Chile Presidential Hopeful Looks to Old Trick to Revive Growth

  • Lagos pledges to revive concession system to boost investment
  • Infrastructure investment has fallen to a third of former peak

Chile’s former President and current presidential hopeful Ricardo Lagos says he has done it once and he can do it again; reviving growth in a moribund economy through a massive program of infrastructure concessions.

The 78-year-old says the government must lift public investment and concessions in infrastructure back above 3 percent of gross domestic product, where it was the last time he headed the government in 2000 to 2006. It reached a low of 1.18 percent of GDP in 2015.

"It is essential to recover economic growth levels and the investment pace we had in infrastructure a decade ago," Lagos said in an interview in Santiago last week. "Chile has a deficit in infrastructure."

A slump in the price of copper has pushed growth in South America’s wealthiest nation to about 2 percent for the past three years, following three decades of expansion averaging 5.4 percent. With elections looming in November, Lagos is looking for a policy that will mark a difference with other potential candidates for the ruling coalition. His track record and experience in infrastructure is just that policy, offering the prospect of lifting growth back above 3 percent within a couple of years, he said.

Lagos has done it before. Back in 2000, he took over an economy emerging from the recession triggered by the Asia crisis. Growth over the next four years averaged 3.8 percent as infrastructure investment soared.

For more on declining investment in Chile, click here

Central to Lagos’s plan is the creation of an infrastructure fund, proposed by the current administration of President Michelle Bachelet and under debate in congress. The fund will use revenue from existing concessions such as toll roads to finance future projects. Lagos, a board member of the think-tank Committee of Infrastructure Policies, calculates the current value of future revenue flow from concessions at $25 billion. Bachelet’s administration hasn’t given an official value for the fund.

“It’s a concrete formula for growing and creating jobs,” Lagos said.

Lagos is currently languishing in the opinion polls behind opposition leader and former President Sebastian Pinera and ex-TV pundit and current Senator Alejandro Guillier. Maybe one of them will pick up his proposals for a quick-fix solution to the country’s economic woes.

    Before it's here, it's on the Bloomberg Terminal.