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Wednesday, April 4 de 2018

Minister Felipe Larraín: “We are tightening our belts to finance social programs”

Minister of Finance Felipe Larraín, accompanied by the Minister of Social Development Mr. Alfredo Moreno, reaffirmed the Government's commitment with social spending, during a visit to Los Jazmines foster house of Coanil (National Corporation for Handicapped Children).

After a tour through the facilities of the institution - that collaborates with the National Service for Chidren (Sename), Minister Larraín announced a Fiscal Austerity Directive, signed today and to be distributed to all the ministries, services, as well as national and regional public agencies.

The measures aim to generate savings of US$ 122 million per year, roughly US$ 500 million in four years.

"We are tightening our belts to finance social programs", said the Minister, who explained that the announcement was made in Coanil because this is one of the institutions that will benefit from the decision of the Government to increase the subsidy to organizations that collaborate with Sename by 25%.

"When we save in the public sector, we can finance initiatives like these" said the authority.

Among the expenses to be reduced, without affecting the operation of the services, there are protocol-related expenses, travel expenses, use of vehicles and advertising.

Two of the areas with the greatest austerity efforts are personnel under fee contracts, trips, and travel-related expenses, which represent almost US$ 66 million, more than a half of the total US$ 122 million. In the case of personnel under fee contracts, these expenses increased almost 60% between 2013 and 2017, which explains why a large part of the fiscal efforts are concentrated on these items.

To place these figures in context, in 2013 the central government spent a total of US$ 1,088 million on personnel fee contracts, goods and services expenditures, and spending on vehicles.

This figure rose by 30%, to US$ 1,418 million, in 2017. Under the announced austerity plan, spending in these items is expected to be 19% above the 2013 level. 

The breakdown of the expected savings is as follows:

1) Spending on advertising, marketing and subscriptions: US$ 9 million

2) Protocol and related expenses: US$ 7 million

3) Personnel under fee contracts: US$ 33 million

4) Infrastructure leased for institutional activities: US$ 9 million

5) Acquisition of vehicles: US$ 19 million

6) Travel expenses and trips: US$ 33 million

7) Payments of overtime and training: US$ 12 million

The Minister of Finance explained that each division has an internal unit in charge of supervising the compliance of the instructions. This unit must inform to the Government's General Internal Auditing Board (CAIGG, in Spanish), which will send a quarterly compliance report to the President of the Republic and the Minister of Finance.

The authority added that the austerity guidance is part of a broader set of measures to balance fiscal accounts.

In addition, Minister Alfredo Moreno highlighted the measure and said that the objective is to allocate the fiscal resources to the poorest people.

"When somebody says that social problems can be solved without resources, is all smoke and mirrors (...) I am glad to have a serious, responsible economic management that privileges those who need more", Moreno said.

When asked about tensions between United States and China, Minister Larraín said that "the commercial war, if it materializes, is definitely a negative issue. To implement protectionist measures, trying to obtain some advantages in other markets, is like playing with fire".

In addition, he warned that "to those who think that Chile should not care about this, I want them to note that we are all involved. If world trade growth falls due to a trade war, estimates show that for every 5% increase in trade protection there are between 0.1% and 0.3% lower growth of the world economy."


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