Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

CHILE

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of July 31, 2005)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: July 27, 1977.
Exchange Arrangement
CurrencyThe currency of Chile is the Chilean peso.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate of the peso is determined freely in the foreign exchange market. The Central Bank of Chile (CBC) may intervene in the market in exceptional circumstances.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketYes.
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currencyAll payments abroad must be made in foreign currency, except for transactions of the CBC.
For current transactions and paymentsYes.
For capital transactions
Transactions in capital and money market instrumentsYes.
Transactions in derivatives and other instrumentsYes.
Credit operationsYes.
Payments arrangements
Regional arrangementsSettlements between Chile and the other LAIA countries are made through accounts maintained in the corresponding central banks, under the framework of the multilateral clearing system of the LAIA.
Clearing agreementsYes.
Administration of controlExchange regulations and their administration are the responsibility of the CBC.
International security restrictionsNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeOnly ADs may trade monetary gold. There are no restrictions on ordinary transactions in gold between private individuals.
Controls on exports and imports of banknotesNo.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyNatural and juridical persons may hold foreign currency accounts. Juridical persons must take into account legal restrictions on investments, based on their commercial activities (e.g., pension fund administrators). In the case of checking accounts, commercial banks must certify the account holder’s domicile.
Held abroadNatural and juridical persons may hold foreign currency accounts abroad. Juridical persons subject to regulations on investment abroad (e.g., banks and pension funds) must abide by such regulations.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedThe opening and holding of checking accounts are subject to domicile requirements.
Domestic currency accountsNo.
Convertible into foreign currencyNo.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsEffective January 4, 2004, import payments exceeding the equivalent of $5 million annually (previously, $10,000 for an individual transaction) must be reported to the CBC for statistical purposes.
Domiciliation requirementsOnly resident natural and juridical persons may engage in import activities.
Import licenses and other nontariff measures
Negative listImports of used motor vehicles are restricted.
Other nontariff measuresYes.
Import taxes and/or tariffsImports are subject to a uniform 6% tariff rate with a few exceptions (including items imported from LAIA countries and under a number of bilateral trade agreements). Imports of wheat, maize, edible oil, and sugar are subject to a price band system.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsEffective January 1, 2004, export transactions exceeding the equivalent of $5 million annually (previously, $10,000 for an individual transaction) must be reported to the CBC for statistical purposes.
DomiciliationOnly resident natural or juridical persons may engage in export activities.
Export licensesNo.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Investment-related paymentsTransactions exceeding $10,000 or its equivalent must be conducted through the formal foreign exchange market.
Credit card use abroadThe CBC authorizes commercial banks to issue credit cards. Card users must pay the balance for purchases abroad with their own resources. However, under the concept of extraordinary expenditures, private individuals may acquire foreign exchange from banks without declaring the purpose.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsCapital transactions exceeding $10,000 or its equivalent must be conducted through the formal foreign exchange market. Effective September 16, 2004, the CBC regulates foreign credit transactions denominated in Chilean pesos but payable in foreign currency.
Controls on capital and money market instrumentsNonresidents may sell securities and other instruments from abroad through the Bolsa offshore mechanism.
On money market instruments
Sale or issue locally by nonresidentsTo operate in the domestic financial market, a company must be registered.
Controls on derivatives and other instrumentsBanks and third parties may trade forward contracts involving Chilean currency with foreign counterparts (either the peso or the inflation-indexed Unidad de Fomento). Banks may hedge credit risk associated with their fixed-income portfolios and commercial loans with residents, using credit derivatives, for both local and foreign currency.
Sale or issue locally by nonresidentsForeigners must establish residence in order to sell or issue derivatives locally.
Controls on credit operations
Commercial credits
By residents to nonresidentsPension funds and insurance companies are not allowed to engage in international trade lending.
