Americas Quarterly - Spring 2009

Corporate Social Responsibility

Aaron Shaw

est economic stimulus ereign wealth funds as plan in Chile’s histo- well as new bond issues. ry. The $4 billion plan is Funds will go primar-aimed at assuring a steady ily toward subsidies, tax growth rate of 2 to 3 per- rebates, infrastructure cent with the creation of projects, and capitaliza- 100,000 jobs. Chile’s eco- tion for state copper pro-nomic stimulus is being ducer Codelco to expand funded by fiscal reserves production. In total, the acquired between 2003 plan will allow for a 10. 7 and 2008. This package percent increase in fis-draws from $21 billion of cal spending this year. copper earnings that the Mexico is applying government placed in sov- similar fiscal measures.

NICOLAS DEGASPERI/AFP/GEtty ImAGES

down in the world economy and in trade. In particular, as fiscal balances will be put under stress, governments should weigh the effectiveness, timing and potential risks associated with launching new public spending programs.

But in the end, swift action is necessary to restore confidence in the advanced economies themselves. And although one may think of various policy actions that could help under current circumstances, it is paramount to realize that the health of financial institutions cannot be hidden under the rug. To be sure, the new U. S. administration has pledged to

Unlike Chile, Mexico is extremely vulnerable to economic turmoil originating in the United States. Exports to the United States represent more than one quarter of Mexico’s GDP. Remittances have also taken a big hit, affecting one of Mexico’s major sources of hard currency.

In January 2009, President Felipe Calderón

The source of Chile’s fiscal boost: copper mining.

revealed a stimulus plan accounting for 1 percent of GDP, or approximately $54 billion, that includes infrastructure investments in roads, railways and oil rigs, cuts in energy prices, measures to extend medical coverage and job creation. In many ways, though, Mexico’s real stimulus will hinge on the success of the $800 billion across the Rio Bravo.

invest significant resources in a new bank rescue plan. Ultimately, its success will depend crucially on implementation by regulators and supervisors as well as on the quality of corporate governance at the financial institutions themselves. While some of the bank rescue actions announced by the U. S. Treasury earlier this year are encouraging, much more is needed. Banks’ credibility needs to be restored by removing toxic assets from their balance sheets and ensuring effective implementation.