Wednesday, March 03, 2010

Piñera and growth

Hillary Clinton was in Chile, and included a press conference with Sebastián Piñera.  One reporter asked a good question:

We’d like to know how you plan to pay for the reconstruction efforts, which are going to be considerable, what you estimate they’re going to cost. And also, how does this affect your economic plan of 6 percent growth and 200,000 jobs created in your first year in office?

The earthquake provides Piñera with the cover necessary to back off that claim (he said there would have to be an "amendment" to his plan) which is good for him because it was never going to happen in the first place.

9 comments:

mike a,  8:00 AM  

There is a flip side to this. All the money which is to be spent on reconstruction, if it is spent via domestic suppliers, may actually help to boost the growth rate of Chile. Pinera can downplay expectations now and come in with an upside surprise.

There will be lots of construction related jobs created because of this, and not many jobs lost, given that Concepcion is not an economic driver of Chile. For all its destruction and hardship, this natural disaster might actually help the Chilean economy.

Anonymous,  9:07 AM  

It really is a poorly phrased question. It is not an economic plan to promise 6% growth and 200,000 jobs. It is a campaign promise w/o any substantive foundation in legislation or policy. Clearly government austerity is not going to be part of the new government's policy in the wake of such a disaster. Hence your derision. Consider this next to Obama's promises for jobs (or that of any democratic politician) and it is normal behavior. Candidates run in poetry and govern in prose. It doesn't say much about Pinera at all unless you are holding him to a new level in the "gotcha" game.

Anonymous,  1:10 PM  

It's a pretty bad question. Chile has over $11 billion in fiscal savings. It has very low debt, and can easily borrow billions if needed. Chile also has extensive earthquake insurance.

And the economy is likely to grow faster once the reconstruction process begins.

Justin Delacour 3:43 PM  

There is a flip side to this. All the money which is to be spent on reconstruction, if it is spent via domestic suppliers, may actually help to boost the growth rate of Chile.

And cows may jump over the moon too.

Anonymous,  8:20 AM  

Yes, it wil almost certainly boost growth. It's a very common phenomenon after a natural disaster as reconstruction goes ahead.

Paul 11:51 AM  

"if it is spent via domestic suppliers, may actually help to boost the growth rate of Chile. Pinera can downplay expectations now and come in with an upside surprise."

Look up the Broken Window Fallacy.

mike a,  1:35 PM  

Justin and Paul, you are both wrong. Hey, even the beloved liberal rag NY Times is with me on this one:

http://www.nytimes.com/2008/07/08/business/worldbusiness/08iht-disasters.4.14335899.html

Paul 9:24 PM  

"Hey, even the beloved liberal rag NY Times is with me on this one"

And this gives you more credibility....how?

Anonymous,  9:48 AM  

The theory of a multiplier effect is what is being argued. The money that Pinera was promising to save in fiscal reforms (austerity) is not going to happen. Instead his government is likely to boost government spending in responding to the crisis. The demand for goods and services, reconstruction, must be done almost entirely within the Chilean economy. The construction industry, the painters, the roofers, the masons and so forth are going to find their labor is in high demand. Will this lead to faster growth and better economic results for Chile? I think so because the governments since 1973 have been very cautious with fiscal and monetary policies. Chile is in a good place for deficit spending or borrowing. It can devalue safely because of its long record of caution. The world climate for export growth is not very good, but the increased domestic demand could lead to a better result in a time of global recession. The irony of course is that Pinera's conservative government will have to make these decisions. Likewise, there is an irony in that leftists of this board are denouncing basic Keynesian thought about government stimulus packages while using the classical economic critiques of Herbert Hoover.

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