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Chile announces $20 billion injection to stop economic crash

A demonstrator sets up a burning barricade during a protest against Chile's government in Santiago, Chile, November 28, 2019.
A demonstrator sets up a burning barricade during a protest against Chile's government in Santiago, Chile, November 28, 2019. Goran Tomasevic/REUTERS

Chile’s central bank announced Thursday a $20 billion injection into the economy aimed at curbing the plummeting value of the peso.

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The economy has been battered by the country’s worst social unrest in three decades, as well as a fall in the price of copper, of which Chile is the world’s leading producer.

The peso lost 1.1 percent of its value on Thursday, reaching a record low for the second day in a row and closing at 828.36 pesos to the dollar.

This followed a 1.6 percent drop on Wednesday, when the peso hit 812 to the dollar.

The central bank said its intervention is justified because “an excessive degree of volatility in the exchange rate hampers the formulation of pricing, expenditure decisions and the production of people and companies”, causing “concerns in the markets”.

Foreign currency injection

From Monday, December 2 until May 29, 2020, the institution will sell “dollars (on the foreign exchange market) for up to $10 billion”, and “hedging (risk) instruments for up to $10 billion”.

The move comes after the central bank announced a $4 billion foreign currency injection on November 13, a move to “mitigate eventual tensions” in financial markets.

The bank said Thursday the fluctuation in the peso’s value would have no immediate effect on households and businesses, with inflation remaining at a “moderate” level below 3 percent.

The peso has lost about 15 percent of its value since October 18, when violent protests broke out over social and economic inequality.

(FRANCE 24 with AFP)

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