Friday, Dec 02, 2022

Chile announces $1.2 billion aid plan amid surging inflation

Chile announces $1.2 billion aid plan amid surging inflation

Chile's government on Monday announced a $1.2 billion economic aid plan that includes bonuses and labor subsidies as the Andean nation struggles with surging inflation and an economic slowdown following a post-pandemic recovery.
President Gabriel Boric, alongside Finance Minister Mario Marcel, said the plan includes a one-time $120 payment that would reach 7.5 million of the country's 19 million inhabitants. The plan also extends a benefit for mothers of newborns and expands a program to boost formal employment.

"There is great pressure on families due to the rise in the cost of living," said Boric, adding that external factors like the war in Ukraine, spiking fuel prices and the drop in the price of copper, of which Chile is the world's no.1 producer, were all contributing to the current inflation crisis.

"We are making every effort to support the sectors most affected by this crisis without abandoning our commitment to fiscal responsibility," Boric said.

Marcel said the measures announced today are more limited and focused than those implemented during the pandemic. He added that since the country's inflation is mostly driven by external factors, the new measures "won't have an impact on inflation."

Monday's announcement comes at a time when the government is promoting a tax reform to finance its ambitious social agenda.

Chile's economy has cooled after a quick post-pandemic recovery helped by state aid and the government allowing multiple pension withdrawals. The strong recovery combined with external pressures have led to a strong rise in prices.

In annualized terms, inflation as of June reached 12.5% while in the last month the local currency has fallen more than 15%, even breaking the barrier of 1,000 pesos per dollar for the first time.

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