Ministry of Finance (Chile)

The Ministry of Finance of Chile (Spanish: Ministerio de Hacienda) is the cabinet-level administrative office in charge of managing the financial affairs, fiscal policy, and capital markets of Chile; planning, directing, coordinating, executing, controlling and informing all financial policies formulated by the President of Chile.

The current Minister of Finance is Mr. Rodrigo Valdés.

History

In 1814 the Secretary of Finance was created, as Supreme Director Bernardo O'Higgins sought to develop an administrative framework for the then newly formed nation, considering the need to ascertain its independence from the Spanish crown.[1] The office was first organized by a Presidential Decree on June 2, 1817, and was named "Secretariat of Finance" (1818 - 1824). Hipólito de Villegas was appointed to lead the new institution.[1] The present structure, duties and attributions were defined by Presidential Decree N° 7912, "General Law of Ministries", on November 30, 1927.

Institutional framework

According to Article 6 of Decree 7,912 of 1927, the Ministry of Finance responsibilities include, among other:[2]

In practice, the Ministry of Finance executes policies through several related and dependent institutions.

Related Institutions:[3]

Dependent Institutions:[4]

Policies

One of Chile’s fiscal policy central features has been its counter-cyclical nature. This has been facilitated by the voluntary application since 2001 of a structural balance policy based on the commitment to an announced goal of a medium-term structural balance as a percentage of GDP.[5] The structural balance nets out the effect of the economic cycle (including copper price volatility) on fiscal revenues and constrains expenditures to a correspondingly consistent level. In practice, this means that expenditures rise when economic activity is low and decrease in booms.[6] The target was of 1% of GDP between 2001 and 2007, it was reduced to 0.5% in 2008 and then to 0% in 2009 in the wake of the global financial crisis[7] In 2005, key elements of this voluntary policy were incorporated into legislation through the Fiscal Responsibility Law (Law 20,128).[6]

However, the financial crisis of 2008 together with the reconstruction following the 2010 Chile earthquake undermined the financial position of the country, resulting in a structural deficit that was reduced to 1/2 percent of GDP in 2012, two years ahead of government expectations to pass the 1% threshold.[6][8] The 2013 budget was devised with a target structural deficit of 1%.[9]

The Fiscal Responsibility Law also allowed for the creation of two sovereign wealth funds: the Pension Reserve Fund (PRF) and the Economic and Social Stabilization Fund (ESSF). The PRF was created as a response to the expected increase in liabilities related to old-age pensions and benefits, especially for the poor,[6][10] and it had accumulated US$5.883 million (market value) by the end of 2012.[11] The PRF is set to receive yearly capital injections between 0.2% and 0.5% of the previous year’s GDP depending on the fiscal surplus, so new resources are secured every year.[12] The ESSF’s objective is to stabilize fiscal spending by providing funds to finance fiscal deficits and debt amortization[10] and had market value of US$14.998 million by the end of year 2012.[11] Each year, the ESSF accumulates any fiscal surplus remaining after the contributions to the FRP and to the capital of the Central Bank of Chile, excluding debt service and anticipatory contributions during the previous year.[13] The funds are managed by the Central Bank of Chile and a Financial Committee advises on their investment policy.[10] Chile also participated in the discussion and agreed to the Santiago Principles.[10]

The main taxes in Chile in terms of revenue collection are the value added tax (45.8% of total revenues in 2012) and the income tax (41.8% of total revenues in 2012).[14] The value added tax is levied on sales of goods and services (including imports) at a rate of 19%, with a few exemptions. The income tax revenue comprises different taxes. While there is a corporate income tax of 20% over profits from companies (called First Category Tax), the system is ultimately designed to tax individuals. Therefore, corporate income taxes paid constitute a credit towards two personal income taxes: the Global Complementary Tax (in the case of residents) or the Additional Tax (in the case of non-residents). The Global Complementary Tax is payable by those that have different sources of income, while those receiving income solely from dependent work are subject to the Second Category Tax. Both taxes are equally progressive in statutory terms, with a top marginal rate of 40%. Income arising from corporate activity under the Global Complementary Tax only becomes payable when effectively distributed to the individual. There are also special sales taxes on alcohol and luxury goods, as well as specific taxes on tobacco and fuel. Other taxes include the inheritance tax and custom duties.[15]

