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Chile announces $5.5 billion economic recovery plan as riots wreak financial havoc

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The Chilean government announced plans on Monday to roll out a $5.5 billion economic recovery plan and issue more debt in foreign currencies after rioting and protests triggered the worst monthly contraction in a decade.

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Finance Minister Ignacio Briones slashed the official forecast for economic growth this year to 1.4% from 2% just a month ago, and he put next year's expansion at 1% to 1.5% instead of its 2.3% estimate previously.

"These aren't just numbers. This means thousands of companies and jobs today are at risk," Briones told a news conference. "The violence, the looting and the destruction have halted the economy with enormous costs for Chileans."

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Riots in Chile began on Oct. 18 over a hike in metro fares but quickly spiraled into mass protests, arson and looting that have left 26 dead and upwards of $1.5 billion in losses for businesses. The peso has plummeted to a historic low, prompting multiple central bank interventions.

Briones said the government will invest $2.4 billion in infrastructure as part of its recovery plan, which also aims to stave off job losses and help small businesses.

Government spending will rise 9.8% next year and the fiscal deficit will widen to 4.4% of gross domestic product. The government plans to sell some $3.5 billion in foreign currency bonds next year to help meet financing needs, more than in previous years, Briones said.

Earlier on Monday, the central bank said the economy shrank 3.4% in October from the same month a year ago, marking the worst contraction in a decade. The IMACEC economic activity index, proxy for gross domestic product tallied on a monthly basis, fell 5.4% from September.

Scotiabank labeled it the "beginning of the bad news" in a note to investors.

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