MercoPress. South Atlantic News Agency

Chile names Harvard-educated economist as new Central bank president

Vergara Montes has a long experience in the bank and is politically close to President Piñera

Chile named this week member of the board and Harvard-educated Rodrigo Vergara Montes as the new President of the Central bank replacing outgoing Jose De Gregorio. President Sebastian Piñera still has to name the fifth member of the board.

Vergara Montes’ nomination must be ratified by the Chilean Senate but the government has the necessary majority. Vergara Montes will hold the post for the next five years. The new president has a masters and doctorate in Economy from Harvard and has been a member of the central bank board since 2009.

With the exit of De Gregorio the four member board of the central bank is split with two members identified with the opposition and two with President Piñera. When he names the fifth member, the current Conservative coalition will have a majority influence in the bank, even when the central bank is technically independent.

The naming of Vergara Montes was supported by Chile’s manufacturing lobby, one of the country’s most important, who described the new president of the bank as a “great professional”, adding that the strength of the central bank is that it has “a great technical prestige”.

Vergara Montes who teaches Economics at the Catholic University spent ten years working for the Central bank, 1985 to 1995 and was named chief economist. He also has experience in the private sector as advisor and member of several boards. The banker has also worked for the World Bank, IMF, Inter American Development bank and several central banks from Latin America, East Europe, Africa and Asia.

Next Tuesday Vergara Montes will be presiding the meeting when the bank has to decide on the basic interest rate. The bank, which targets 3% inflation, has kept borrowing costs unchanged at 5.25% since July. Inflation has accelerated every month since then, even as the economy weakens, expanding at its slowest pace in more than 18 months in October.

In related news the National Stats Institute reported that Chile’s consumer prices rose 0.3% in November from the month before, pushing up annual inflation. Annual inflation quickened to 3.9% from 3.7% in October and monthly core inflation was 0.2%, the institute said in its report.

The Chilean government and central bank are prepared to stimulate the economy if Europe’s debt crisis damps growth further, one of the bank’s board members announced last week.

While Chile has left rates unchanged, Brazil has cut three times since August. Brazil’s GDP contracted 0.04% in the third quarter from the previous three months, compared with an expansion of 0.64% in Chile.