Chile’s Finance Minister Says Job of Stabilizing the Economy Is Almost Done

Mario Marcel, the Cambridge University-trained minister, is trying to guide Chile out of an economic slowdown that was engineered to rein in torrid demand and smother the fastest inflation since 1992

Photo: Al Drago/Bloomberg
By Matthew Malinowski - Alix Steel - Guy Johnson
September 15, 2023 | 07:47 AM

Bloomberg — Chile’s finance minister said the job of stabilizing the nation’s economy following a period of high inflation and overheated expansion is nearly complete as consumer price pressures wane.

The annual inflation rate is about third of what it was a year ago and will continue declining to 4% in December, Mario Marcel said Wednesday in a Bloomberg Television interview from London, where he is meeting business executives as part of the Chile Day investors event. That consumer price level would be just above the central bank’s 3% target.

“We started combining fiscal policy with monetary policy to stabilize the economy and that job is almost complete,” said Marcel, who’s a former Chilean central bank governor. “The adjustment has reflected mostly in stabilizing the level of GDP.”

The Cambridge University-trained minister is now trying to guide Chile out of an economic slowdown that was engineered to rein in torrid demand and smother the fastest inflation since 1992. Its gross domestic product is expected to shrink this year, according to a Bloomberg survey, marking one of the worst performances in Latin America. He is getting help from the central bank, which has started the region’s most aggressive cycle of interest rate cuts after having lifted borrowing costs to the highest in over two decades.

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The current slowdown is the latest in a series of economic setbacks that started with a wave of social unrest in late 2019 and continued with the pandemic. The last few years have marked a sharp contrast with the previous three decades when Chile had earned a reputation as an investor favorite amid rapid growth and subdued inflation.

The country’s economic outlook has been helped recently by steady declines in annual inflation, which eased to 5.3% last month from a peak of 14.1% hit in 2022. Some analysts are warning that recent weakness in the peso, which touched a year-to-date low last week, may firm up price pressures again.

The nation’s economy surged by a record 11.7% in 2021 as billions of dollars in early pension withdrawals and public transfers during the pandemic set off a consumption frenzy. By contrast, the government is now placing bets on renewable energy, green hydrogen and a public-private lithium model aimed at developing one of the world’s largest reserves of the metal used in batteries.

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Copper Demand

Marcel said Chile is continuing to see strong demand for its top export, copper, despite the slowdown in the Chinese economy, which is the nation’s biggest trading partner.

“We are seeing very strong demand for copper that comes from more structural changes all over the world, toward electro-mobility,” Marcel said. “In terms of pricing, things look much better than usually at times when larger economies are contracting.”

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When asked whether Chile would one day have to choose between China and Western nations in terms of where it sells raw materials like lithium and copper, Marcel said his country doesn’t “usually pick sides.”

“Either on the investor side or on the client side, our economy is open to all counterparts,” he said. “We don’t see a need to get involved in that right now.”


Marcel, who was previously the Chilean government budget director and head of the World Bank’s Global Good Governance practice, is one of the South American country’s most prominent economic authorities. He is also one of the best-evaluated cabinet members, public opinion surveys show.