President-elect Gabriel Boric warned that Chile’s consumer spending boom was unsustainable and public finances were under pressure, providing a reality check in one of the world’s fastest growing economies.
Growth should be driven by investment, while protecting the environment, Boric said Thursday at a trade event in Santiago. Raising government revenue through tax reform while providing investors with legal safeguards will help make economic expansion more sustainable and address social issues, he said.
“Our current status quo is slowing economic development and deepening social discontent,” Boric said. “If we don’t move forward with material solutions, we won’t solve the causes of social discontent.”
Chile’s economy grew around 12% last year, a record for the South American nation, according to the central bank, which expects growth to slow to 2% this year. Policymakers are likely to raise the key interest rate again this month, extending hikes totaling 350 basis points since July as annual inflation beats the target.
Boric, a 35-year-old former student leader, will assume the presidency in March after promising greater equality in a country that is both one of the most prosperous in Latin America and a favorite in global financial markets. Investors expect him to announce his cabinet in about a week.
Raising productivity and recovering formal jobs, especially for women and young people, are top priorities, Boric said Thursday. The incoming administration’s changes will be gradual and will be implemented with fiscal responsibility, he said, pledging to reduce the structural deficit from 2023.
The new government knows that partnerships with the private sector will be essential to stimulate investment, according to the new head of state. Boric said his team will always be open to dialogue with different segments of society.
His speech comes a day after the current administration awarded controversial lithium contracts. The timing drew criticism from opposition groups and from Boric, who told reporters on Wednesday the decision resembled “those laws that tie you up at the last minute when a government is about to end.”