Geert Bekaert and Campbell R. Harvey's


Chronology of Economic, Political and Financial Events in Emerging Markets




Major Political and Economic Events




Finance houses were allowed to operate.p Commercial bank interest rates were liberalized. a1


Value-added tax introduced, rates 8 and 20%.p


Freeing of interest rates broadened.p


Banking crises: entire mortgage system insolvent. a2


New foreign banks were admitted. Mehrez and Kaufmann Liberalization date. a1


Very limited degree of capital mobility allowed in mid-1979.p


Currency fixed to the dollar, called the Effective Chilean Peso Rate. p,a


Effective Rate was abolished, along with daily minidevaluations. Peso fixed. A


Restrictions on all capital inflows, except short-term, removed.a


Government liquidates 8 financial institutions.p


Social security system reformed.p


The introduction of the Insider Trading Laws.a4


Banking crises (1981-1983): 7 banks and 1 financiera were involved in banking crises, accounting for 45% of total assets. Causes: (1) high levels of domestic and international interest rates reduced corporate sector's ability to repay debt; (2)deterioration of ToT due to a sharp decline in the price of copper; (3) overvalued exchange rate coupled with wage rigidity; (4)speculation in shares and properties and the bursting of the bubble; inadequate strengthening of regulatory and accounting framework and banking supervision. Overall change in macro policy: introduction of crawling peg; government tried to use monetary policy actively to moderate increases in interest rates; and structural adjustment program was implemented. a2


Import surcharges from 4 to 28% imposed on more than 30 items; two tier exchange rate.p Capital controls were re-imposed. a1


The fixed Official Rate abandoned. Currency placed on a controlled, floating basis and linked to a basket of currencies, establishing an Effective Rate.a


Effective Rate was allowed to float freely, with the unit depreciating sharply.a


Beginning of Mexican debt crisis - impacts most of Latin America.


Preferential Foreign Debt Repayment Rate, applicable for the repayment of foreign credits, was introduced.a


The Peso was again pegged to the U.S. dollar with daily devalutions.a


Import tariffs raised from 10% to uniform 20%.p


Government liquidates two banks and nationalizes others.p


Import Exchange Rate introduced. Tax placed on purchase of foreign exchange for imports.a


Import tariffs temporarily hiked to 35%.p


Bank debt restructuring agreement.i


Bank debt restructuring agreement.i


Bank debt restructuring agreement.i


Import tariffs stabilized to 20%.p Capital controls were eased again. Mehrez and Kaufmann's second Liberalization date. a1


Nonresidents could use the debt instrument for direct investment in Chile. Authorized was granted for residents and nonresidents to purchase selected debt instruments using foreign exchange not obtained in the official foreign exchange market, for conversion into pesos, without remittance rights. The peso assets could be used only to reduce domestic debt or to acquire specified assets owned by domestic banks.a3(first entry)


Bank debt restructuring agreement.i


Restrictions on the use of peso assets obtained by residents and nonresidents at a discount abroad with foreign exchange not obtained in the official market were lifted.a3


Laeven's banking liberalization (FLI) dates.a13


LAN18657 requires foreign portfolio investments to be held a minimum of 5 years before they can be repatriated. The law governs the organization of a Foreign Capital Investment Fund (FCIF). FCIF should be a fund or trust set up outside of Chile. FCIF may neither invest more than 10% of its assets in a single issuer nor own more than 5% of the voting shares of any issuers. Must have a local administrator.e


Toronto Trust Mutual Fund trades as unlisted mutual fund. Net asset value $37.7 in December 1991.aa


Bank debt restructuring agreement.i


A fund was established to guaranteed loans granted to nontraditional exporters to cover their capital needs.a3


The establishment of External Investment Funds to facilitate the conversion of Chilean external debt was authorized. Small external investors are able to participate in debt equity conversions without having to go through the case-by-case conditions normally applied to such operations.a3


The setting up of foreign capital investment funds was allowed. Proceeds from these funds may only be invested in Chilean domestic financial instruments with certain portfolio restrictions. Original capital may only be repatriated after five years, without limit on profit remittances.a3


Compania de Telefonos (Telecommunications) privatized, $170 million.p


Debt conversions by mortgage debtors, in amounts of up to US$6,000 and without having to be subjected to the auction system, were allowed.a3


Chile Investment Company, SA privately placed. Net asset value $110.4.aa


Bank debt restructuring agreementi (Amendment to June 1987 agreement).


