US$ 4 billion economic stimulus plan for Chile

By Richard High07 January 2009

Chile's President Michelle Bachelet has announced a US$ 4 billion economic stimulus package to boost the country's economy as a result of the global financial credit crisis.

Worth 2.8% of the country's GDP, the package will be financed with funds from the country's Sovereign Wealth Funds and a sovereign bond issue.

It will increase 2009 public spending by almost US$ 1.5 billion. However, this means the government will post a fiscal deficit of 2.9% in 2009 and requires suspending legislation that forces the government to post a structural surplus of at least 0.5% of GDP.

Announcing the plan this week, President Bachelet said it aimed to create 100000 jobs, would increase public spending by nearly US$ 1.5 billion, with US$ 700 million earmarked for public works projects and would include handouts for the most vulnerable families as well as a temporary cancellation of stamp duty.

The plan also includes tax incentives and measures designed to provide SMEs with easier access to financing.

It would also lower employer contributions for SMEs, include tax rebates and deprive the government of around US$ 1.5 billion in fiscal income, added President Bachelet.

The plan also includes a one-off payment of US$ 63 for all poor children under the age of 18. The payments, which will be made in March when the school year starts, are designed to help an estimated 3.7 million people.

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