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Country Commercial Guides for FY 2000:
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CHAPTER VIII: TRADE AND PROJECT FINANCING
Brief Description of Banking System
The banking system offers many of the asset and liability products available in international financial centers. Foreign trade financing and money exchange operations are particularly active and efficient compared to the rest of Latin America.
In early 1999, 29 banks and 3 financial societies were operating in Chile. At December 31, 1998, loans by these institutions totaled $53.0 billion and deposits $43.3 billion. Authorities have not allowed new banks to enter the market since the early 1980's financial crisis, except via purchasing existing banks. This restriction applies to domestic as well as foreign banks. Vigorous economic growth in recent years has strengthened bank profits, but restrictions remain on banks' ability to enter some rapidly growing areas of business, especially pension fund management. A new banking law promulgated in late 1997 has relaxed some of the restrictions by allowing banks to provide factoring and leasing services. The new law theoretically provides objective criteria by which to judge applications for new banking licenses, but the Government reserves the right to limit such licenses based on economic needs in the marketplace.
The sector is regulated by the Superintendent of Banks and Financial Institutions, an agency that reports to the Finance Minister. The Central Bank, which is autonomous from the government in conducting monetary and exchange rate policy and regulating international capital movements, also regulates bank operations.
The only state-owned bank (aside from the Central Bank) is the Banco del Estado, Chile's second largest bank, which accounted for 13 percent of loans and 14 percent of deposits at the end of 1998. Private banks handle nearly all corporate business. The only Chilean banks with a direct presence in the U.S. as of June 1999 are the Banco de Chile, which has branch offices in New York and Miami, and Banco Santiago, which has a representative office in New York.
The banking sector has entered a period of consolidation as banks combine to achieve economies of scale necessary to compete internationally. The largest Chilean private banks are the Banco Santiago and the Banco de Chile. The largest foreign bank is the Spanish Banco Santander.
U.S. banks operating in Chile ranked by size of deposits in Chile are: Citibank, BankBoston, Chase Manhattan, Republic National Bank of New York, American Express, and Bank of America. U.S. banks concentrate mostly on corporate lending to small and medium-sized business, although Citibank and BankBoston are active in retail banking. Corporate lending is focused on medium-sized businesses, because restrictions on the percentage of a bank's assets that can be lent to a single customer lead firms wanting large loans to resort to international sources of finance.
Foreign Exchange Controls Affecting Trading
Money exchange operations are particularly active and efficient by Latin American standards. As a general rule, currency may be freely traded in two markets, the informal and the formal or inter-bank market. The Central Bank is empowered to require that certain transactions be executed only through the formal market, such as those related to the import or export of goods and services, foreign loans, capital flows and profit remittances. It may also determine that certain operations be subject to prior approval as is the case of foreign loans and investments, repatriation, as well as hedging and other futures market operations.
The exchange rate theoretically is allowed to float within a band around a central rate (a "crawling peg") that is adjusted to compensate for differences between Chilean inflation and that of its trading partners. The band supposedly allows for significant fluctuation in the real value of the peso. The government widened the band from 20 percent to 25 percent in early 1997, effectively revaluing the peso, because the peso was regularly pressuring the limit of the band. In June 1998, in response to the Asian crisis that was exerting downward pressure on the peso, the band was narrowed to restrict the peso from rising more than 2 percent above the central rate or falling more than 3.5 percent below. The band has since been widened once again.
General Financing Availability
Companies utilize a variety of financing sources, including retained earnings due to strong profitability, stock, direct investment, bank debt, bonds and, since 1993, through the issue of ADRs on U.S. stock exchanges. Eurobonds are also utilized. The larger corporations have evolved from the use of bank debt to public source of funds such as stock and bonds issued locally and also to international capital markets.
Chile has consistently received investment grade ratings by companies such as Moody's and Standard and Poor's since the mid-1990's. Despite the successive financial crises from late 1997 to early 1999, the ratings have been reaffirmed by these companies. Some 30 Chilean ADR's are traded on the NYSE.
How to Finance Exports / Methods of Payment
Payment to suppliers is often made via an irrevocable letter of credit from a Chilean commercial bank to the supplier. This is fast and simple, with no lengthy delays in the remittance of foreign exchange. Payments are made upon receipt of notice of shipment of goods. Other methods of payment to suppliers include cash against documents and open account. Suppliers dealing in open account usually have developed a long-standing relationship with the buyer.
Types of Available Export Financing and Insurance
The U.S. Export-Import Bank and the Overseas Private Investment Corporation provide credit and insurance programs for U.S. exporters and investors in Chile. The Inter-American Development Bank is also active. The World Bank's Multilateral Investment Guarantee Agency's (MIGA) first project involved Chile. The Bank is quite willing to provide financing to Chile and has targeted guarantees to private sector investors in infrastructure. The country's currency reserves and balance of payments surplus have made new loans undesirable. In fact, Chile has been prepaying its multilateral institution obligations.
Private companies can take advantage of the World Bank's International Finance Corporation (IFC), which is providing financing to private sector companies for infrastructure. The IFC is particularly interested in green-field projects, non-traditional industries, cross-border operations, and asset securitization, especially in housing and infrastructure finance.
Available Project Financing
Major project financing is available through issue of equity and bonds in the international capital market, and through syndicated loans (see General Financing Availability above). Eximbank offers project financing in Chile. The amount to be financed depends exclusively on the U.S. content of the proposed project. More information available through Eximbank web page www.exim.gov
List of Banks with U.S. Correspondent Banking Arrangements
The following U.S. banks operate in Chile:
Telephone Fax Bank (56-2) (56-2) ------------------------- ---------- --------- American Express Bank Ltd. 350 6700 335 8308 Bank of America NT & SA 243 7200 243 7393 BankBoston 639 3841 686 0760 The Chase Manhattan Bank, NA 690 5172 690 5367 Citibank, NA 338 8000 338 8055 Republic National Bank of N.Y. 695 2002 698 7512The following banks, both Chilean and foreign-owned, maintain correspondent banking relationships with U.S. banks:
Telephone Fax Chilean Bank (56-2) (56-2) ------------------------ ------------ ----------- Banco BHIF 679 1000 679 1250 Banco BICE 692 2000 696 5324 Corp Banca 698 2741 672 6729 Banco de A. Edwards 388 3000 388 4012 Banco de Credito e Inversiones 692 7000 695 8961 Banco de Chile 637 1111 637 2560 Banco Santiago 692 4000 695 6342 Banco del Desarrollo 674 5000 671 5547 Banco Internacional 638 3894 369 7367 Banco Security 270 4000 270 4001 Banco Sud Americano 692 6000 698 6008 Banco del Estado 670 7000 670 5711 Non-Chilean Banks ------------------------- ABN Tanner Bank 679 5000 672 2696 Banco Dresdner Banque Nationale de Paris 696 8201 671 5934 Banco de la Nacion Argentina 671 2045 696 2700 Banco do Brasil 336 3001 336 3005 Banco do Estado de Sao Paulo 695 1307 672 2459 Banco Exterior 385 7000 385 7069 Banco Santander 631 2000 695 6342 ING Bank 330 0600 330 0650 The Bank of Tokyo Ltd. 203 1180 203 1190 Banco Real 361 1537 367 2013 Banco Sudameris 638 1514 633 0957Note: Chilean Banking Law does not discriminate among banks on the basis of origin or ownership.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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