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Chile FinMin: It’s very difficult to rebuild confidence

Jessica Hartogs, Special to
We are prepared for a Fed hike: Chile's FinMin

As Brazil, Venezuela and Argentina deal with political crises and corruption allegations of their own, it seems that Chile has not escaped unscathed from the scandals embroiling South America. Chilean finance minister Rodrigo Valdes told CNBC at the OECD meeting in Paris, "It's very easy to lose confidence and it's very difficult to rebuild it – and we are in the process."

Approval ratings for Chilean President Michelle Bachelet dropped to 24 percent in May from 29 percent the previous month, returning to last year's all-time low, according to a recent survey by pollster Gfk Adimarklm, reported Reuters. Bachelet has seen her popularity take a sharp drop over the country's stagnant economy, as well as several financial scandals.

President Michelle Bachelet of Chile.
Adam Jeffery | CNBC

"Lower growth takes a toll on confidence. Confidence, because of the political scandal, takes a toll on the economy- and we have a sort of circle – although I have to say that Chile reacted very strongly to the scandal, we have put together several pieces of legislation- separated completely businesses from politics – I would say we have been a model in the reaction but it takes a long time and a lot of effort to heal this problem of confidence," said Valdes.

As well as trying to boost its ratings, the Chilean government is also preparing for the U.S. Federal Reserve's June decision, after U.S. central bank chief Janet Yellen said the Fed would raise interest rates in June or July if the economy picked up as expected and employment numbers continued to rise.

"We're well prepared for that, we are a floating regime, the exchange rate will move probably. My sense is that as long as it's not very often, what the Fed does, I think we'll be able to navigate that," Valdes told CNBC. "Of course, if they hike twice in a row, let's say, that's another scenario – the markets will be very iffy, but my sense is that the world economy is not strong enough for the Fed to go too fast in this normalization of rates."

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