Chile’s president predicts strong growth on back of vaccine push

Chile expects this year to recover all the economic growth it lost to coronavirus, the only major Latin American nation to do so, as rapid vaccination helps it beat the pandemic, according to President Sebastián Piñera.

Although a strong second wave of infections triggered fresh lockdowns at the end of last month, Piñera told the Financial Times that it was mainly unvaccinated younger people who were testing positive. 

“The numbers show that the vaccines which we are applying in Chile, Pfizer and Sinovac, are effective,” he said in an interview, rejecting doubts over the Chinese jab.

Chile has so far administered 65 vaccine doses per 100 people, putting it third in the world after Israel and the UAE, which both have much smaller populations, thanks to early government action to secure supplies.

Around 90 per cent of Chileans have received Sinovac’s CoronaVac jab and a large-scale health ministry study released on Friday said the Chinese vaccine had proved 67 per cent effective at preventing symptomatic infection more than two weeks after the second dose, although its effectiveness after one dose was much lower. It was 80 per cent effective in preventing deaths and 85 per cent effective at preventing hospital admissions.

The rapid pace of vaccination should allow the economy to rebound rapidly, helped by higher world prices for its main export copper. “We expect this year that the growth of the Chilean economy will be higher than the fall which we had last year,” Piñera said. “All the projections indicate that Chile will grow 6 per cent this year and hopefully more.” The economy contracted last year by 5.8 per cent.

Critics have attacked the government for easing mobility restrictions too quickly earlier this year, allowing a fresh surge of the virus to take place over the southern hemisphere summer and hospitals to be swamped, but Piñera said the higher summer infection rate was common to many countries and the fresh lockdowns were bringing the disease under control.

Chile hopes to reach herd immunity by June through vaccination, although a former health minister, Jaime Mañalich, has questioned whether this is possible when nearby countries such as Brazil, Peru and Argentina are experiencing high infection rates and new variants are circulating.

The fresh surge of cases has forced the postponement to mid-May of elections for a special assembly to draft a new constitution, replacing a document dating from the Pinochet dictatorship. The new constitution, and an extensive welfare package worth 10 per cent of gross domestic product, form the centrepiece of the government’s response to a wave of riots and social protests which swept the country in October 2019.

Investors are concerned that the assembly will be deliberating during the campaigns for presidential and congressional elections in November and may be swayed into writing unaffordable social pledges into the new charter or weakening property rights which have made Chile a prime destination for foreign capital.

Piñera said that while no country was immune from the global “disease” of populism, he believed in Chileans’ “wisdom, prudence and good judgment”, pointing out that a two-thirds majority was required for changes, which should moderate demands.

However, in a sign of growing populism, lower house legislators on Thursday passed a bill allowing savers to pull money early from Chile’s private pension system to spend now, ignoring government warnings.

Piñera, speaking before the vote, told the FT that “if we continue withdrawing pension savings, it will be very difficult to give our elderly, now and in the future, a pension which allows them to live in dignity”. Analysts estimate that up to $10bn in savings may be pulled out this time, on top of $34bn taken out in the first two withdrawals.