Date: Wed, 30 Sep 98 23:18:06 CDT
From: firstname.lastname@example.org (Rich Winkel)
Subject: DEVELOPMENT-CHILE: Crisis Measures Expected to Cost Jobs
/** ips.english: 524.0 **/
** Topic: DEVELOPMENT BULLETIN-CHILE: Crisis Measures Expected to Cost Jobs **
** Written 4:04 PM Sep 29, 1998 by newsdesk in cdp:ips.english **
Copyright 1998 InterPress Service, all rights reserved.
Worldwide distribution via the APC networks.
Crisis Measures Expected to Cost Jobs
By Gustavo Gonzalez, IPS
26 September 1998
SANTIAGO, Sep 24 (IPS) - Measures adopted by Chile's government to
ease the impact of the international financial crisis on the South
American country are likely to cost jobs, several experts said
here this week.
The measures include severe cuts in government spending and the
lowering of gross domestic product (GDP) growth targets.
The new estimates place unemployment figures for next year at
about 10 percent, which would represent the highest rate in the
country since the foreign debt crisis in 1992, when recession
pushed joblessness to 30 percent.
Until last week, academic and business circles were estimating
that the unemployment figure could increase to 9 percent in 1999
as a result of the impact of the international crisis on economic
activity. But the tightening of the adjustment measures imposed
last week by the Central Bank will imply greater restrictions,
smaller GDP growth, and higher unemployment.
In July, 6.7 percent of the labour force was jobless, according
to the latest statistics available. However, the employment
situation clearly worsened in August when there was a strong
decline on the stock market.
Last week, the Central Bank increased interest rates from 8.4
to 14 percent, and eliminated the 10-percent bank insurance
(guaranteed deposits) for external credit, with the purpose of
containing the rise of the dollar.
The bank's measures are aimed at slashing inflation to 4.5-5.0
percent by the end of the year, which requires a greater cooling
down of the economy in order to contain consumption and reduce
public and private spending.
Economic Affairs Minister Eduardo Aninat had predicted a 2.8-
percent increase in expenditure next year over 1998, but now, it
is likely to be two percent.
The right-wing opposition and some business groups argue that
public spending and salaries should be frozen next year at their
1998 levels. This, they say, is the only way of avoiding a bigger
For this year, the government estimates GDP growth of 5.0 to
5.5 percent, as against 7.0 percent in 1997. For 1999, it
estimates that growth will be 3.8 percent.
Economists Patricio Mujica, of the University of Chile, and
George Lever, of the Chamber of Commerce of Santiago, feel that
Chile's economy will grow by only three percent next year, given
the new scenario created by the new Central Bank measures.
Tomas Flores, an analyst at the Liberty and Development
Institute, estimates that GDP will grow by 2.0 to 3.0 percent next
year, while Jorge Desormeaux of the Catholic University, is even
more pessimistic and does not rule out an increase limited to
between 1.0 and 2.0 percent.
"Undoubtedly, the problem of unemployment will intensify and
we will approach the 10-percent range (in 1999)," says Flores.
Desormeaux, meanwhile, estimates that unemployment will reach 9.5
percent at the start of the second semester of next year.
Lever, on the other hand, predicts that the average
unemployment rate in 1999 will be about 7.7 percent, though there
will be months in which it will be higher, especially drng the
third quarter, when unemployment rates will hit nine percent.
The issue of job protection looks set to be one of the most
controversial in the virtual social contract that the Frei
government hopes to achieve with unions and business groups in
order to confront the international crisis.
The proposal to freeze public spending and salaries at the same
time will undoubtedly be resisted by the unions, which believe it
will place the burden of the crisis on workers.
Government circles, too, are anything but enthusiastic about
keeping public spending at the same level as this year since new
investments on the social front, such as health care, housing and
education, are viewed as indispensable.
Origin: Amsterdam/DEVELOPMENT BULLETIN-CHILE/
[c] 1998, InterPress Third World News Agency (IPS)
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