Chile’s new leftwing president selects central bank chief as finance minister

Chile’s moderate central bank chief, Mario Marcel, has been appointed finance minister by incoming president Gabriel Boric, in a signal to markets of the new leftist administration’s commitment to build a broad coalition.

Boric, the 35-year old president-elect, announced the nomination of Marcel and other members of his cabinet at an event in the capital Santiago on Friday. The new government takes office on March 11.

Marcel, 62, has presided over Chile’s central bank since 2016. He has consistently supported the bank’s independence, and has been a harsh critic of the early pension fund withdrawals that have worried investors.

The Chilean peso, the best-performing major currency so far this year, gained a further 0.5 per cent against the dollar in early trading on Friday after the announcement. Since the start of January, it has gained 6.8 per cent.

Analysts said that Boric’s finance minister nomination signalled that he intended to govern not as an anti-market hard leftist, as some had feared, but rather as a more modern, pragmatic social democrat.

Leonardo Suárez, senior economist at Santiago-based brokerage LarrainVial, welcomed the news of the technocrat’s appointment, given his reputation for fiscal responsibility. “Marcel is the most credible choice . . . Boric has demonstrated he seeks to build a Uruguayan-type political and welfare state and not something more radical with this choice,” Suárez told the Financial Times.

Ever since a resounding election victory on December 19, business leaders have worried about how Boric, who has never before served in government, will deliver his deep reforms without damaging the economy, in one of the first real-world tests for a young millennial president.

He has pledged to make major economic reforms to Chile’s market-led model, promising to raise taxes, increase public spending and scrap private pensions and student debt. But critics worry those moves could overturn three decades of moderate centrist government that has delivered some of Latin America’s best growth.

Boric, a former student leader backed by the Communist party, will be the youngest Chilean president in more than two centuries when he takes over in March from Sebastián Piñera, a conservative billionaire whose popularity plunged after the 2019 wave of social protest.

Jorge Selaive, chief economist at Scotiabank Chile, said that “part of the political risk” that has weighed on Chile’s currency since those protests “has receded” with Friday’s cabinet announcement.

Boric’s win over a conservative rival in December came after two years of sometimes violent demonstrations, with protesters demanding improvements in pensions, public services and inequality.

Marcel has been praised for the way he guided the central bank’s response during that period of social unrest and the Covid-19 pandemic that followed. Policymakers cut the interest rate to a record low, intervened in the currency market to support the peso and extended credit lines.

After a tough 2021, Chilean assets rebounded strongly this month after Boric continued to moderate his message.

In a speech to big business last week, Boric said that his plans to bring Latin America’s wealthiest large economy into a new era of transformation would be “gradual”, and pledged fiscal responsibility. He also signalled that he would prioritise investments and respect the environment.

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