Chile Government Proposes a 3.9% Spending Increase for Next Year

Chile’s government plans to raise spending 3.9 percent next year, the second-smallest increase since 2003 and below the central bank’s forecast for economic growth in 2014.

The budget will focus on employment, education, crime, poverty, children, pensioners and infrastructure, President Sebastian Pinera said in a televised address late yesterday, without giving details.

The increase in spending compares with the 5.9 percent programmed for this year and 4.7 percent in 2012, according to the Budget Office. The budget, Pinera’s last as president, follows two years of student protests for cheaper public schooling and comes less than two months before presidential elections. Pinera stressed that he would leave office with the economy in better shape than when he assumed power four years earlier.

“We received an economy that grew little, created few jobs and had a high fiscal deficit,” the president said. “Today it has recovered its dynamism and it has duplicated its capacity to grow and create jobs.”

Economic expansion has exceeded 4 percent in all but one of the past 13 quarters.

Pinera, who is barred by law from running for a second straight term, reiterated plans to shrink the structural deficit to 1 percent of gross domestic product from 3.1 percent when he took office. The structural deficit adjusts revenue for cyclical swings in commodity prices.

“The incoming government will have a healthy and solid fiscal, macroeconomic and savings situation,” Pinera said.

The president is supporting the candidacy of ruling coalition candidate Evelyn Matthei, who will face off against former President Michelle Bachelet in November.

Chile’s peso has gained 0.2 percent in the past three months against the U.S. dollar, the biggest increase among major Latin American currencies after Colombia. At 2.2 percent, Chile has the slowest inflation in the region.

To contact the reporter on this story: Javiera Quiroga in Santiago at jquiroga5@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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