Chile to borrow little
Earthquake recovery can be funded largely with reserves
SANTIAGO, Chile – Chile may need to spend twice as much as Haiti to recover from its devastating quake and tsunami, but it doesn’t have the same desperate need for international aid or loans.
Thanks to surplus stashed away in better times, Chile will be able to finance much of its own reconstruction from last month’s disaster. On Friday, President Sebastian Pinera said the country will draw on foreign credit “with moderation.”
In his first presidential press conference, Pinera said the reconstruction effort would last years and cost “close to $30 billion” – more than double economists’ damage estimates of around $14 billion for Haiti’s Jan. 12 quake.
And while both countries are still coping with the wrenching human cost of the disasters, Chile is on far sounder footing when it comes to addressing material losses.
“I haven’t seen a country in such a favorable position to address a natural disaster in a long time,” said Carlos Felipe Jaramillo, the World Bank’s director for the Andean region, in an interview with the Associated Press. “They are in fabulous standing with us and have a tremendous capacity to respond.”
The Chilean government saved $11 billion of surplus revenue from copper exports in good years. In addition, the private sector is expected to recover more than $3.5 billion in insured damages.
The country can also count on strong domestic financial markets before it needs to turn to foreign loans – and when it does reach out to international creditors, Chile can attract low interest rates with its sterling fiscal record and minimal debt.
“Right now Chile isn’t drawing at all on international relief funds,” University of Chile economist Joseph Ramos said. “If they want to go directly to international financial markets, the debt would be another drop in the bucket.”
Pinera has made clear that reconstruction will not be easy, calling for “tremendous austerity” in government spending. He said Friday that his government will rework the existing 2010 budget with executive orders and new laws.
But his administration still intends to follow through on a campaign promise, made during last year’s economic downturn, to deliver a “March bonus” of nearly $80 to more than 4 million struggling Chileans.
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