IFC liberalization date.i 


Value-added tax reduced to 16% from 20%.p


Widespread country funds are introduced into Chile.i


Brady plan (adjustment packages that combined debt relief and market-oriented reforms).


Chile Fund launched on NYSE. Initial net asset value $160.4 million.aa


Buckberg Liberalization date.d


Kim and Singal Liberalization date.


Independent Central Bank established.p


Chile receives first new loan since debt crisis from NMB Bank (Netherlands). This marks the first voluntary general purpose bank loan into the Latin American sovereign market since 1982.i 


Labor laws reformed.p


Compania de Telefonos de Chile, SA announces ADR.aa


Foreign direct investment allowed by residents.b


President Aylwin submits extensive tax reforms to congress (corporate taxes changed).p


Bekaert/Harvey Official Liberalization date. [NBER version].


Compania de Telefonos de Chile raises $98 million by issuing ADRs on NYSE. This marks the first international equity borrower in Latin America in over 25 years.i


The procedures under which foreign capital investment funds may have access to the official exchange market for repatriation abroad of imported capital, profits earned on such capital, and payments of expenses involved in foreign investment activities were specified.a3


Andean pact renewed (Bolivia, Colombia, Ecuador, Peru and Venezuela) (Chile refused).p


Bank debt restructuring agreementi (Amendments to previous agreements).


Chile issues $200 million in bonds at 1.5% over LIBOR and schedules to issue another $120 in March of 1992.i


Tariffs reduced to 11% across the board.p


A reserve requirement of 20% was imposed on all new foreign borrowings, except for credits that are provided directly to Chilean exporters by foreign importers.a3


Credits granted by foreign commercial banks to Chilean commercial banks as part of restructuring packages were exempted from 20% reserve requirement.a3


An alternative means of satisfying the 20% reserve requirement on new foreign borrowing in the form of a special repurchase agreement with the Central Bank was established.a3


The 20% requirement was extended to existing credits, except for credits with maturity of less than 6 months. The requirement on existing credits maturing between July 11 and December 31, however, would be phased.a3


After paying a fee to the Central Bank, foreign investors were allowed to sell their investments to domestic residents.a3


DL600 eased restrictions on foreign investment and repatriation of capital to one year holding minimum. Central Bank revalued peso by 5%. DL600 also offers guaranteed access to the foreign exchange market.e


Bekaert/Harvey Official Liberalization date.




A-rated Chilean enterprises and banks were authorized to issue bonds in foreign markets.


Pension funds were authorized for the first time to invest abroad up to 1.5% of the total value of the fund. The reserve requirement on foreign currency deposits at commercial banks was increased from 20% to 30%. The period of application of the reserve requirement on external credits was increased from 90 days to 1 year. Commercial banks were authorized to sell foreign exchange, using their term deposits in foreign exchange.a3


Reference rate for peso changed (pegged to 3 currencies).


Exchange arbitrage operations undertaken abroad by banks were authorized. Commercial banks were authorized to increase their foreign exchange exposure and sell their excess holdings to other banks instead of only to the Central Bank. Foreign exchange can be bought for purpose of amortization of capital and payments of interest on debt duly registered at the Central Bank within 90 days of the due date.a3


Reserve requirements on foreign liabilities increased from 20 to 30%. Standard and Poors assigns first time rating of BBB to sovereign debt.i


First exchange-traded overseas listing.a9


The limit on investment that pension funds are allowed to undertake abroad was increased from 1.5% to 3% of their total value.a3


Creation of central securities depository.