To residents from nonresidentsCommercial credits may be contracted with foreign banks and financial entities, subject to a tax of 4% on interest if loans are provided by a financial institution, or a tax of 35% if the creditor is not a financial institution.
Financial credits
By residents to nonresidentsOperations by insurance companies, pension funds, and institutional investors are subject to prudential regulations.
To residents from nonresidentsThe regulations governing commercial credits apply.
Controls on direct investmentNo.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactionsNo.
Provisions specific to commercial banks and other credit institutionsBanks and financial institutions may engage in the following: borrowing funds from the public through time deposits and savings; granting mortgage loans and syndicated loans to residents; purchasing bonds issued abroad by residents; and issuing deposits, bonds, and promissory notes abroad that may be traded domestically or abroad. Some of these operations may take place between local and foreign banks. Banks are also authorized to trade and issue derivatives in foreign exchange, based on exchange and interest rates; and on commercial credits, using forwards, futures, and swaps; and to acquire options and credit derivatives.
Borrowing abroadLoans with up to one year maturity are subject to a 3.6% reserve requirement.
Maintenance of accounts abroadBanks may hold foreign time deposits within the margin for financial investment abroad. Nonbank financial institutions are not allowed to maintain accounts abroad. External current accounts are not controlled.
Lending to nonresidents (financial or commercial credits)Banks are allowed to deal in debt instruments and sovereign bonds issued abroad. Banks may acquire stocks of foreign banks or establish branches abroad with the authorization of the Superintendency of Banks. Banks may invest a maximum of 40% of their Tier I and Tier II capital in affiliated companies, or corporations that support their line of business, or banks of a given country, and are authorized to extend loans to natural and juridical persons residing abroad.
Lending locally in foreign exchangeBanks may grant loans or purchase securities denominated or expressed in foreign exchange, provided they remain within the open position limits.
Purchase of locally issued securities denominated in foreign exchangeYes.
Differential treatment of deposit accounts in foreign exchange
Liquid asset requirementsReserves on foreign currency deposits must be held in dollars, regardless of the currency in which the deposit is maintained.
Interest rate controlsThere are statutory ceilings on interest rates for both domestic and foreign currency loans. Those ceilings are defined as one-and-a-half times the average market interest rate of the previous month.
Credit controlsEffective July 4, 2005, banks must comply with a maximum limit of exposure in foreign currency in accordance with the regulation recommendation of the Basel Committee on Banking Supervision.
Investment regulations
Abroad by banksForeign financial investments by commercial banks are subject to prudential regulations.
In banks by nonresidentsBanks are allowed to issue CDs and bonds abroad.
Open foreign exchange position limitsThe limit is 20% of capital and reserves. This margin includes derivative and spot instruments, foreign investment, and assets and liabilities issued abroad or denominated in foreign exchange.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsInvestments by institutional investors are subject to prudential regulations.
Limits (max.) on investment portfolio held abroadThere are five types of pension funds—A, B, C, D, and E. The maximum amount that each type may invest in foreign currency without hedging against risk is 40%, 25%, 20%, 15%, and 10% of total resources, respectively. Each type A, B, C, and D pension fund may invest up to a maximum of 1% of its assets in a Foreign Capital Investment Fund (FICE), and its investment may not exceed 1% of the FICE’s assets in aggregate. Insurance companies may invest abroad up to a maximum of 20% of their technical reserves and risk assets.
Currency-matching regulations on assets/liabilities compositionYes.
Other controls imposed by securities lawsNo.
Changes During 2004
Imports and import paymentsJanuary 4. The limit on import payments beyond which importers must report to the CBC was increased to the equivalent of $5 million annually from $10,000 for an individual transaction.
Exports and export proceedsJanuary 4. The limit on export proceeds beyond which importers must report to the CBC was increased to the equivalent of $5 million annually from $10,000 for an individual transaction.
Capital transactionsSeptember 16. Foreign credit transactions denominated in Chilean pesos and payable in foreign currency were made subject to CBC regulatory control.
Changes During 2005
Capital transactions
Provisions specific to commercial banks and other credit institutionsJuly 4. Banks were required to comply with limits on foreign exchange exposure in accordance with the recommendations of the Basel Committee on Banking Supervision.

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