As California looks to discover how it went from being among the national leaders in its governing wizardry (been awhile that) to a national laughing stock, one could learn from the heroic actions of this finance minister in Chile, who through thick and thin, made sure his country maintained a rainy day fund when everyone around him said to spend it.
As reported by the Wall Street Journal, an excerpt.
“SANTIAGO, Chile -- During the emerging economies' commodities boom a few years back, Chilean Finance Minister Andrés Velasco was a wet blanket at the fiesta. Chile, the world's largest copper producer, was reaping a bonanza from the quadrupling in the metal's price. Mr. Velasco insisted on squirreling away a large chunk in a rainy-day fund.
“As the savings swelled above $20 billion -- more than 15% of Chile's economic output -- Mr. Velasco faced growing pressure to break open the piggy bank. In September, protesters barged into a presentation by Mr. Velasco, carrying an effigy of him and shouting, "The copper money is for the poor people."
“The 48-year-old Mr. Velasco, wary that a flood of copper income could generate lending and consumption bubbles, stood his ground, even as the popularity of the center-left government withered. Latin American history, he cautioned, was full of "booms that had been mismanaged and ended badly."
“Today Mr. Velasco looks like a prophet. Since the onset of the global economic crisis, copper prices have fallen by 50%, in line with the sharp decline in other commodities. Emerging economies that got too giddy in the good years are now coping with nasty hangovers. Soybean-dependent Argentina is facing a possible debt default while oil-rich Russia has been stuck bailing out banks and companies that got in over their heads in debt.
“Thanks to Mr. Velasco's caution, Chile is now in a position to try to bootstrap its own recovery from the global recession. Mr. Velasco's preemptive moves have kept Chile's government from having to spend a single peso on bank bailouts. Having paid down foreign debt during the fat years, Chile is now a net creditor nation, with a debt rating that was upgraded by Moody's Investors Service in March.”
