Chile to Boost School Spending to End Student Strike (Update3)

June 2 (Bloomberg) -- Chile's government, seeking to end a strike by more than 800,000 high school students, agreed to use some of the revenue from record copper prices to boost spending on schools.

The government will increase education outlays by 1.3 percent, or 31 billion pesos, from this year's budget and 103 billion pesos over two years, Finance Minister Andres Velasco said today in Santiago. Student leaders are considering the proposal, outlined in a televised speech last night by President Michelle Bachelet.

``She is in a challenging position,'' said Roger M. Scher, managing director and head of Latin American sovereign ratings at Fitch Ratings. ``With copper so high, Chile isn't totally isolated from the problems of other countries. Pressure is mounting on her to spend.''

Bachelet's effort to end the two-week strike with concessions to the students could open the floodgates for protests if she is seen as weak, said Adam Isacson, an analyst with the Washington-based Center for International Policy. Bachelet has pledged to restrain spending, setting aside a portion of revenue from copper, the country's leading export, for the time when prices decline. Chile was holding $1.9 billion of the savings in the U.S. at the end of April to avoid strengthening the peso ..

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