Will Boric’s New Social Plan Lessen Tensions in Chile?
Chile’s government on Jan. 5 announced a new $2 billion social-spending package that includes doubling the budget of an annual cash-transfer program for the poor and middle class, a new payment to help families to buy food, an expansion of a school lunch program, discounts on medicine and government guarantees for loans to the construction industry. What will be the economic impact of the program, and is the money well-targeted? How much could the program lift President Gabriel Boric’s sagging approval ratings? How well is Boric’s government managing the economy in general, and what are the main obstacles it faces?
Sergio Urzúa, professor at the University of Maryland and international research fellow at Clapes UC: “It is hard to pinpoint exactly when, but Chile fell into the middle-income trap sometime in the last decade. The 2019 riots and the Covid-19 pandemic kept the ruling class under a veil of ignorance, even a state of denial, regarding the nation’s new standing. Then, record inflation (12.8 percent, the highest since 1991), a rising public debt (25 percent of GDP in 2018, now approaching 40 percent), a large current account deficit (around 10 percent of GDP in 2022) and a darkening economic outlook sounded the alarms. On top of that, the 2022 constitutional fiasco and the erratic behavior of the Boric administration around sensitive issues (such as ratification of the Trans-Pacific Partnership and controlling violence) have raised public awareness of Chile’s economic challenges and, not surprisingly, took Mr. Boric’s approval ratings down from 50 percent to 25 percent in less than a year. And 2023 seems bleak. Until now,…”Read More
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