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Public investment accelerates in 2024

2023 was not a good year for public investment, with an advance rate of the law approved as of December of 82.2% and a drop of 2.4%. For this reason, this year the government generated a modification to accelerate the pace of this key variable to boost economic activity.

At the beginning of the year, it was instructed to identify during January and February the specific projects to which 90% of the budget associated with investment initiatives will be allocated. This was achieved in February and therefore, capital spending, which is made up of public investment and capital transfers, had a good start to the year.

According to the Fiscal Execution report of the Budget Directorate (Dipres) for the first quarter, capital spending grew 28.2%, being its largest expansion since 2009 for said period, in the midst of the subprime crisis, when it rose 57.4% . And its execution reached 16.9% between January-March 2024.

In the breakdown, the report indicates that the first part of capital spending, which corresponds to investment, registers a growth of 45% compared to the accumulated execution as of March of the previous year.

Public Works had the greatest expansion with 60.5%, which is explained by the greater execution of investment initiatives, associated with the execution of projects of the Directorate of Roads and Concessions. Health increased 31.4% in real terms, explained by greater execution in investment initiatives in hospital infrastructure and primary care establishments. And Housing registered a real expansion of 17.6% in the amount executed, due to greater progress in the development of investment projects.

Education, meanwhile, presented a real increase of 14.3%, due to greater execution in investment initiatives of the National Board of School Aid and Scholarships and, to a lesser extent, to investment initiatives of the National Board of Kindergartens .

Regarding capital transfers, the Dipres report indicates that there was a growth of 22.1% compared to the accumulated figure as of March of last year. In this line, the real increase of 76.4% registered in Regional Governments stands out, due to the financing of carryover commitments associated with the execution of the Regional Government Investment program. In Public Works, a real annual expansion of 50.7% was recorded, mainly explained by transfers for payments for VAT refunds to concessionaire companies, and in Housing and Urban Planning a real increase of 15.7% was observed in relation to the same period of 2023, due to the greater execution of housing subsidies.

Regarding current spending, this presented an advance in the first quarter of 25.4% and a growth of 5.6%, a level similar to the advance of recent years, and is led by the expenses of the Ministries of Health, Labor and Social Security, and Education.

In sum, total Central Government spending grew 7.7% accumulated in the first quarter, being the highest since 2021, when it rose 12.3% in the same period. For the year, the latest projection made by the government for the growth of public spending is 5.6%. Likewise, the fiscal execution of the budget was 24% in the first quarter.

“There is a significant expansion of public investment, while execution progress as of March reached 24%, higher than what was recorded in 2022 and 2023. These figures indicate a better execution capacity and are good news, in line with a rebound in economic activity,” says OCEC-UDP senior economist Juan Ortiz.

Margarita Vial, Fiscal Program researcher at the San Sebastián University (USS), adds that “what we see in capital expenditure is an advancement of the execution of the investment, associated with a change in the administrative procedure that enables this type of expenditure. , a modification that allowed it to begin execution a month earlier. Therefore, unless this advancement translates into a greater capacity to execute by the MOP, the momentum will be diluted month by month.”

Although this level of execution and growth of public investment is good news for economists, in the analysis they show caution: “There is a significant execution of public investment in the first quarter, which is good news. However, it should be mentioned that this advance only reflects a recovery of the historical average of advance to March that existed before the pandemic. The last 4 years had a greater than normal underexecution as a result of the pandemic, while this year the historical execution would only be recovered,” underlines LyD economist, Macarena García.

(230405) — ANTOFAGASTA, April 5, 2023 (Xinhua) — Image taken on September 27, 2022 of machinery operating at the plant of the Sociedad Química y Minera de Chile, in the Salar de Atacama, in the Antofagasta region, Chili. The National Lithium Company of Chile, whose creation will be announced this month, will have the capacity to be in the entire lithium production chain, the Minister of Economy, Development and Tourism of the South American country, Nicolás Grau, reported on Tuesday. (Xinhua/Jorge Villegas) (jv) (oa) (jg) (ah) (vf)

On the tax revenue side, the figures are not as positive as investment. According to Dipres, in the first quarter the income of the Total Central Government had a real decrease of 10%, mainly affected by the lower collection of tax revenues that fell 8.3%, particularly from the taxation of other taxpayers, which decreased 8.3%. .1% and property income, which fell 59.3%. In this last case, the Dipres report specifies that this decrease is explained by “the drop in payments from SQM and Albemarle to Corfo for lithium exploitation contracts, which is in line with the recent evolution of the price. of the mineral.”

On the other hand, taxation of private mining (GMP10) decreased by 12.8% in real terms and raw copper was reduced by 5.9%. Thus, total income reached $16,031,553 million (5.5% of GDP).

In detail, the decrease in tax revenues (-8.3%) in the first quarter is explained by the lower collection of the Income Tax of -16.3% and the lower collection of the Tax on Specific Products of -38, 6%. Regarding the first, both the rest of the taxpayers and large private mining (GMP10) presented decreases.

In the rest of the taxpayers, income tax collection decreased by 8.1%, which is due to the drop in monthly provisional payments (PPM) and the monthly declaration and payments. In the case of the annual declaration, the accumulated collection shows a growth of 38.5%, mainly explained by a decrease in the expense for income refunds of 39.4%.

Experts affirm that the sharp drop in lithium revenue is within what the Treasury expected. “Already in this year’s Budget, a 40% drop in lithium income was expected compared to what was obtained in 2023 as a result of the lower price, so the drop of almost 60%, so far, would have rather limited effects. in the treasury’s income,” says García.

Vial adds arguments by pointing out that “last year, lithium leasing income represented 4.5% of tax revenue, which is a fairly high percentage, and for this year it is expected to reach 2.2% of the total.” of income, higher than the income that Codelco is expected to deliver. However, at the beginning of this year we saw that the income line where lithium rents are recorded fell by 59.3%, although it is difficult to follow up because Dipres does not report disaggregated information on lithium in the execution.”

Ortiz puts a cold shoulder to the analysis: “Income from lithium has been of greater importance, through lease payments to Corfo. In any case, it is necessary to consider their relative weight in total income. According to Dipres, Corfo’s lithium revenue would amount to 0.5% of GDP, being 2.2% of the total revenue of the central government.”

Likewise, it mentions that “the reduction in lithium revenue is already contemplated in the Budget, since an annual drop of 47.8% in real terms is estimated in 2024 compared to 2023.”

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