Bill approved allowing for investment repatriation after 1 year and lower taxes on capital gains. Empresa Nacional de Electricidad becomes the first Latin American private sector company to receive an investment grade rating from one of the main rating companies.i


Capital markets reform bill presented to Congress. The National Ratings Commission no longer provides its own ratings but approves those issued by private rating companies.i Capital Markets legislation passed reclassifying the ratings system to bring it more in line with international standards.i


The "guaranteed" corporate income tax for foreign investors was lowered from 49.5% to 42%.a3


Moody's assigns rating of Baa3 to Compania de Telefonos de Chile.i


Capital markets reform bill passed by the Chamber of Deputies. Bill expands investment alternatives for Chile's pension funds and insurance companies.


Corporations issuing bonds on the international capital market were required to obtain from a foreign rating company a credit rating equal to or better than assigned to Chile.a3


Eduardo Frei elected president. He favors pro-business policies.


Capital markets reform bill enacted into law. Law eased restrictions on pension fund investments, improved financial market regulation, and developed new financial instruments through securitization.


Central Bank eased regulations on share and bond sales by reducing minimum amount required from 50 to 25 million. Eased restriction for companies to be rated 'A' by local rating agencies.


The requirement that nonfinancial enterprises be rated by the National Risk Classification Commission in order to be eligible to issue bonds in foreign markets or to issue ADRs was replaced with the requirement that they be rated BBB+. The minimum amount for each ADR issue or band issue was lowered to US$25 million from US$50 million for these issuers. The maximum amount that pension funds, insurance companies, and mutual funds are allowed to invest abroad was raised to 4% form 3% of their portfolio.a3


Agreement with MERCOSUR signed.


The issuance of ADRs but not of bonds by banks was simplified: the minimum amount for each issue was lowered to US$25 million from US$50 million, and the requirement that the issuing bank be rated A by the National Risk Classification Commission was replaced by the requirement that it be rated BBB+ by two international rating agencies.a3


Rules regulating investments by banks and financial institutions on offshore financial institutions were established.a3


New accounting regulations: allowed companies to amortize over 10 years instead of 5 years.


Revalued peso. Foreign exchange liberalization package adopted allowing 25% of export earnings to be kept overseas instead of 14%.


The ceiling on foreign exchange positions held by commercial banks was eliminated, and all reserve requirements on foreign borrowing were required to be held solely in U.S. dollars.a3


Proposal made that would allow pension funds to invest 40% (up from current 30%) of total assets in equities.


The maximum amount of financial investment that banks and financial institutions can deducted from the foreign exchange position used to calculate their reserve requirement is equal to the maximum limit on such investments.a3


The Central Bank established the ceilings on investment abroad. Pension funds and insurance companies are granted access to the formal exchange market to carry out these operations. As a transitory provision, the Superintendency of Banks and Financial Institutions would determine the time period during which banks will be required to adjust the ratio between their foreign investments and their total assets to the ceiling established by the Central Bank.a3


The Central Bank authorized exchange houses operating in the formal exchange market to carry out exchange operations related to investment abroad by pension funds, insurance companies, and mutual funds.a3


Relaxing of exchange controls on exporters. Exporters now allowed to hold larger amount of revenues abroad.


Central Bank raised overall limit on pension fund investment in equity from 30% to 37%. Superintendencia cleared way for certain mutual funds to invest 30% of assets in foreign markets. New tax of 3% on foreign investment in locally traded shares imposed.


The limit on foreign investment by pension funds was increased from 6% to 9% of the total value of the fund, and investment in variable income securities up to 4.5% of the value of the fund was allowed.a3


Moody's and Standard and Poor's upgrade Chilean credit ratings.


New restrictions on ADR trading imposing 3% fee and requiring investors to place 30% of investment in non-interest bearing accounts for one year. Trading restrictions are implemented to discourage short term capital inflows.


The coverage of the existing 20% reserve requirement on foreign liabilities was broadened to include investment flows that do not constitute an increase in the capital stock but only a transaction of assets from residents to nonresidents. The Central Bank eased the ceiling on foreign investment by banks and financial institutions by allowing 30% of the 20% ceiling of capital and reserves to be invested in instruments with a minimum rating of BBB-, but the remaining 70% must be invested in BBB- or less risky securities, below the minimum A- requirement in place earlier. The credit rating of the securities in which pension funds can invest was lowered from A- to BBB-. For the stock investments of insurance companies, a minimum BBB- credit rating requirement for the country where the stocks are traded was established.a3


