Budget

The fiscal budget is the result of a thorough process of analysis, formulation, enquiry, discussion and approval that is executed by diverse players and institutions. In order to ensure financial and economic consistency, since 2000 this process has been carried out according to a rule that requires generating a structural surplus equal to 0% of the Gross Domestic Product (GDP).

The structural surplus rule means that the government considers its long-term sustainable revenues in making decisions on spending, avoiding commitments that are based on transitory revenue peaks, such as when the price of copper is high or when the economy overheats. In order for this practice to be as transparent as possible, a commission of external experts is consulted on long-term copper prices and on the economy’s potential production level. These factors are included in government estimates and allow it to determine the compatibility of expenditures with the structural surplus rule.

The budgeting process begins in April when government officials and authorities, external experts and members of Congress begin analyzing data to prepare the budget for the following year. At the same time the Ministry of Finance evaluates the results and performance of programs and public institutions included in the previous year’s budget.

This information is used to define an initial budgetary framework that includes expenses to meet legal or contractual requirements, and continued spending on successfully evaluated programs. Once priorities have been considered, the public institutions design and submit proposals to the Ministry of Finance intended to expand successful programs or create new ones, which must apply for a common biddable fund. After a comprehensive process of technical analysis and discussion conducted by the Ministry of Finance and MIDEPLAN, the president of the republic reviews and defines a budget project for each public institution.

By September 30, the Ministry of Finance must conclude preparation of the proposed budget for the coming year, which is signed by the president of the republic and sent to Congress.

In early October, after the Ministry of Finance’s report on the country’s public finance, Congress begins to analyze the budget proposed by the executive for the different government agencies. This task is performed by a Joint Finance Committee, which is made up of 13 senators and 13 representatives and divided into 5 sub-committees, each of which analyzes the budgets proposed for an equal number of Ministries.

The joint committee analyzes reports and proposals prepared by the sub-committees for each ministry. After voting on the proposals, the data provided in the reports are included in the final reports the joint committee submits to the Lower House, which votes on the bill and sends it to the Senate. Any discrepancy between the bills passed in the Lower House and the Senate are resolved by the joint committee.

During the legislative process, modifications to the original bill may be effected through amendments or by vote, with Congress having only the power to decrease expenditures proposed by the executive that are established by permanent laws.

Congress has until November 30 to approve the budget bill for the following year, after which the president of the republic signs the new budget into law. On January 1 of the following year the Budget Law goes into effect, and the activities to execute the committed projects begin.

Should Congress not pass the budget bill for the following year by November 30, the Constitution provides that the president of the republic will sign into law the original bill sent to Congress, which will become effective on January 1st, which would mean that all objections and modifications presented during the discussion in Congress would be disregarded.

About three quarters of fiscal revenue comes from tax collections carried out by the Department of the Treasury. The remainder comes from the transfer of earnings to the government from public companies such as Codelco and ENAP, from social security payments made by individuals to the Social Security Service (INP) and the Government Health Care System (FONASA), from donations to public entities made by individuals and institutions, and from other minor sources of income collected by the Treasury and other government institutions (such as ministries) for services rendered by them.

The Office of the Budget helps prepare the fiscal budget bill by projecting revenue based, not a one particular year but according to the structural surplus rule, which requires using expected long-term, or structural income.

According to the Structural Balance Rule, if there is a deficit, the expenditure that is not financed by the above mentioned revenue sources must be financed from the sale of government assets or through borrowing. According to our Constitution specific sources of funding cannot be used to finance specific expenditures, so the source of government funding does not affect the structure of public spending, which is defined annually during the budget debate.

The annual Fiscal Budget Law may be found on the internet at www.dipres.cl. It may also be purchased at the reception office of the Office of the Budget, located inside the Ministry of Finance Building, Teatinos 120 1st floor.