MercoPress. South Atlantic News Agency

Chilean government halves gasoline hike

Chilean government halves gasoline hike.
Economy forecasted to surge 6% in 2006

Chilean government halves gasoline hike.

Chile's motorists will breathe a little easier this week, as gasoline prices rose Monday by less than half of the 40 pesos per litre that had been predicted last week. According to National Energy Company (ENAP) figures, prices will rise only 18 pesos per litre, thanks to the intervention of the Fund for the Stabilization of Combustibles (FEPC).

Government intervention means the price of 93 octane as will rise by 17 pesos per litre, whereas the price of 95 and 97 octane gas will rise by 18 pesos. After the most recent hikes, Santiago residents will be paying between 605 and 620 pesos per litre at the pumps.

The FEPC subsidy amounted to between 15 and 16 pesos per litre, which means that without the intervention of the fund ? with coffers of around 21 million US dollars ? the gas hike would have reached 34 pesos per litre.

A US dollar in Chile is equivalent to 535 Chilean pesos.

Michelle Bachelet's government is stressing a long term approach to the problem of high and rising gas prices. One of the proposals is reconfiguring the special tax on gasoline, which for 97 octane gas amounts to 31.7 percent of the final price paid by consumers, or about 191 pesos per litre.

Currently, the special tax on gasoline is higher than the special tax on diesel fuel. One formula to give gas consumers some relief from the high prices would be to raise diesel tax to pay for a gasoline tax cut.

Chilean economy forecasted to surge 6% in 2006

The Chilean economy grew 6.3% last year in line with the forecast of the country's Central Bank and is forecasted to keep on the same track.

The bank reported that all sectors expanded in 2005, except Fisheries, with Commerce, Manufacturing and Construction the most dynamic.

Domestic expenditure expanded 11.4% and real gross national available income 9.1% boosted by improved trade terms and the booming mining prices which more than compensated the surge in oil prices.

Total national savings rose to 23% of GDP made up of a domestic savings rate of 23.6% and minus 0.6% foreign savings, which corresponds to the surplus in the balance of payments current account.

Goods (5.6%) and services (8%) exports expanded 6.1% in 2005. Manufacturing and to a lesser extent farm produce were the most dynamic with mining and fisheries exports contracting in volume.

Goods and services imports rose 20.4%, particularly because of industrial goods purchases which expanded 25% and services 7.6%.

The Chilean Central Bank forecasts the economy will grow between 5.25% and 6.25% this year. Private sectors analysts are more inclined to a 6% estimate, boosted by the domestic demand and the international price of copper, the country's main export.

The more dynamic domestic demand is attributed to a 2.2% rise in employment; 1.8% jump in real income and easier access to credit that has helped boost car and other durable goods sales.