Regulations governing the purchase of selected Chilean foreign debt instruments abroad and restricted related profit and capital remittances, were eliminated, thus lifting restrictions on the remittances of profits and the three-year holding for capital entered under these regulations.a3


The Central Bank reduced from 65 days to 5 days the period in which banks can sell or purchase foreign exchange in connection with ADRs transactions.a3


The Central Bank introduced an estimate of differentials in productivity growth between Chile and its trading partners as a new factor in the determination of the official reference exchange rate. This new factor will allow for a gradual yearly appreciation of 2% in real terms.a3


Corporations with ADRs in foreign stock exchanges were allowed to make new issues of ADRs with a minimum of US$10 million or its equivalent in other currencies.a3


IFC announced new policy determining foreign legal limits of ownership in IFCI Chile Index.


Regulations governing speculative trading firms changed. Fixed income investment are now required to enter under Chapter XIV as opposed to DL600. Chapter XIV imposed reserve requirement of 30% on investments. Privatization of Colbun (electric utility) cancelled.


Debtors of credits recorded in Chapter XIV of the CEIR may access in advance the formal market to repay the credits or maintain the resources in an account abroad, which may be given in guarantee to the creditor.a3


External credits destined exclusively to prepay foreign credits that were previously authorized and recorded with the CBC were exempted from the 30% reserve requirement, provided the weighted average terms of each credit and the residual of the original credit are similar. Mutual funds were permitted to use the formal exchange market to make investments abroad.a3


The first prosecution under the Insider Trading Laws.a4


Chilean electric utility issues first 100 year bond sale. Bill proposed allowing foreign countries to list shares on domestic stock exchanges. 


Overnight lending rate was cut by 25 basis point to 7.25%.


Foreign financial investments of Chapter XIV of the CEIR for amounts of less than US$100,000 were exempted from the cash reserve requirement.a3


Growth of Chile's economic output in February was 2.9%, the smallest year-on-year increase since July 1994. Supreme court approved the decrease in the electricity rate charged by electricity distributors to its clients.


(Controls on derivatives and other instruments) The rules on financial derivatives were simplified. The need to seek prior authorization from the CBC to carry out such operations abroad was abolished, as well as the requirement for every operation to be backed by a real foreign trade or investment operation abroad. In addition, derivative operations involving variable income instruments were authorized. (Controls on personal capital movements) The quantitative limit of US$15, 000 a month was abolished. (Provisions specific to commercial banks and other credit institutions) Banks were given authorization to extend loans to natural or juridical persons resident abroad in order to finance foreign trade operations between third countries.a3


(Controls on capital and money market instruments) The rules governing investment abroad were amended. The following were added as authorized investment operations: acquisition of real and financial assets, deposit taking, granting of loans, and participation abroad in contracts for the exploration and exploitation of natural resources. However, investments with currency not obtained in the formal exchange market are limited to the acquisition of financial and real assets. The repatriation of capital and profits is not required, but when this occurs, it must be done through the formal exchange market. The repatriation of currency will be subject to the one-year 30% reserve requirement, unless an exception is made by the CBC.a3


The repatriation of proceeds from investment abroad, including profits, made through the formal market was exempted from the 30% reserve requirement.a3


(Provisions specific to institutional investors) The limit on holdings of foreign instruments by pension funds was raised to 12% from 9% of their assets.a3


Access to the formal exchange market was extended to allow for certain investments abroad, which include the acquisition of real or financial assets, participation in companies, contracts for the exploration and exploitation of natural resources abroad, deposits abroad, and the granting of foreign credits. The obligation to inform the CBC is maintained.a3


The new ADR listing on May 9 of the supermarket chain Unimarc on the NYSE.


(Controls on capital and money market instruments) Holders of ADRs were permitted to participate in preferential share offerings, changing shares thus acquired into secondary ADRs.a3


Concerns on Brazilian real devaluation.


Comments from the Economic Ministry implying a tightening of reserve requirement rules to reduce the capital inflow from foreign loans.


The stock market suffered concerns over rising domestic interest rates and Hong Kong market crash. 