In 2012, general government expenditure reached 21.5% of GDP, while revenues were equivalent to 22% of GDP.[5] Gross financial debt amounted to 12.2% of GDP, while in net terms it was of -6.9% of GDP, both well below OECD averages.[5]

Chile’s prudent fiscal policy along with low debt levels have been cited as contributing factors to Chile’s exceptionally high credit rating in the context of the region.[16] Chile’s AA- S&P rating is the highest in the Latin America, while Fitch Ratings places the country one step below, in A+.[17]

Titulars

Patria Vieja period

Picture Name Entered Office Exited Office Notes Appointed by
José María Villareal March 14, 1814 July 23, 1814 Secretary of Government Francisco de la Lastra
Bernardo de Vera y Pintado July 23, 1814 August 10, 1814 Secretary of Government and Finance Government Junta
Manuel Rodríguez Erdoyza August 10, 1814 October 2, 1814 Secretary of Government and Finance

Ministers of Finance

Picture Name Entered Office Exited Office Notes Appointed by
Hipólito de Villegas y Fernández September 7, 1817 March 30, 1818 Bernardo O'Higgins
Anselmo de la Cruz y Bahamonde March 30, 1818 April 14, 1818
José Miguel Infante y Rojas April 14, 1818 June 27, 1818
Anselmo de la Cruz y Bahamonde June 27, 1818 May 2, 1820
José Antonio Rodríguez Aldea May 2, 1820 January 28, 1823
Agustín Vial Santelices January 28, 1823 April 8, 1823 Government Junta
Pedro Nolasco Mena y Ramírez Rivilla April 8, 1823 July 12, 1823 Ramón Freire
Diego José Benavente Bustamante July 12, 1823 February 22, 1825
José Ignacio Eyzaguirre Arechavala February 22, 1825 June 18, 1825
Rafael Correa de Saa Lazón June 18, 1825 October 8, 1825
Diego José Benavente Bustamante October 8, 1825 October 17, 1825
Manuel José Gandarillas Guzmán October 17, 1825 September 9, 1826
Agustín Vial Santelices September 12, 1826 October 20, 1826 Agustín Eyzaguirre
Melchor de Santiago Concha y Cerda October 20, 1826 October 22, 1826
Ventura Blanco Encalada March 8, 1827 July 23, 1828 Reappointed Ramón Freire
Francisco Ruiz-Tagle Portales July 23, 1828 July 16, 1829 Francisco Antonio Pinto
Manuel José Huici July 16, 1829 November 9, 1829 Francisco Ramón Vicuña
Pedro José Prado Montaner November 9, 1829 December 7, 1829
Mariano Egaña Fabres February 20, 1830 March 18, 1830 Francisco Ruiz-Tagle
Juan Francisco Meneses Echanes March 18, 1830 June 15, 1830
Manuel Rengifo Cárdenas June 15, 1830 November 9, 1835 José Tomás Ovalle
Joaquín Tocornal Jiménez November 9, 1835 April 14, 1841 José Joaquín Prieto
Rafael Correa de Saa Lazón April 14, 1841 September 18, 1841
Manuel Rengifo Cárdenas September 18, 1841 April 10, 1845 Manuel Bulnes
José Joaquín Pérez Mascayano April 10, 1845 September 22, 1846
Manuel Camilo Vial Formas September 22, 1846 May 9, 1848 Interim
Salvador Sanfuentes Torres May 9, 1848 June 12, 1849 Interim
Antonio García Reyes June 12, 1849 April 19, 1850
Jerónimo Urmeneta García-Abello April 19, 1850 May 7, 1852 Appointed by
Reappointed by Manuel Montt
José Guillermo Waddington Urrutia May 7, 1852 January 7, 1854
José María Berganza Lorca January 7, 1854 September 18, 1856 Interim
José Francisco Gana López September 18, 1856 October 31, 1856 Interim
Alejandro Vial Guzmán October 31, 1856 September 29, 1857
Francisco de Borja Solar Gorostiaga September 29, 1857 January 8, 1858
Matías Ovalle Errázuriz January 8, 1858 October 3, 1859
Jovino Novoa Vidal October 3, 1859 October 1, 1861
Manuel Rengifo Vial October 1, 1861 July 9, 1862 José Joaquín Pérez
