By Nathan Gill and Sebastian Boyd

     Sept. 2, 2008 (Bloomberg) — Chile’s government pledged to fund Santiago’s public transportation system after a newspaper reported that a loan made to develop the capital’s transit network was unconstitutional.

     President Michelle Bachelet will ask the country’s Constitutional Tribunal to clarify its decision on the $400 million loan after the verdict was apparently leaked to the press, government spokesman Francisco Vidal said today.

     Finance Minister Andres Velasco and Transport Minister Rene Cortazar may risk impeachment should the tribunal rule the loan was unconstitutional, Senator Camilo Escalona, head of Bachelet’s Socialist Party, said yesterday. Opposition senators asked the tribunal in June to rule on whether a government guarantee of the Inter-American Development Bank loan to a company that runs Transantiago’s finances is allowed under Chile’s charter.

     “We are going to persevere with our objective,” Vidal said. “The objective is to improve public transport in the whole of Chile, keep the fares in the capital region and subsidize, that is reduce, the price of bus tickets in practically all the metropolitan region.”

     The government will continue to push a bill providing money for Transantiago through the Senate, Vidal said. A law giving as much as 197 billion pesos ($383 million) in annual funding for transportation in Santiago and other regions was approved by one vote in the Congressional Chamber of Deputies last month.

     As much as $300 million of the IDB’s loan may have already been spent, El Mercurio reported yesterday on its Web site.

     The court has already decided the loan was illegal, La Tercera reported in its print edition on Aug. 30, citing unnamed members of the tribunal, which has yet to officially announce its verdict.

     “We know there was a leak; we don’t know if it’s true or false,” Vidal said. “Hopefully the decision can be announced as soon as possible.”

     Design flaws have dogged Transantiago since it was introduced in February last year. Within a month, commute times doubled because of shortages of buses and subway trains, leading Bachelet to sack the transport minister who had overseen its launch.

     There are still between 600 and 700 fewer buses than needed on Santiago’s streets, Cortazar said on Aug. 30. He had earlier threatened to strip bus companies of their concessions if they don’t increase the number of vehicles on the road.

     Transantiago’s administrators sought the Inter-American Development Bank loan after posting an $88 million loss in the first quarter of this year.