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date: 18 March 2019

Abstract and Keywords

Chile has managed to avoid the St Augustine Syndrome of fiscal procrastination. This has required the prudent management of both fiscal flows and stocks. On the one hand, a fiscal policy rule has permitted Chile to save in sunny good times and to spend extraordinary resources on rainy days. The stabilizing fiscal policy rule has been key to smooth fiscal expenditure and avoiding the economic sins present in several countries: those of deficit bias and procyclicality. On the other hand, the management of fiscal stocks through its sovereign wealth funds (SWFs) has transformed Chile into an international example of transparency, good management, and responsibility. This sounds easy but it requires both political courage and economic responsibility. Several lessons could be learned from this which would be useful for other countries in any stage of development.

Keywords: sovereign wealth funds, Chile, fiscal policy, political economy, natural resources management, commodities

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