(Controls on credit operations) The minimum amount for foreign direct investment to be exempted from the 30% nonrenumerated reserve requirement was raised to US$1 million.a3


The financial troubles in Asia's market, especially the collapse of Yamaichi Securities in Japan.


A new banking law passed. It stipulates objective parameters for allowing new banks to enter the Chilean market and substantially expands the types of activities in which banks may engage: both Chilean and foreign banks may establish subsidiaries for securities and insurance brokerage, leasing, and factoring.a8


Concern that an economic slowdown in Asia will affect Chilean exports. 


Banks are allowed to expand abroad and to enter new business areas at home.a13


High bond yields depressed the stock market.


IMF said that the country has sound fundamentals, with $17 billion in reserve, to deal with the fallout from Asian crisis.


A decline of 23.1% in Chilean exports to Asia's 10 largest economies for January and February.


The Federal Reserve Board of the United States, the U.S. Comptroller of the Currency, and the Chilean Superintendency of Banks and Financial Institutions entered into a cooperation arrangement to exchange information concerning applications filed for establishing banking business in Chile and the United States, as well as material information relevant to banking supervision, subject to each country's disclosure restrictions.a8


The government planed to raise the minimum wage to 100,00 pesos from 71,400 by the year 2000


The unremunerated reserve requirement on capital inflows was lowered to 10% from 30%.a3


The central bank eliminated rules requiring investors to place 10% of the value of their ADR investment in a non-interest-bearing escrow account for one year.


The unremunerated reserve requirement on capital inflows was eliminated.a3


Political instability was implicated as  former-President Augusto Pinochet was arrested. Economists expect Chilean GDP growth in 1998 to surpass 4.5%.


(Provisions specific to institutional investors) The maximum amount of investment abroad allowed to pension funds was increased from 12% to 16% of the fund, and from 10% to 15% for life insurance companies, and from 15% to 20% for general insurance companies.a3


Shareholders of giant energy company Enersis blocked Endesa of Spain?s $1.5 billion takeover bid by a 1% margin.   


(Provisions specific to institutional investors) The maximum amount of investment abroad allowed to pension funds was increased to 16% from 12% of the fund. For life insurance companies, the margin authorized for financial investments was widened to 15% from 10%. In the case of general insurance companies, the margin was increased from 15% to 20%. a3


For entities other than banks and financial firms, bond issues were permitted with terms of more than two years and less than four years, with a minimum BB classification being required. In the case of bond issues for terms of at least 4 years, the minimum classification required is BB-. (Provisions specific to institutional investors) The limit on investment in variable return instruments was increased from 8% to 10% of the fund. (Controls on personal capital movements) The requirement that loans by residents to nonresidents be authorized by the CBC was eliminated.a3


(Controls on derivatives and other instruments) The CBC authorized financial institutions to make foreign interest rate forwards, futures, and swaps in the local market.a3


Chile?s antitrust commission suspended the Endesa (Chile) sale  moments prior to its completion on grounds the purchase would give the Spanish giant a disproportionately large share of  the Chilean energy market.


(Controls on capital and money market instruments) For entities other than banks and financial firms, bond issues were permitted with terms of more than two years and less than four years, with a minimum BB classification being required. In the case of bond issues for terms of four years or longer, the minimum classification required is the BB-. (Provisions specific to institutional investors) The limit on investment in variable return instruments was increased to 10% from 8% of the fund.a3


The Endesa sale was approved. Interest rate cut leaded to the lowest rate levels since 1995.


(Provisions specific to commercial banks and other credit institutions) Banks were allowed to have financial investments of up to 70% of their effective capital.a3


The exchange rate band was abolished.


The government imposed rate cut for telephone services. Unemployment rate reached an 11-year high. Markets stopped rising.


(Provisions specific to commercial banks and other credit institutions) Banks were allowed to invest up to 50% of their effective capital in a single country.a3


Copper price rose.


Spain-based Telefonica announced consolidation of its holdings across Latin America.


The newly elected President Ricardo Lagos took office and emphasized fiscal prudence and economic stability.


The central bank lifted the one-year holding period for foreign investors. The government also removed the capital gains tax of 15% for foreigners. The Upper House of Congress cleared the OPA law giving minority shareholders the rights to the same premiums as controlling investors in the event of a takeover. The markets stayed unaffected.


