• version imprimible
Tuesday, December 3 de 2019

The Government of Chile announces an Employment Protection and Economic Recovery Plan for USD $ 5.5 billion

The Minister of Finance, Ignacio Briones, called for “building a shared social roadmap, to move forward in a credible and responsible way”.

The Minister of Finance, Ignacio Briones, unveiled the Employment Protection and Economic Recovery Plan, which consists in a series of measures that strengthen employment protection, boost public investment, aid SMEs and the reconstruction of cities, in order to support the economic recovery.

The Economic Recovery and Employment Protection Plan allocates USD $4.8 billion in new measures. The total cost of the Plan reaches USD $ 5.5 billion by adding a previously announced capitalization of BancoEstado and credit support for SMEs.

During the announcement, Minister Briones emphasized that the 3,4% contraction of the October indicator of economic activity (IMACEC) revealed that the impact of recent events on the economy is greater than expected.

“Economic activity showed a contraction only compatible with years of economic crises that have ended in recession. Although the unemployment figures do not yet reflect the recent weakness, we must act with a sense of urgency to mitigate the negative effects of this shock on employment and families, especially the most vulnerable,” said the Minister.

In addition, Ignacio Briones called for a greater sense of social unity. “I would like to make a call, an invitation to build a shared social roadmap. For many years we were not able to see and empathize fully with heartfelt demands (...) it is time to amend the course, and draw up a shared social roadmap, to continue moving forward in a credible and responsible way. We cannot dishonor the expectations that Chileans have placed on us. This agenda, this shared social roadmap, must be a priority,” he said.

Initiatives of the Plan

The Economic Recovery and Employment Protection Plan totals US $ 5.5 billion in total and this figure is distributed in greater public spending of US $ 3,025 million, measures to support SMEs for US $ 1,950 million and other initiatives for US $ 525 million. 

Minister Briones explained that all these measures are mostly transitory and focused on supporting job creation, directly or indirectly via public investment, as well as support for SMEs.

The Plan is expected to create at least 100,000 new jobs in 2021, he added. 

Employment protection is at the heart of the Plan. Employers and employees in companies that have been negatively affected by the current socio-political crisis, will have the ability to agree on a reduction in working hours, with support from the unemployment insurance. In these cases, workers will obtain a supplement to their salaries with funding from the unemployment insurance.

In addition, the unemployment insurance will be strengthened. There will be a 10 percentage point rise in the replacement rates of the first three monthly payouts for workers with open ended contracts, as well as a rise of the first two payouts for workers with a fixed-term contract.

Another measure of this agenda is to accelerate the transition of the solidarity component of pensions.

Support for SMEs

The Minister detailed a series of initiatives to support SMEs that have been affected by violence.

Among them, he highlighted the early return of income tax for SMEs that experienced a drop in sales in October, compared to the average of the last twelve months. Specifically, they will receive in advance 20% to 75% of the average of monthly provisional payments paid until September and the returns received in the last two years. 

These measures consider resources for up to US $ 536 million and will benefit more than 500 thousand SMEs.

He also informed new facilities for the payment of VAT. It consists in the payment of the VAT corresponding to the months of October, November and December, in 12 monthly installments with zero real interest rates, starting next February. This measure considers releasing resources for up to US $ 564 million.

Another measure will be the generation of a special donation regime for SMEs.

The Plan adds US$ 100 million of capitalization for the Small Business Guarantee Fund (Fogape). This measure adds to the already approved capitalization of BancoEstado for US $ 500 million and the US $ 200 million of capitalization for the General Investment Guarantee Fund (Fogain), which in total will allow SMEs to access loans for about US $ 9 billion.

The Minister informed that these measures would be presented to Congress through a bill for immediate discussion. 

More public investment 

Minister Briones announced initiatives to strengthen the reconstruction and economic recovery through public investment, for an amount in excess of US $ 3 billion. 

In particular, the Plan considers reconstruction projects for US $ 921 million, which are added to Metro (US $ 380 million) approved in the Budget Law for 2020.

At the same time, the Plan consists in the acceleration of investment projects in regions; the Santiago-Melipilla Train; in drinking water public works, construction of housing, subsidies and improvement of neighborhoods, and investment in education, among other initiatives.

--- To see the presentation made by the Minister about the Economic Recovery and Employment Protection Plan, click here (Spanish only). 

Ir arriba