A Conversation with Felipe Larraín Bascuñán

Irene Estefanía González / Inter-American Dialogue

On April 20, the Inter-American Dialogue in partnership with the Brookings Global - Economic and Social Policy in Latin America Initiative (CERES), hosted the Minister of Finance of Chile, Felipe Larraín Bascuñán, for an open conversation on the economic challenges and choices facing Chile. The discussion was moderated by Peter Hakim, President Emeritus of the Inter-American Dialogue, and Ernesto Talvi, director of CERES at The Brookings Institution. The conversation explored continuity amid the cycle of administrations, the need for inclusive growth, and how Chile fits in the global economy.

Hakim opened the conversation by asking Larraín what could be expected of Piñera’s new administration and what the Minister would like to accomplish. Larraín began by assessing the current situation following Bachelet’s second term as a part of the Nueva Mayoría coalition. He stressed that he values continuity for the country’s ongoing stability, but that the Nueva Mayoría essentially “bulldozed” much of the economic model from Piñera’s first term. Although the intentions of the many social policies implemented between 2014 and 2018 were admirable, the results of these changes did not live up to expectations. Larraín focused on the decline of growth from 5.3% to 1.7% during Bachelet’s second term and claimed that it could not be explained completely by external factors. The biggest part of the slowdown came from inside the country itself – a lack of confidence, increasing uncertainty and a decrease in the quality of economic and social policies.

In order to address some of these shortcomings, Larraín suggested he would focus on increasing Chile’s growth from 1.7% to 3.5-4%. Regaining business and consumer confidence by better managing resources of the state would help to double the rate of growth. The level of debt, which doubled over the past 4 years, also caused a downgrade in Chile’s credit rating, and the Minister intends on regaining the A+ rating during his tenure. Larraín also stressed that the projected growth in the country needed to be inclusive. This would be addressed by focusing on improving access to education, especially technical education, and by reducing the corporate tax rate.

Talvi then asked about the risk of polarization in the country due to the lack of continuity between administrations. Larraín suggested that building a consensus with a minority in the two chambers would be difficult, but that he would make it a priority during the next 4 years. In terms of continuity, the Minister noted that Chile will remain a part of the TTP agreement and that it will form multipartisan groups to address topics like education, pensions, and health. The most important goal would be to simplify the reforms that were implemented during the previous administration.

Overall, Larraín emphasized the importance of reaching a political equilibrium internally in order to increase inclusive growth, especially due to global trade concerns today. The administration will, therefore, capitalize on the agreements between the parties, particularly on tax reform simplification and the modernization of the state, in order to benefit all Chileans.

Watch the full recording of this event here: