Good figures confirm that Chile is on the road to economic recovery
A drop in unemployment, a projected rise in GDP and a Monthly Economic Activity Index (IMACEC) growth rate of 18.1% for July show that the Chilean economy is recovering step by step. These figures are a reflection of the government measures promoted under the Plan Paso a Paso Chile de Recupera (Chile Recovers Step-by-Step Plan), such as public investment, which will create 250,000 direct jobs.
One year on from the launch of the Plan Paso a Paso Chile se Recupera, presented by Chile’s government to reactivate the economy, important news was announced this week to demonstrate our country’s economic recovery. In some areas, it has even returned to pre-pandemic levels.
With regard to job recovery, the National Statistics Institute’s (INE) National Employment Survey indicated that the 8.9% unemployment rate represents a 4.2 percentage point fall in comparison with the same quarter of the previous year, the lowest it has been in the last 16 quarters. The same survey highlights the recovery of 1,075,744 jobs over a 12-month period.
Labor and Social Security Minister Patricio Melero pointed out that employment recovery figures confirm the government has taken the appropriate measures and emphasized that “employment subsidy programs have become an important complementary tool to boost job recovery and encourage the creation of more jobs.”
Further positive news regarding the economy was the announcement by Chile’s Central Bank of an 18.1% increase in the Monthly Economic Activity Index (IMACEC) for July in comparison to the same month of the previous year, a figure that was far beyond the expected 16.3% rate.
This is in addition to the Central Bank’s Monetary Policy Report, which positively adjusted its growth projections, from between 8.5% and 9.5% in its June report to projected growth of between 10.5% and 11.5% in September.
Investment as a catalyst for employment
The Plan Paso a Paso Chile se Recupera has not only focused on supporting workers and SMEs; it has also strongly encouraged public and private investment as a catalyst to generate growth and employment.
1. Public Investment
US$ 34 billion will be made available (18% higher than the previous maximum during the 1990s), thus creating more than 250,000 associated direct jobs in the 2020-2022 period, in addition to others created by the employment pillar and the SME pillar of the Plan Paso a Paso Chile se Recupera.
This represents the highest budget spending in recent years, with public investment growing an average 14.1% over the last five months. Furthermore, this investment has been decentralized, thus reaching all of Chile’s regions.
Update by ministry:
Public Works Ministry (MOP): The current 2021 MOP investment initiatives budget is US$ 3.4 billion, which, together with the US$ 1.3 billion invested in the first half of the year, makes it the largest in history. Never in the past 18 years has there been so much infrastructure investment as this year. Contracts include a wide variety of investments, including port improvements, road maintenance and reservoir improvements, among other things.
Housing and Urban Development Ministry (MINVU): MINVU has begun the construction and improvement of more than 102,230 houses since the start of the reactivation plan. Furthermore, 106 urban projects are in progress or have been completed and the construction or improvement of more than 65,000 works and 17 urban projects will get under way throughout the country during the third quarter.
Regional and Administrative Development Undersecretary’s Office (SUBDERE): Since the start of the reactivation plan, 1,297 economic recovery projects worth US$ 116 million have been approved in 296 municipalities. This means that 86% of Chile’s municipalities have received direct investment from SUBDERE, for improvements in sewage works, parks and connectivity, among other things.
Agriculture Ministry: More than US$ 697 million has been invested in different projects. As of August 13, 56% of resources are currently in use and 44% are in the procurement stage.
Transport and Telecommunications Ministry: There are 167 public investment initiatives valued at US$ 2.5 billion. These projects include investment in the Metro, Ferrocarriles del Estado (State Railways) and various other projects, such as bus stops, bike paths and demarcation, in order to improve mobility and connect the country.
Energy Ministry: Over 100 investment initiatives are underway in order to provide renewable energy for the whole of Chile. Projects include the Programa Casa Solar (Solar House Program), which has had 111,339 applications and more than 3,470 projects tendered, with investments valued at US$ 4.25 billion.
Sport Ministry: Investment in sports infrastructure for 2021 is the highest in recent years, amounting to US$ 49.15 million. This is a 64% increase in comparison to average investment in recent years. Some key projects are: training facilities for high-performance sports; Elige Vivir Sano (Choose to Live Healthily) Sports Centers; and the renovation of existing sports facilities, among others.
2. Private Investment
US$ 30.7 billion and 150,000 jobs for the 2021-2022 period, by expediting investment initiatives, bidding for public property and MOP concession projects.
In addition, more than 211 investment projects have been expedited. Between February and July alone, nine projects worth US$ 5.8 billion obtained their environmental qualification resolution permits and construction began on another 14 projects worth US$ 3.75 billion. Thanks to tax modernization, 1% of investments will go directly to regional coffers.
Foreign direct investment through June of this year is the highest since 2003 and 66% higher when compared to the same period in 2020.