May 21 (Bloomberg) — Chilean President Michelle Bachelet said managing the economic crisis is her top priority and emphasized her commitment to social welfare in a speech laying out her policies for the next 10 months.

     The government plans to pay a bonus of 40,000 pesos ($71) to poor families in August, Bachelet said. She spoke today in her last annual message to lawmakers before elections in December.

     Bachelet’s popularity rose to its highest since she took office after she started using Chile’s $22 billion in copper revenue savings to stimulate the economy and fight unemployment. Under the Chilean constitution she is barred from running in this December’s elections and will step down in March 2010, as Chile celebrates 200 years of independence.

     “The first task we have for this year is to recover from the international economic crisis,” Bachelet said. “It seems a long time since the days when we faced economic crises by tightening our belts, cutting spending, raising interest rates and lowering social benefits.”

     Government stimulus spending has created 113,000 jobs, she said. Chile’s gross domestic product may shrink by as much as 0.75 percent or grow by 0.25 percent this year, after contracting 2.1 percent in the first quarter, according to central bank estimates.

Saving Copper Windfall

     

     Chile will recover faster than its trading partners from a sharp economic slowdown at the end of last year thanks to the policy of saving the windfall from a boom in copper prices, Bachelet said. Copper is Chile’s biggest export and the government owns Codelco, the world’s biggest copper company.

     Unemployment probably rose to 9.6 percent in April, the highest since September 2005, according to the median estimate of four economists surveyed by Bloomberg. The joblessness rate may reach 11 percent in the winter months of August and September, Tomas Flores, an economist at Santiago-based research group Libertad y Desarollo, said in an interview yesterday.

     The government plans to increase state pensions and provide more funds for building homes for Chile’s poor, Bachelet said. By the end of next year, the government will have built enough homes to get rid of the last shanty towns, she told lawmakers. The special winter bonus will benefit 4 million people, including workers on low wages and those receiving welfare payments, she added.

Mutual Fund Rules

     Bachelet said the government would send new rules on mutual and pension funds to congress for approval in July, offering no further details. Chile can become an exporter of financial services, she said.

     She attacked executives who collude to set prices, saying her government would promote a law fixing jail terms for breaking competition law. Earlier this year, Santiago-based pharmacy chain Farmacias Ahumada SA admitted fixing prices with rivals.

     Opposition presidential candidate Sebastian Pinera welcomed the 40,000-peso handout, saying he would have preferred 50,000 pesos. He attacked what he called government corruption for wasting resources that could have been used for social programs.

     “In times of crisis you have to direct resources not to plundering and corruption, but to solving the people’s problems,” Pinera told reporters in Santiago after the speech.

     At least two people, including a photographer, were injured as protesters clashed with police using water cannons, Radio Cooperativa reported on its Web site, without saying where it got the information.

     Bachelet’s approval rating rose to 67 percent in April from a low of 35 percent in September 2007, according to a poll of 1,024 adults surveyed by Santiago-based Adimark GfK between April 6 and April 30.