Chile’s fiscal rule has served the country well, helped strengthen fiscal discipline and medium-term planning, and contributed to both building buffers ahead of the Global Financial Crisis (GFC) and keeping debt low by international standards. In addition, the fiscal rule is very well regarded internationally and has been considered a model to emulate by many countries. Nonetheless, in light of the decade-and-a-half experience with the fiscal rule, as well as the upward trajectory of public debt, this analysis aims to provide a fresh assessment of the fiscal rule’s effectiveness and explore scope for further improvement.
This booklet summarizes the presentations in the conference titled “Enhancing Chile’s Fiscal Framework: Lessons from Domestic and International Experience,” organized by Chile’s Ministry of Finance and the International Monetary Fund in January of 2019. The conference’s objective was to explore challenges and possible opportunities to improve Chile’s fiscal framework, including the fiscal rule, by looking at the Chilean and international experience. The conference had the valuable participation of current and former senior policymakers from Chile, including former Ministers of Finance ranging across the political spectrum and central bank presidents, which provided an insightful perspective in areas for improvement in the realm of fiscal policy. These views were complemented by representatives from the IMF and the Inter-American Development Bank, academics, and country officials from New Zealand and Peru, which provided lessons from the international experience.
Rodrigo Cerda has been National Budget Director at the Ministry of Finance since March 2018. Immediately prior to this post he was Deputy Director of the Latin American Center for Economic and Social Policies (CLAPES UC) and adjunct professor at the Pontificia Universidad Católica de Chile. Between 2010–2014, Mr. Cerda was Head of Macroeconomic Policy and Chief Advisor at the Ministry of Finance. Mr. Cerda has a bachelor’s degree in business administration and an MA in applied macroeconomics from the Pontificia Universidad Católica de Chile as well as an MA and PhD in economics from the University of Chicago.
Rodrigo Vergara Montes is a Senior Researcher at the Center for Public Studies, and Research Fellow at the Mossavar-Rahmani Center at the Harvard Kennedy School of Government. Mr. Vergara is also a professor at the Institute of Economics at Pontifical Catholic University of Chile. Between 2011–16, Mr. Vergara was the Governor of the Central Bank of Chile, and a board member between 2009–11. He is also an advisor and board member to several firms and has been a consultant to governments and international institutions. Mr. Vergara graduated in economics from Pontifical Catholic University of Chile and holds a Ph.D. in economics from Harvard University.
Charles Wyplosz is Emeritus Professor of International Economics at the Graduate Institute in Geneva where he was director of the International Centre for Money and Banking Studies. He currently serves as policy director at the Center for Economic Policy Research (CEPR). A French national, Charles Wyplosz holds a degree in Engineering from Ecole Centrale, Paris, and a PhD in Economics from Harvard University.
Rodrigo Valdés is a professor at the School of Government of Pontificia Universidad Católica de Chile, and he is a board member to several firms. He was Minister of Finance of Chile between 2015–17, and president of BancoEstado immediately prior to his post at the ministry. In the past he worked in the private and public sectors, in BTG Pactual in Santiago, Barclays Capital in New York, at the International Monetary Fund, and at the Central Bank of Chile. Mr. Valdés has a PhD in economics from the MIT and a degree in business administration from the Universidad de Chile.
Jose De Gregorio is a professor and dean of the School of Economics and Administration of the Universidad de Chile. He is also nonresident senior fellow of the Peterson Institute for International Economics. He is also a director and financial advisor of several private sector firms as well as a consultant for international financial institutions. Mr. De Gregorio was Governor of the Central Bank of Chile between 2007–11, Deputy Governor between 2003–07, and board member between 2001–03. Between 2000 and 2001 Mr. De Gregorio was minister for three different Ministries at the same time: Economics, Mining, and Energy.
Vittorio Corbo is currently President at Vittorio Corbo & Associates and has a distinguished career in academia, international financial institutions, and both the public and private sectors. In academia he has held posts at Pontifica Universidad Católica de Chile, Stanford University, Georgetown University, and Concordia University. He was Governor of the Central Bank of Chile between 2003–07 and has been a member of several high-level advisory bodies. Mr. Corbo has also been a board member to several important firms. Mr. Corbo has a bachelor’s degree in business administration from Universidad de Chile and a PhD in economics from MIT.
A developed fiscal framework is based on several fiscal institutions that contribute to fiscal and macroeconomic performance: a formal process of government budget planning, congressional discussion and approval, execution, and accountability; fiscal rules; sovereign wealth funds; and fiscal councils.
Paolo Dudine is currently senior economist in the Fiscal Affairs Department of the International Monetary Fund. In his career at the IMF, Mr. Dudine has worked on the Fiscal Monitor (the IMF’s flagship publication on fiscal issues), has provided policy advice on fiscal rules, and has worked as the fiscal economist on Argentina, as external sector economist on Bulgaria and Honduras, and as real sector economist on Guinea and Angola. He also spent five years in the Institute of Capacity Development of the IMF, training country officials and leading the creation of the IMF online course on financial programming. Mr. Dudine holds a PhD in economics from New York University.