Analysts in Chile attentive to Boric’s Finance Minister’s election

Following his runoff victory, Chile’s president-elect Gabriel Boric will focus his attention on forming a cabinet that tries to satisfy allies and voters without further alienating nervous investors who have been selling assets.

The economic scenario that the president will face is by no means simple. The country’s central bank forecasts that next year economic growth will slow, falling from about 12% this year to just 1.5%, as the pandemic stimulus is withdrawn. The next government must address a fiscal deficit that has grown to nearly 12% of gross domestic product.

Financing costs will be high as inflation will average 5.9% next year and the central bank will continue to raise rates. Interest rate swaps show that the benchmark monetary policy rate will reach 7% in six months.

Investors will look for clues in Boric’s election of his finance minister to try to determine if he will deliver on his campaign promise of macroeconomic stability or if the country is entering a period of heavy public spending.

These are its main candidates:

Andrea Repetto

If calming markets is your goal, Boric can choose Andrea Repetto, 52, a renowned economist and professor with a Ph.D. from the Massachusetts Institute of Technology.

Repetto joined his campaign after the first round when Boric reached out to Chile’s center-left parties to expand his coalition. He has spoken of the need for prudence, given the divisions in Congress.

“Since none reached minimal majorities, whoever is elected president will have difficulty carrying out their proposals. Added to this is the fiscal tightness and an economy with not very encouraging indicators. All that remains is to review what has been promised and think carefully about what will be feasible in this new scenario.”He wrote in an opinion article in the newspaper El Mercurio.

Repetto participated a decade ago in designated advisory panels that analyzed pension reform and reducing corruption during Michelle Bachelet’s second administration, and was chosen by her peers as Chile’s economist of the year in 2018.

“Repetto is a recognized academic with clear public policies and could ask for more restraint in Boric’s program,” said Carolina Ratto, head of equity studies at Credicorp Capital in Santiago.

She would be the Prime Minister of Finance of Chile.

Local media have reported that Repetto is not interested in occupying a high-visibility position. Boric’s campaign did not respond to a request for comment on his candidacy and others.

Nicolas Grau

Nicolás Grau, 38, has been part of Boric’s inner circle and may be the closest to him of all the candidates. He advised Boric on economic issues as he prepared for the first televised debates of the July primaries.

He has a Ph.D. in economics from the University of Pennsylvania. Her research has focused on education, juvenile delinquency and gender discrimination.

Grau has supported the incorporation of workers’ representatives on company boards, the reduction of the working day to 40 hours and the increase of the minimum wage to 400,000 pesos, according to Ex-Ante.cl. He has also cited the works of the economist Mariana Mazzucato in praising the role of the State and public funding in scientific innovation.

Claudia sanhueza

Another Boric confidant is Claudia Sanhueza, 47, who was mentioned before the first round in November as a potential candidate to head the Ministry of Finance. He has a Ph.D. in economics and an MA in philosophy from the University of Cambridge.

Sanhueza caused controversy in October when he said Chileans would only keep what they had saved so far after the Boric Administration eliminated the country’s private pension system. Future payments would go to a public social security system.

That was unpopular in the country, given that 93% of Chileans are in favor of allowing savings to be inherited, according to polling firm Criteria. Boric’s campaign has since backed down, saying that future savings will remain private property and that family members will be able to inherit them, though they would be paid for as annuities and not as a lump sum.

Other candidates

Other names in circulation are former Central Bank president Roberto Zahler, 73, and former pension and securities regulator Guillermo Larraín, 57, who also joined Boric’s team after the first round. Both have ties to the center-left coalition that ruled Chile after the Augusto Pinochet dictatorship.

Boric’s economic advisory team also includes University of Chile professors Eduardo Engel, Diego Pardow, and Ricardo Ffrench-Davis, as well as former Bachelet education adviser, Javiera Martínez, and the executive director of the Opes think-tank. Chile, Javiera Petersen.

Boric may not want to nominate someone who joined his side so late to the post of Finance Minister and may prefer someone closer to his political party, such as Grau, according to Felipe Alarcón, an economist at the insurer Euroamérica.

“This latest batch of advisers are not from the trusted core (of Boric) and that is why I am more inclined to insist on Grau that the market does not give guarantees of anything”Said Alarcón.