José Victorino Lastarria Santander July 9, 1862 January 16, 1863
Domingo Santa María González January 16, 1863 May 10, 1864
Alejandro Reyes Cotapos May 10, 1864 January 7, 1869
Melchor de Concha y Toro January 7, 1869 August 2, 1870
José Antonio Gandarillas Luco August 2, 1870 September 18, 1871
Camilo Cobo Gutiérrez September 18, 1871 April 12, 1872 Federico Errázuriz Zañartu
Ramón Barros Luco April 12, 1872 September 18, 1876
Rafael Sotomayor Baeza September 18, 1876 October 27, 1877 Aníbal Pinto
Augusto Matte Pérez October 27, 1877 August 5, 1878
Julio Zegers Samaniego August 5, 1878 April 17, 1879
Augusto Matte Pérez April 17, 1879 June 16, 1880
José Alfonso Cavada June 16, 1880 September 18, 1881
Luis Aldunate Carrera September 18, 1881 April 25, 1882 Domingo Santa María
Pedro Lucio Cuadra Luque April 25, 1882 January 18, 1884
Ramón Barros Luco January 18, 1884 September 5, 1885
Pedro Nolasco Gandarillas Luco September 5, 1885 October 13, 1885
Hermógenes Pérez de Arce Lopetegui October 13, 1885 September 18, 1886
Agustín Edwards Ross September 18, 1886 April 13, 1888 José Manuel Balmaceda
Enrique Salvador Sanfuentes Andonaegui April 13, 1888 November 2, 1888
Justiniano Sotomayor Guzmán November 2, 1888 June 11, 1889
Juan de Dios Vial Guzmán June 11, 1889 October 23, 1889
Pedro Montt Montt October 23, 1889 January 21, 1890
Pedro Nolasco Gandarillas Luco January 21, 1890 August 7, 1890
Manuel Salustio Fernández Pradel August 7, 1890 October 15, 1890
Lauro Barros Valdés October 15, 1890 December 26, 1890
Anfión Muñoz Muñoz December 26, 1890 January 5, 1891
Ismael Pérez Montt December 27, 1890 January 5, 1891 Interim
José Miguel Valdés Carrera January 5, 1891 March 29, 1891
Manuel Arístides Zañartu Zañartu March 29, 1891 July 29, 1891
Manuel José Yrarrázaval Larraín July 29, 1891 August 29, 1891
Joaquín Walker Martínez September 7, 1891 December 26, 1891 Revolutionary Junta of Iquique
Francisco Valdes Vergara December 26, 1891 March 14, 1892 Jorge Montt
Agustin Edwards Ross March 14, 1892 July 9, 1892
Enrique Mac-Iver Rodríguez July 9, 1892 April 22, 1893
Alejandro Vial Guzmán April 22, 1893 April 26, 1894
Carlos Riesco Errázuriz April 26, 1894 December 7, 1894
Manuel Salustio Fernández December 7, 1894 August 1, 1895
Enrique Mac-Iver Rodríguez August 1, 1895 November 24, 1895
Hermógenes Pérez de Arce Lopetegui November 24, 1895 September 18, 1896
José Francisco Fabres September 18, 1896 November 20, 1896 Federico Errázuriz Echaurren
Justiniano Sotomayor Guzmán November 20, 1896 June 26, 1897
Juan Enrique Tocornal June 26, 1897 August 25, 1897
Elías Fernández Albano August 25, 1897 December 23, 1897
Alberto González Errázuriz December 23, 1897 April 14, 1898
Darío Zañartu del Río April 14, 1898 June 28, 1898
Rafael Sotomayor Gaete June 28, 1898 June 27, 1899
Manuel Salinas González June 27, 1899 October 14, 1900
Ramón Santelices Cuevas October 14, 1900 November 3, 1900
Nicolás González Errázuriz November 3, 1900 March 15, 1901
Manuel Fernández García March 15, 1901 May 1, 1901
Juan Luis Sanfuentes Andonaegui May 1, 1901 October 3, 1901
Luis Barros Borgoño October 3, 1901 November 18, 1901 Germán Riesco
Enrique Villegas Encalada November 18, 1901 May 6, 1902
Guillermo Barros Jara May 6, 1902 November 20, 1902
Ricardo Cruzat Hurtado November 20, 1902 April 7, 1903
Manuel Salinas González April 7, 1903 September 1, 1903
Miguel Cruchaga Tocornal September 1, 1903 January 10, 1904