The central bank cut interest rates by 50 basis points to boost investor confidence.


Strong oil prices depreciated the peso.


U.S.-based AES would acquire Gener SA. The successive truckers and port workers strikes, together with the continuing turbulence in the NASDAQ, and crisis in Peru and Argentina sent the market down.


In the first quarter, prices for copper, Chile's chief export, crashed. The Central Bank lowered rates three times during the first quarter, pushing the peso to all time lows.


In the second quarter, foreign investors were allowed to buy or sell securities and repatriated profits without the central bank's approval, restrictions on ADR issuance were removed, and foreign currency bond issuance of Chilean companies were simplified. The 15% capital gains tax was also eliminated. Other proposed measures included facilitating internationalization of the banking sector, allowing greater investment flexibility to pension funds, strengthening voluntary savings, and deregulating insurance industry.


The peso had slid 15% for the year. The central bank was forced to intervene in the foreign exchange market for the first time since the 1999 floatation of the currency. It halted rate cuts and switched from a real interest rate target to a nominal target, but the peso lost 10% in the quarter.


The peso gained 4% during November and December.


Cabinet ministers from Chile's Christian Democrat Party have offered their resignations after their party, which is part of the ruling Concertación coalition of President Ricardo Lagos, suffered heavy losses in Sunday 16 December's legislative elections, and lost its position as the single largest party in the lower house. b1


The Chilean Senate has approved a proposal to introduce a bill to reform the country's 1980 constitution to remove anti-democratic features that were included by the military dictatorship of General Augusto Pinochet


Chile's Congress passed reforms to the private pension fund system, in an effort to facilitate access to financing for high-risk ventures and increase payments to retirees.


The national executive of the Chilean Christian Democratic Party has elected Senator Adolfo Zaldívar as its new leader.


The Central Bank lowered interest rates for the second time this year, again by 50 basis points.


The Central Bank yesterday moved towards its third cut of benchmark rates this year. The 75 basis point cut brings benchmark interest rates down to 4.75%.


As from 1 May 2002, a revised regulation controlling the sale of companies' fixed assets is to be implemented in Chile, constituting part of the country's Anti-Tax Evasion Law. All fixed assets that are sold off by a company within four years of being purchased are to be affected by the new legislation, which is also to include vehicles.


The Chilean Congress has approved a minimum wage of 111,200 peso (US$170). The new minimum wage will come into force on 1 June 2002 and will remain law until 30 June 2003.


All charges against Pinochet are dropped after the Supreme Court upholds a verdict finding him mentally unfit to stand trial for human rights crimes. Days later, Pinochet resigns from his post as a lifelong senator. b6


Chile's government has announced tax breaks and a loosening of company accounting rules in an effort to kick-start stumbling economic growth and boost fiscal stability.


Having announced that the tax regime was to be reformed back in July, the government was forced to make a u-turn on its proposal because it was fundamentally flawed.b1


Reforms to promote labor market flexibility, which are backed by the International Monetary Fund (IMF), have been scotched by the government.


Chile's Chamber of Deputies has approved a bill that seeks to boost investment via tax incentives. The bill, known as the Investment Platform, establishes tax benefits and norms so that foreign invested firms can make investments in third countries from Chile. b1


Chile's lower house has approved a political, economic and co-operation accord with the European Union (EU) that will give the country access to programs currently only available to EU member states.


Head of the Central Bank Carlos Massad announced his shock resignation from what is his third term in office. Massad's secretary is reported to have leaked documents and information to the Inverlink brokerage, which has since been charged with a number of financial irregularities. b1


Parliamentarians from all sides in Chile have approved a bill to introduce transparency to electoral funding.


The Chilean government signed a free-trade agreement (FTA) with the European Free Trade Association, which comprises Iceland, Liechtenstein, Norway and Switzerland. The deal will take effect February 2004.


Chile's Deputy Public Works Minister Juan Carlos Latorre has resigned, citing problems of compatibility within the Ministry.


