Chile is to establish two “fiscal responsibility” funds to prevent its copper-fattened budget surplus overheating the economy.

Andrés Velasco, finance minister, told the FT that the funds would come into effect by the end of the year following the almost unanimous approval of a bill by the Senate.

Up to $4bn (€3bn, £2bn) will be placed into an economic and social stabilisation fund, including $1.5bn from an existing copper stabilisation fund that will then be wound up. A further $600m from the 2005 budget surplus will form a pension fund to cover a forecast shortfall in liabilities.

“This means Chile is taking a big step . . . to guide fiscal policy. We are trying to stabilise social and public spending so that we do not have to cut spending in slow growth periods. Fiscal policy can be countercyclical,” Mr Velasco said, adding that the bill must first be approved by the constitutional court.

The funds will be able to invest in a range of overseas instruments and those denominated in other currencies, with the exception of company shares, and will be subject to the same criteria governing investments by the country’s pension funds.

The government has yet to decide who will manage the funds, although it could be the central bank.

By keeping foreign earnings offshore, the funds will allow Chile to reduce the impact of copper price gains on its economy. Peso appreciation this year on the back of high copper prices has hurt the country’s other exporters, particularly in the food products sector.

The IMF recently praised Chile’s fiscal management.

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