End the UF: What do the candidates for La Moneda say after exceeding 30 thousand pesos? | Economy

This Thursday, September 9, the Development Unit (UF) reached its historical maximum, surpassing the $ 30 thousand barrier. The unit of account created by decree during the government of Eduardo Frei Montalva (in 1967) has since been readjusted in accordance with the variation in the Consumer Price Index (CPI), which in August recently recorded a monthly increase greater than expected: 0.4%, accumulating 3.2% so far this year and 4.8% at twelve months.

That the value of the UF rises has a direct impact on the pocket of Chileans. Mortgage loans, consumer loans, educational fees, health plans and even the price of tolls also depend on this unit of account.

According to information from the Financial Market Commission (CMF), the UF began to operate with a value of 100 escudos (Eº), calculated quarterly at that time. Eight years later, and as the shield ceased to be the official currency in Chile, it began to be expressed in pesos and readjusted month by month, and then began to be updated daily.

The main purpose ?: “To face the abrupt inflationary changes with a tool that identifies an adjustable price and for a limited period,” says CMF.

Historical evolution of the UF

Can you end the UF?

In the current scenario, there are not a few who propose that in the Chilean credit market the UF should be stopped, pointing out that the common citizen is affected to a greater extent because he earns in pesos and pays credits in UF.

When consulted by BioBioChile in this regard, several of the presidential candidates made their point of view known and made it clear whether or not they would continue with this mechanism in a possible government.

Artés: “It’s a robbery”

The first to speak is the candidate for La Moneda de Unión Patriótica (UPA), Eduardo Artés. Without hesitation, the applicant warns that if it depended on him, he would end the UF.

“We consider that the UF is a distortion of the market that indisputably favors the employers and simply harms the workers and the majority of the people. Also small and medium-sized merchants -and even- homeowners “, he emphasizes.

In the same sense, it indicates that “everyone earns in pesos and ends up in debt in UF, thereby distorting the market in such a way that sometimes double or triple what would correspond” is paid.

“We are not going to continue with the UF. We will look for a mechanism such that there is no distortion between what is paid and what is earned (…) We are going to eliminate the UF as such, because it is a robbery and it is to chain people to an eternal debt ”, he complements .

Kast targets inflation

For his part, the Republican Party candidate, José Antonio Kast, argues that the important thing is to control inflation and defends the use of the UF.

“In a country with a history of high inflation like Chile, which took so much effort to contain it, it is essential that those who contract long-term services have the guarantee that the agreed prices will retain their purchasing power. This objective has been fully achieved in Chile with the UF ”, he assures.

In Kast’s opinion, “it would be reasonable to think about eliminating the UF if Chile enjoyed low inflation and, above all, expectations of lower future inflation. But it is not the current case in which inflation is high and expectations are even higher ”.

Sichel: The problem is another

Asked by Radio Bío Bío in Concepción, the candidate from Chile Vamos a La Moneda, Sebastián Sichel, said that the UF by itself is not the problem. Although he did not elaborate on details, he said that it was necessary to end sanitary restrictions to reduce inflation.

“The problem is not the UF, it is inflation. The UF only reflects inflation and what must be done is to urgently stop inflation, “said the candidate, pointing his darts against the curfew and other restrictions due to covid-19.

According to what was stated by the former president of BancoEstado, in order to control inflation (and therefore the value of the UF) it is essential “that sanitary restrictions end, that companies move forward, that the State put more money on it. SMEs and that the economy develops to unleash the markets forward, because improving productivity reduces inflation ”.

Likewise, Sichel emphasized that it is necessary “to put more money into the pension funds and pensions of Chileans and not continue with withdrawals because that is generating more inflation.”

“Regarding the UF discussion, the problem is that if the banks did not operate in UF, they would build the inflation rate, which will always be more than what the market itself adjusts. Our problem, and the problem of the future in Chile, is inflation ”, he pointed out.

Parisi: “The UF fulfilled its stage”

On the same subject, the economist and presidential candidate of the People’s Party (PDG), Franco Parisi, indicates that the Development Unit no longer has a reason to exist.

The commercial engineer maintains that the readjustment for inflation in mortgage loans and the financial market should begin to be nominalized.

“In other words, leave behind the insurance of the readjustment of the UF. Throughout the world, mortgage and medium and long-term loans are in current currency, not readjusted for inflation on a daily basis as it is in Chile ”, he emphasizes.

“The UF, in my opinion, fulfilled its stage at the beginning of the 2000s, 2010 was almost being put aside. The problem is inflation and not the UF. Therefore, it is necessary to nominalize the economy in its entirety, as do all the rest of the countries that have nominal credits and not credits in UF ”, the candidate points out.

According to Parisi, at present what the system does is “squeeze the middle class and the emerging middle class”, for which he proposes to get “250 thousand mortgage loans in pesos for 30 years at a rate of between 4 and 5 percent with state guarantee, to put competition in the market ”.

The candidates of Approve Dignity and Constituent Unit, Gabriel Boric and Yasna Provoste, respectively, were also consulted for this publication. However, it was not possible to obtain a response despite repeated requests.

Resounding no

Asked about the matter by the BioBioChile Research Unit, the academic from the Faculty of Economics (FEN) of the University of Chile, Alejandro Alarcón, is categorical.

The Macroeconomics teacher is emphatic in defending the use of the Development Unit in our country and claims to be “totally in disagreement” with those who propose to eliminate it.

“It is the same as those who say ‘let’s break the thermometer so it doesn’t get cold.’ Please, if the UF is a measure, which effectively produces a dynamic process of rising costs, but otherwise it would produce a problem in the provision of many goods … starting with rents, continuing with education, continuing with the interest rates that they are also expressed in UF ”, argues the commercial engineer, assuring that the country is not fixed“ by breaking the thermometer, but by controlling inflation ”.

The economist also warns that in order to control inflation (and thus the sustained increase in the UF) it is important -among other things- that a new withdrawal of pension funds is not authorized.

The foregoing, complements Alarcón, because inflation is a direct consequence of the injection of too much liquidity of money into the economy.

“I understand that part of the liquidity comes from fiscal spending, that people have more money to spend, because they have many problems and because there were many people who lost their jobs. But I don’t understand about the withdrawals (of pension funds) that have produced liquidity that was not needed in the country and that is producing enormous inflation. Moreover, if there is a fourth withdrawal, annualized inflation will go to more than 6%…. I want to see them there ”, he sentenced.


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