 400,000 pesos (US$500) to address the post-pandemic crisis and rising inflation.

“You have before you a government that is determined to do everything possible to respond to your urgent needs and desires (…) We will present a bill to increase the minimum wage significantly,” he said at a press conference.

The minimum wage, which must be approved by parliament, is set to rise from 350,000 pesos (about US$430) to 400,000 pesos (about US$500) by the end of 2022, an announcement that is in line with his campaign promise to raise it to 500,000 pesos (about US$620) by the end of his term.

Of the more than US$3.7 billion, US$1.386 billion is earmarked for job creation and support for lagging sectors, US$1.34 billion will go directly into the pockets of families, and US$1 billion will support small and medium-sized businesses.

Key measures include the provision of capital to develop a plan to contain price increases in gasoline, oil, and kerosene, and the extension of employment subsidies (IFE labor) until September 2022.

In addition, public transport prices will be frozen until 2022, the food subsidy for universities will be increased by 15% and the “subsidio protege”, which benefits working women with children up to four years old, will be extended.

“We will also grant a special bonus for cultural workers, a contribution of 450,000 for a total of 30,000 people,” he added. he added.

Chile has approved more than US$40 billion in aid since the pandemic began, all announced by former president, conservative Sebastián Piñera, who left office March 11.

The aid was announced amid debate over a new 10% withdrawal from pension funds; a measure adopted three times during the pandemic that experts say was one of the causes of oppressive inflation because the increase in cash flow it caused more than US$50 billion.

Chilean prices have risen 7.8% in the last 12 months (as of February), an increase that has led the Central Bank to take measures unprecedented in the last 20 years, such as raising the key interest rate from 2.75% to 7.5% in less than six months.

After an economic recession of 6% in 2020, Chile consolidated its recovery from the Covid 19 pandemic last year with record gross domestic product (GDP) growth of 11.7%, the best in at least 30 years.

In recent months, however, the country has started to show signs of a slowdown, with the monthly economic activity indicator (Imacec), which is considered a predictor of monthly GDP, disappointing markets with a 0.7% decline from January and the lowest year-on-year growth in almost a year (6.8%).