Chile faces $30B price tag for quake recovery, but in better position to pay than Haiti

Chile faces huge recovery cost, but can go it solo

SANTIAGO, Chile — Chile may need to spend twice as much as Haiti to recover from its devastating quake and tsunami, but it doesn’t have the same desperate need for international aid or generous loans.

Thanks to surplus stashed away in better times, Chile will be able to finance much of its own reconstruction from last month’s disaster. On Friday, President Sebastian Pinera said the country will draw on foreign credit “with moderation.”

In his first presidential press conference, Pinera said the reconstruction effort would last years and cost “close to $30 billion” — more than double economists’ damage estimates of around $14 billion for Haiti’s Jan. 12 quake.

And while both countries are still coping with the wrenching human cost of the disasters, Chile is on far sounder footing when it comes to addressing material losses.

“I haven’t seen a country in such a favorable position to address a natural disaster in a long time,” said Carlos Felipe Jaramillo, the World Bank’s director for the Andean region, in an interview with The Associated Press. “They are in fabulous standing with us and have a tremendous capacity to respond.”

The Chilean government saved $11 billion of surplus revenue from copper exports in good years. In addition, the private sector is expected to recover more than $3.5 billion in insured damages.

The country can also count on strong domestic financial markets before it needs to turn to foreign loans — and when it does reach out to international creditors, Chile can attract low interest rates with its sterling fiscal record and minimal debt.

“Right now Chile isn’t drawing at all on international relief funds,” University of Chile economist Joseph Ramos said. “If they want to go directly to international financial markets, the debt would be another drop in the bucket.”

Pinera has made clear that reconstruction will not be easy, calling for “tremendous austerity” in government spending. He said Friday that his government will rework the existing 2010 budget with executive orders and new laws.

But his administration still intends to follow through on a campaign promise, made during last year’s economic downturn, to deliver a “March bonus” of nearly $80 to more than 4 million struggling Chileans.

New Economy Minister Juan Andres Fontaine is sticking by another campaign vow: 1 million new jobs and an average growth rate of 6 percent during Pinera’s four-year term. In comments Friday, Fontaine predicted growth of 4.5 percent to 5 percent this year, before picking up for the rest of the term.

The government projections reflect the unflinching confidence among the team of business elite that the billionaire entrepreneur brought with him to the presidential palace. Pinera is Chile’s first right-wing president since the dictatorship of Gen. Augusto Pinochet ended in 1990.

And while he has often referenced the transition from dictatorship to democracy, he called on Chileans in his inaugural address to embark on a “second transition” to take the country into the upper echelons of developed nations.

Those aspirations were bolstered in January when Chile signed an agreement to be the first South American member in the Organization for Economic Cooperation and Development — a group of 30 high-income countries regarded as economically developed.

National pride took a hit last month with the magnitude-8.8 earthquake and tsunami that killed at least 497 people, destroyed or heavily damaged at least 500,000 homes and broke apart highways and hospitals. But experts maintain that Chile is prepared to pick up and move ahead.

“Chile has a number of things in its favor,” said Luis Alberto Moreno, president of the Inter-American Development Bank, in a television interview.

The IDB is redirecting $460 million in projects within the country toward reconstruction, but Moreno said he doesn’t expect it to need major financial aid. “Chile really doesn’t need many resources from anybody.”