Ramón Santelices Cuevas January 10, 1904 April 12, 1904
Guillermo Barros Jara April 12, 1904 May 12, 1904
Maximiliano Ibáñez May 12, 1904 October 30, 1904
Ernesto Hübner Bermúdez October 30, 1904 March 18, 1905
Antonio Subercaseaux Pérez March 18, 1905 October 21, 1905
Belfor Fernández October 21, 1905 March 19, 1906
Ramón Santelices Cuevas March 19, 1906 May 7, 1906
Joaquín Prieto Hurtado May 7, 1906 September 18, 1906
José Raimundo del Río Soto Aguilar September 18, 1906 October 29, 1906 Pedro Montt
Rafael Sotomayor Gaete October 29, 1906 June 12, 1907
Ramón Subercaseaux Pérez June 12, 1907 October 25, 1907
Enrique A. Rodríguez October 25, 1907 August 29, 1908
Pedro Nicolás Montenegro Onel August 29, 1908 January 22, 1909
Luis Devoto A. January 22, 1909 June 15, 1909
Joaquín Figueroa Larraín June 15, 1909 September 15, 1909
Manuel Salinas González September 15, 1909 June 25, 1910
Carlos Balmaceda Saavedra June 25, 1910 December 23, 1910
José Raimundo del Río Soto Aguilar December 23, 1910 January 11, 1911 Ramón Barros Luco
Roberto Sánchez García de la Huerta April 11, 1911 August 15, 1911
Pedro Nicolás Montenegro Onel August 15, 1911 May 20, 1912
Samuel Claro Lastarria May 20, 1912 August 8, 1912
Manuel Rivas Vicuña August 8, 1912 April 8, 1913
Pedro García de la Huerta Izquierdo August 8, 1913 June 16, 1913
Arturo Alessandri Palma June 16, 1913 November 17, 1913
Ricardo Salas Edwards November 17, 1913 September 3, 1914
Alfredo Barros Errázuriz September 3, 1914 September 6, 1914
Enrique Oyarzún Mondaca September 6, 1914 September 15, 1914
Alberto Edwards Argandoña September 15, 1914 December 15, 1915
Manuel García de la Huerta December 15, 1915 December 23, 1915
Ramón Santelices Cuevas December 23, 1915 January 8, 1916 PC Juan Luis Sanfuentes
Armando Quezada Acharán January 8, 1916 July 1, 1916 PR
Luis Devoto Arrizaga July 1, 1916 November 20, 1916 PLD
Arturo Prat Carvajal November 20, 1916 July 14, 1917 PN
Armando Quezada Acharán July 14, 1917 October 12, 1917 PR
Ricardo Salas Edwards October 12, 1917 January 18, 1918 PC
Manuel Hederra Concha January 18, 1918 April 27, 1918 PN
Luis Claro Solar April 27, 1918 September 6, 1918 PL
Luis Aníbal Barrios September 6, 1918 November 25, 1918 PR
Luis Claro Solar November 25, 1918 July 9, 1919 PL
Julio Philippi Bihl July 9, 1919 November 8, 1919
Ramón Subercaseaux Pérez November 8, 1919 March 26, 1920 PNa
Enrique Oyarzún Mondaca March 26, 1920 June 16, 1920 PR
Antonio Viera Gallo June 16, 1920 July 1, 1920 PN
Francisco Garcés Gana July 1, 1920 December 23, 1920 PL
Daniel Martner December 23, 1920 May 12, 1921 PR Arturo Alessandri
Enrique Oyarzún Mondaca May 12, 1921 August 16, 1921
Víctor R. Celis Maturana August 16, 1921 November 3, 1921
Francisco Garcés Gana November 3, 1921 March 22, 1922 PL
Galvarino Gallardo Nieto March 22, 1922 April 1, 1922 PR
Samuel Claro Lastarria April 1, 1922 August 29, 1922 PL
Guillermo Edwards Matte August 29, 1922 December 21, 1922
Ricardo Valdés Bustamante December 21, 1922 January 12, 1923
Aníbal Rodríguez Herrera January 12, 1923 March 16, 1923 PN
Víctor R. Celis Maturana March 16, 1923 June 14, 1923 PR
Agustín Correa Bravo June 14, 1923 July 2, 1923 PLD
Ramón Subercaseaux Pérez July 2, 1923 January 3, 1924 PN
Enrique Zañartu Prieto January 3, 1924 February 1, 1924 PLD
Samuel Claro Lastarria February 1, 1924 March 14, 1924 PL
Belfor Fernández Rodríguez March 14, 1924 July 20, 1924 PLD
Enrique Zañartu Prieto July 20, 1924 September 5, 1924 PLD

