Effective as of May 12 2000, the Central Bank of Chile has abrogated the restriction imposed on foreign capital investments that they remain in the country for a 12-month period from the date of investment. Investments made under Chapter XIV of the Compendium of Rules on Foreign Exchange of the Bank may now be freely remitted from Chile, (both in the capital and profits), as foreign currency acquired in the formal foreign exchange market.
Additionally, the definition of 'formal market' has been broadened to include (in addition to banks established in Chile and exchange houses approved by the bank), those broker-dealers and stockbrokers authorized by the Central Bank. Following a trend already established in the region, these changes aim to:
- enlarge the foreign exchange market;
- reduce the differences between the formal and informal market; and
- ease the flow of foreign capital.
These measures are expected to result in additional foreign investment. This, combined with a less restricted flow of foreign exchange to and from Chile, is expected to drive the peso-dollar exchange rate to levels more in line with quotes in the international markets.
Since the change only applies to Central Bank regulations, a bill should be considered by Congress to amend the Foreign Investment Statute (Decree Law 600, 1974, as amended) which also provides for a one year lock-in period for capital invested from abroad.
The financial and legal community has welcomed these changes, but still looks forward to the implementation of further changes (eg, the abrogation or reduction in tax rates levied on capital gains realized by foreigners from the sale of Chilean securities).
For further information on this topic please contact Jose Maria Eyzaguirre at Claro y Cia by telephone (+56 2 367 3000) or by fax (+56 2 206 0658) or by e-mail ([email protected]).
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