LatinFinance - March/April 2013 - 22

Finance ministry scorecard

Standing out
By Mariana Santibáñez and Taimur Ahmad

L

atin America’s economic
temperament in 2012 could hardly
have struck more of a contrast with
the developed world, crippled under
the weight of debt burdens and facing
lackluster growth. The newfound vigor of
the former, in the face of severe economic
headwinds, has proved an immense boon
for a region that, not so long ago, was a
byword for financial turmoil.
This strength is reflected in
LatinFinance’s annual finance ministry
scorecard. Our ranking incorporates the
views of economists, analysts, investors
and independent experts on the adeptness
of economic management in the region.
It considers the institutional strength of
finance ministries, the soundness of public
finance management as well as success
in advancing policies that encourage
economic development. We also evaluate
institutions in light of countries’ overall
macroeconomic performance in the
preceding calendar year.
Growth in the region’s largest
economy, Brazil, trailed off sharply last
year, amid fears that a more widespread
slowdown in the world’s large emerging
economies, led by China, could cast
a shadow over Latin America. Yet if
anything, the past year has cemented the
status of a fresh crop of small, nimble
economies as the region’s most dynamic –
and resilient.
Top of this year’s ranking is no
stranger to praise for its economic
management. Chile shows a commitment
to fiscal rectitude that has long served
as a model for emerging economies. The
past year, under the stewardship of Felipe
Larraín, its finance minister, has been no
exception.
“Chile’s economy is doing well,
and that is attributed to very sound
policymaking and a large part belongs to

22 LatinFinance

March/April 2013

The past year has cemented the status of a fresh crop of small,
nimble economies as the region’s most dynamic – and resilient.
When it comes to economic management, Chile leads the way

Larraín: “we did what is responsible”
the finance ministry,” says Nick Chamie,
global head of emerging markets research
at RBC Capital.
The government has made significant
progress in addressing growing social
demands from the country’s emerging
middle class. In September, lawmakers
passed a tax reform to finance an overhaul
of the Chilean education system – a
central plea of protests that had rocked the
country since 2011.
Under the new rules, Chile’s businesses
face a tax rate of 20%, up from 18.5%, and

fewer loopholes to avoid them. The tax
overhaul will boost revenues by roughly $1
billion per year.
“We did what is responsible in terms
of fiscal policy,” Larraín tells LatinFinance
in an interview. “We wanted to step up
the spending in education but we did it
in a way that we did not compromise our
commitment to achieve a structural deficit
of 1% of GDP.”
The tax reform, as Larraín puts it, was
“moderate” – raising 0.35% of GDP in net
terms – and was part of a “more complex
LatinFinance - March/April 2013

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