costs are regularly passed on to consumer prices. markets for foodstuff are globally integrated and competitive. in the case of fuels, every week the changes in the international price are passed on to domestic consumers. however, there is a price stabilization fund to smooth out short run fluctuations and recently there has been a gasoline tax cut, which ameliorates the large increase in international prices. finally, the electric power price - setting mechanism is designed to pass changes in upstream marginal costs to retail prices. electric power rates, affected by a rise in costs, posted an average increase of 23 % during 2007 compared with a less than 6 % average increase between 2000 and 2006. this context of price flexibility provides the right signals to markets. in the case of chile, with the increase in the prices of electricity and minerals, several investment projects are in the pipeline, which will propel an expansion of supply. electricity ( us $ mm ; index dec - 98 = 100 ) iii energy investment iii 08 cpi electricity ( 1 ) figures as of february. ( 2 ) includes investment in buildings, engineering, equipments and others. sources : corporation for technological development of capital goods ( cbc ) and national statistics bureau ( ine ). copper ( us $ mm ; us cents / lb. ) iii mining investment iii 08 copper price ( 1 ) figures as of february. ( 2 ) includes investment in buildings, engineering, equipments and others. sources : corporation for technological development of capital goods ( cbc ) and bloomberg. for countries that are net exporters of commodities, the impressive price hikes results in a positive terms - of - trade shock. in chile, terms of trade have increased by almost 70 % in the last three years, mostly due to the sharp increase in copper prices. not surprisingly, this shock has resulted in an appreciation of the real exchange rate. however, the macroeconomic policy framework, as well as particular characteristics of the chilean mining sector, has mitigated the effects of terms of trade gains on domestic demand, inflation and the exchange rate. half the income from copper ( after tax ) goes to foreigners and almost none of it remains in chilean territory. the other half is from a state - owned enterprise and taxes from private companies. there is a fiscal rule for government spending that stipulates that all income above certain long - term price has to be saved. government surplus has been 7 % on average the last three years, and foreign assets reached about 13 % of gdp in 2007. moreover

in direct contrast to the great depression, when policy - makers basically failed to respond and even worsened the situation by enacting protectionist international trade policies. the response today is designed precisely to mitigate the risk of a recessionary or depression - like negative dynamic. indeed, the situation is much more like a natural disaster than a typical 2 / 5 bis central bankers'speeches economic recession — with policies designed to essentially stop the clock and later restart it. economic recoveries from natural disasters are usually quite rapid and robust. instead of offering new forecasts, bank staff worked through multiple scenarios. these were designed to help us understand the importance of assumptions around the spread of the virus and the associated containment measures, how financial markets might react, how business and consumer confidence might be affected, and how much long - term or permanent structural damage might result from the shutdown. positives in the mix were fiscal measures, including outright income support ; policies to encourage maintenance and expansion of credit ; and monetary easing. with these variables, bank staff developed two contrasting scenarios for the bank ’ s governing council to consider. the first, “ best - case, ” scenario assumed that containment measures would be lifted at least in part during may. this scenario would see a decline in the economy during the first quarter of 1 – 3 percent, and a further decline in the second quarter that would take the economy to around 15 percent below its level at the start of the year. the third quarter would then see a significant but partial rebound in the level of activity and then a gradual recovery back to trend over the next year or two. very little structural damage was envisioned under this scenario. the darker scenario assumed that containment measures would extend into summer, taking the economy in the second quarter as much as 30 percent below its level at the start of the year. the rebound in the second half would be even more partial, and the structural damage would be much greater. even after two years of recovery, the level of gross domestic product ( gdp ) would still be well short of its original trendline under this scenario. in mid - april, there were signs that canada ’ s containment measures were succeeding in flattening the curve, despite the tragedy that was unfolding in long - term care centres. further, governments were beginning to lay out criteria for a return to work. all of this suggested to us that our best - case scenario was within reach. nevertheless, the recovery phase requires that monetary policy contribute significantly once containment measures begin to