Appeals court blocks attempt to force Pinochet to stand trial; judges vote against lifting his immunity from prosecution. In October Supreme Court rejects application to lift his immunity from prosecution. b6


Chief of Police Investigations Nelson Mery tendered his resignation yesterday following accusations that he tortured detainees during the dictatorship. b1


VAT increase of 1% to 19% took effect.


Santiago's Court of Appeals acquitted 12 high-level civil servants caught up in a corruption scandal.


The Senate approved by 41 votes to three the nomination of Manuel Marfan, a socialist and economist, to replace Jorge Marshall on the five-member board of the Central Bank.


Chilean president Ricardo Lagos ratified a free-trade agreement with the US, the last step in the process before the treaty comes into effect in January 2004.


Chile's Central Bank reduced the key interest rate by 50 basis points to 2.25%, the first reduction since January.


Judge Marcos Libedinsky has been chosen to lead Chile's highest court.


Chile's Senate has finally given approval to its first free-trade agreement (FTA) with South Korea.


The sovereign bond issued was the first launched by the Chilean authorities to include a Collective Action Clause (CAC). In the event of a default, the CAC allows the paper to be renegotiated with the support of a 'super-majority' - as opposed to totality - of bondholders. b1


The Independent Democratic Union (UDI) party has picked founding member Senator Jovino Novoa as its new leader in a bid to bring unity to the opposition Alliance For Chile (APC)


President Lagos signs new law giving Chileans right to divorce, despite continued opposition from Roman Catholic Church.


Manuel Contreras, former head of secret police, jailed for 15 years over disappearance and death of journalist in 1974.


Court strips Augusto Pinochet of his immunity from prosecution; case centers on campaign in 1970s and 1980s against suspected government opponents. b6


A Chilean Supreme Court judge has rejected the second and final extradition request against Argentine ex-President Carlos Menem.


The Central Bank launched a 5bn-peso (US$8.1m), 10-year fixed-rate bond. The sale met with an enthusiastic response from investors, with demand exceeding supply by 7:1. b1


Chilean Judge Sergio Munoz has begun investigating corruption claims against ex-dictator Augusto Pinochet after evidence of a secret bank account containing up to US$8m was uncovered in the United States.


Regulations on Foreign Investors


Restrictions:1. Investment must be authorized and registered at the Central Bank of Chile for remittance of income and capital. 2. Capital may not be repatriated for a period of one year form date of entry. The Central Bank must be informed of the transferring abroad of dividends and capital which is allowed at any time. 3. Nonresident investment may not exceed 5% of the voting stock of any single company. The securities of single company cannot be more than 10% of the fund's assets invested in Chile. The fund must have at least 20% of its assets invested in the shares of publicly-traded companies after the first year of operation, and at least 60% after the third year, and at least 80% must be invested in shares and long-term financial instruments. The fund's holdings in securities issued by a single business group may not exceed 40% of its assets; and not exceed 25% of shares of any single private company.

Taxation: 35% dividend tax rate (less a tax credit of 15% rated at which company profits are taxed and institutional investors can choose a flat rate of 10% payable at repatriation). 35% capital-gain tax (15% for non-customary traders holding shares for at least one year). Lower tax rates for Argentine investors because of a double taxation treaty with that country. 1% to 25% inheritance tax on gifts and inheritances.a5(first entry)


No change through 2001.a5


15% corporate tax payable on an annual basis plus monthly provisional payments on account of the corporate tax throughout the year. In addition, once profits are made available to the nonresident investor, the 35% tax becomes due, with a 15% tax credit deduction. Thus, the effective additional tax rate is 20%, and the total overall tax burden for nonresident entities doing business through a branch or subsidiary in Chile is 35%.a15(first entry)


Restrictions: 1. Starting June 6, the minimum investment under DL 600 to $5 million per investor, and increased it to $250,000 in the case of fixed assets, technology, debt capitalization, and profit reinvestments after that date. 2. Investors must acquire a license in telecommunications, and the number of licenses available is limited in some new sectors of the industry. 3. Except for the fisheries and media sectors noted above, Chile does not restrict the right to private ownership or establishment. b7

Taxation:  Corporate Tax changed to 17%.  VAT increased by 1% to 19% effective October 1st. b1