Chile’s consensus-building finance minister calms troubled waters

Serving as finance minister during the worst regional recession since records began is a tall order. When your country has been convulsed by months of riots over inequality even before the latest crisis, it is harder still.

Yet Ignacio Briones, Chile’s youthful finance minister, has won praise for his response to the coronavirus pandemic. After weeks of painstaking negotiations — even keeping a sleeping bag in his office — he won cross-party backing for one of the biggest stimulus packages (as a proportion of gross domestic product) of any emerging market economy.

A 47-year-old former university dean with a fondness for travelling by motorbike, Mr Briones hails from a different generation to his patrician predecessor, Felipe Larraín. Mr Larraín, a scion of one of Chile’s most famous families, was an early political casualty of the bloody street protests which erupted last October after the government raised prices on the Santiago metro — the last straw for protesters angry at precarious employment and costly, poor-quality public services.

Now Mr Briones is spearheading a $28bn package of government aid to combat the pandemic, which includes income support for the poor and subsidies for job creation — a far cry from the tax-cutting, pro-business agenda upon which President Sebastián Piñera was elected in 2017. The independent central bank is helping with a $16bn credit line to business and a plan to buy $8bn in assets. 

“Priorities number one, two, three, four and five are to recover and reactivate the economy and employment, to protect the incomes of families,” Mr Briones told the Financial Times in a telephone interview. “It may seem trivial, but it is tremendously valuable that this has been agreed to in writing with the main opposition parties.”

During the early phase of the pandemic, Chile won international praise for its swift lockdown and the highest level of testing in the region. But Mr Piñera’s conservative government ran into trouble as deaths spiked higher over the past seven weeks, indicating that the lockdown had been ineffective for informal workers, and the health minister quit. 

Mr Briones insists that the latest $12bn spending package will not squander Chile’s reputation for sound economic policymaking. Tax rises to pay for the measures are “not in the plans we have” at present because of their recessionary impact, but will be necessary once a recovery takes hold, he added.

The central bank forecasts that the country’s economy will shrink 5.5-7.5 per cent this year, making it one of the better-performing economies in Latin America, the world’s worst hit developing region. Next year Mr Briones expects a strong recovery with growth of “more than 5 per cent”.

To reassure investors worried about Chile abandoning fiscal prudence, he points to a “sunset clause” in the latest spending measures, which expire after two years. The aim is to keep Chile’s gross debt burden below 43 per cent of GDP. “Otherwise, our debt would explode and the truth is that is the worst signal you can send to investors,” explained Mr Briones.

The more consensual political approach adopted by Mr Briones and other new faces in the government, together with the looser fiscal policy demanded by the twin crises of coronavirus and social upheaval, represent a significant shift in Santiago’s approach, said Jimena Blanco, head of Latin America at Verisk Maplecroft, a risk consultancy.

“We have an administration on the back foot, facing a very unstable social and political landscape, that then got hit by a pandemic,” she said. “At this stage, damage control is the top priority.”

Mr Briones’s competent handling of the crisis so far and his ability to broker consensus in a highly polarised country has led some to speculate that the economist, who has a PhD from Sciences Po in Paris, could be presidential material. A recent opinion poll showed him to be the most popular member of the cabinet after the new health minister.

“Briones has been a bit of a fresh face, which is a good thing,” said Andrés Velasco, dean of the school of public policy at the London School of Economics and himself a former Chilean finance minister under a previous centre-left government. “He doesn’t give himself airs . . . and he comes across as a nicer guy than your average politician.”

Robert Funk, a political scientist, argues that in the current climate in Santiago, the star of outsiders like Mr Briones is on the rise. “Briones has proven to be a good political operator, but his main value is a communicational style that resonates with people. In a government that is totally out of touch . . . this is a valuable asset,” he added.

The finance minister’s political acumen will soon be put to the test. The consensus view among the commentariat in Santiago is that once the coronavirus crisis is over, “the protests will return with a vengeance”, according to Mr Funk.

Mr Briones thinks otherwise. “We are in a completely different situation from that which triggered the protests late last year . . . it redefines the whole political and economic discussion, where the recovery, the ability to generate employment and income, become a national priority,” he said. “The idea that the underlying problem and demands remain the same, as if there had been no pandemic, doesn’t seem very consistent to me.”