MercoPress. South Atlantic News Agency

Fiscal deficit no longer a “dirty word” for Chilean gov.

Velasco "surpluses are not for ever"

Chile's Finance minister said one month's fiscal deficit is “no problem” and minimized the impact of the strong increase in government expenditure in October as in most of the other nine months.

"What's the problem?" said Andres Velasco. "There's nothing wrong with the 170 million US dollars shortfall because revenue and expenditure vary from month to month, so it makes no sense to argue on a monthly result", he added. However from the private sector forecasts are that fiscal accounts will continue to deteriorate. "We had estimated a 1% GDP fiscal deficit in 2009, but it now looks it will be slightly more negative", said economist Leonardo Suarez de Larrain Vial. But Velasco said that the over expenditure of October (up 21.5% over estimates) must be analyzed over the whole budget year, which currently stands at a plus 13.4%. "There's nothing to worry about; we must look at the annual targets and these will be accomplished", insisted Velasco who said that consolidated outlays for the whole year are estimated to grow 6.8%. But here also private economists don't necessarily agree. "The 13.4% increase in government expenditure is surprising when the commitment was to decelerate and help combat inflation", said Jose Ramón Valente a columnist from El Mercurio. Rossana Costa from the conservative think-tank L&D was more caustic. "The truth of the matter is that the situation is becoming worrisome because the current rate of outlays expansion is double the 6.8% target, and at this time of the year budget managing become more complicated". Over the last few years Chile has had a strict balanced budget policy and with the boom in copper prices managed successive surpluses and even created a sovereign fund. But with the collapse in commodities the situation apparently has changed drastically: lesser revenues and greater outlays to boost public works and help employment.