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date: 26 January 2021

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

Eric Parrado

Eric Parrado is Superintendent at Superintendency of Banks and Financial Institutions of Chile and Professor of Economics at Universidad Adolfo Ibáñez. He was the first manager of the Chilean Sovereign Wealth Funds between 2007 and 2010. He was particularly influential in developing and promoting a transparency code for sovereign wealth funds in the world internationally known as the “Santiago Principles.” As a consultant on sovereign wealth fund governance, he has provided advisory services to the governments of Colombia, Mongolia, Nigeria, Panama, and Papua New Guinea. He has a PhD in Economics from New York University.

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