Chile FinMin Larrain warns Bachelet government on growth

Chile’s finance minister Felipe Larrain has urged the incoming administration of Michelle Bachelet not to abandon pro-growth policies, following campaign pledges of major tax and education reforms to redress the country’s social divisions. “I’m concerned about one thing: growth,” he said in an interview with LatinFinance. “So I would say [to the incoming administration] ‘don’t forget growth.’ Growth is essential in trying to retain the opportunities for investment in our economy, to develop our entrepreneurs, to give them new ways to find new opportunities.” Bachelet, who ran on a platform of social policies to address a deep divide between rich and poor, was elected December in a landslide victory. Analysts say an overhaul of the tax regime — which is expected to include a hike in corporate taxes to 25% from 20% — is likely to be among the laws Bachelet will prioritize as she seeks extra funds for social reforms upon taking office in March. But Larrain warned that shifting away from policies to promote economic expansion could prove counterproductive. “We need to be talking about how to stimulate investment and keep unemployment low,” he said, adding that a conservative fiscal policy in recent years was critical to creating an environment conducive to job creation and growth. “We maintained growth of spending less than GDP growth, we restrained our spending by $6bn per year,” Larrain said. “We created an environment conducive to growth.” He added that the outgoing center-right government of Sebastian Pinera had reduced unemployment to 5.7%, its lowest level in 30 years, by boosting Chile’s average GDP expansion rate since 2010 to 5.4%, compared to a global rate of 4% over that period. “Returning the Chilean economy to solid growth is one of the most important objectives we have achieved,” Larrain said. But he denied that Bachelet’s victory reflected an indictment of his government’s policies. “I don’t think it’s an indictment. We faced a formidable candidate and po