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Ministry of Finance (Chile)

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Mario Marcel, the current Minister of Finance.

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.

Since March 2022, the Minister of Finance is Mario Marcel.

History

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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 2 June 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 30 November 1927.

Institutional framework

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

  • Management of State's financial policy
  • Collection and administration of public revenue
  • Public accounting
  • Study of custom policy and intervention in trade agreements
  • Issues concerning monetary laws, banks and credit institutions
  • Issues concerning corporation oversight, stock exchange and insurance
  • Everything related to public credit and the presentation in Congress of projects affecting public finance
  • The development and technical study of the Budget of the Nation and investment account

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

Related Institutions:[3]

  • BancoEstado
  • Government Procurement Directorate
  • Civil Service Directorate
  • National Customs Service
  • Internal Tax Service
  • Public Purchasing and Recruiting Department
  • Superintendency of Banks and Financial Institutions
  • Superintendency of Securities and Insurance
  • Superintendency of Game Casinos
  • Financial Analysis Unit

Dependent Institutions:[4]

  • Budget Office
  • General Treasury of the Republic

Policies

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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]

List of ministers of finance

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Patria Vieja period

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

Ministers of finance

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

Sources

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  • República de Chile (1942). "VI. Poder Ejecutivo - Nómina de Gobernantes, Presidentes y Ministros desde la Independencia.". Manual del Senado. 1810-1942 (PDF) (in Spanish). Santiago de Chile: Imprenta Universitaria.
  • Valencia Avaria, Luis (1986). Anales de la República: textos constitucionales de Chile y registro de los ciudadanos que han integrado los poderes ejecutivo y legislativo desde 1810 (in Spanish) (2ª edición ed.). Santiago de Chile: Editorial Andrés Bello.

References

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  1. ^ a b 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. ^ a b c OECD (2013), OECD Economic Surveys: Chile 2013.[permanent dead link‍] OECD Publishing.
  6. ^ a b c d 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. 25 August 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, 8 July 2013.
  10. ^ a b c d "Ministry of Finance of Chile website, Sovereign Wealth Funds, About the Funds". Archived from the original on 13 June 2015. Retrieved 20 December 2013.
  11. ^ a b "Ministry of Finance of Chile, Sovereign Wealth Funds Annual Report 2012 (in Spanish)". Archived from the original on 13 June 2015. Retrieved 20 December 2013.
  12. ^ "Ministry of Finance of Chile website, Sovereign Wealth Funds, Pension Reserve Fund". Archived from the original on 20 December 2013. Retrieved 20 December 2013.
  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 Archived 26 February 2015 at the Wayback Machine
  16. ^ RPT-Fitch affirms Chile's FC IDR at 'A+'; outlook stable, Reuters, 25 October 2013.
  17. ^ Sebastian Boyd, “Chile Raised to 4th-Highest Rating at Standard & Poor’s". Bloomberg News, 26 December 2012.
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