Chile Studies Reconstruction Funding

Chile plans to turn to a mix of outside funding sources to raise the more than $700m it needs to fund earthquake reconstruction, according to the new finance minister. “We have a number of options to finance the reconstruction,” says Felipe Larrain, adding that the $700m will come from running a budget deficit and be put in a special reconstruction fund. He explains that the shortfall should be funded through a mix of multilateral borrowing, the sale of local and international bonds, and by drawing on a $12bn sovereign wealth fund. He declines to give further details, saying that the exact proportions of the different options are now under study. The government is now working on an agreement with the IDB, he says, and expects an announcement soon. Larrain expects the budget deficit this year should still be less than the 4.5% Chile ran last year. The $700m figure represents what the government will initially put toward public infrastructure repairs. The total cost of the damage from last month’s strong earthquake is estimated at $30bn. CAF approved earlier this month a $300m credit line for Chile. The government had already planned to raise $3bn equivalent through local debt sales in the first half of 2010. It has not sold a dollar bond since 2004. Local brokerage BCI Corredores de Bolsa expects Chile to issue $2bn more in bonds to help finance reconstruction, according to Dow Jones, which cites a BCI report. Larrain was speaking at IDB meetings in Cancun.