Sources

References

  1. 1 2 Ministry of Finance website, History.
  2. ↑ Decree 7,912 (in Spanish), LeyChile.
  3. ↑ Ministry of Finance of Chile website, Related institutions (in Spanish)
  4. ↑ Ministry of Finance of Chile website, Dependent institutions (in Spanish)
  5. 1 2 3 OECD (2013), OECD Economic Surveys: Chile 2013. OECD Publishing.
  6. 1 2 3 4 Rodríguez, J., C. Tokman and A. Vega (2007). “Structural balance policy in Chile". OECD Journal on Budgeting 7(2), pp.59-92.
  7. ↑ Corbo, Vittorio. La política fiscal chilena. Blogs from El Mercurio Newspaper. August 25, 2013.
  8. ↑ Chile 2013 Article IV Consultation, IMF Country Report No. 13/198, International Monetary Fund, July 2013.
  9. ↑ IMF Executive Board Concludes 2013 Article IV Consultation with Chile, Public Information Notice (PIN) No. 13/77, International Monetary Fund, July 8, 2013.
  10. 1 2 3 4 Ministry of Finance of Chile website, Sovereign Wealth Funds, About the Funds.
  11. 1 2 Ministry of Finance of Chile, Sovereign Wealth Funds Annual Report 2012 (in Spanish).
  12. ↑ Ministry of Finance of Chile website, Sovereign Wealth Funds, Pension Reserve Fund.
  13. ↑ Ministry of Finance of Chile website, Sovereign Wealth Funds, Economic and Social Stabilization Fund.
  14. ↑ Internal Tax Service (Servicio de Impuestos Internos) website, Statistics, Annual tax revenue 2009-2012 (in Spanish)
  15. ↑ Internal Tax Service (Servicio de Impuestos Internos) website, Chilean Taxation
  16. ↑ RPT-Fitch affirms Chile's FC IDR at 'A+'; outlook stable, Reuters, October 25, 2013.
  17. ↑ Sebastian Boyd, “Chile Raised to 4th-Highest Rating at Standard & Poor’s". Bloomberg News, December 26, 2012.

External links

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