CHILEAN FINANCIAL MARKETS AND INSTITUTIONS

Whitney Casey

Leigh Barter

Sarah Kate Cameron

Adam Middleton

FOUNDING OF CENTRAL BANK OF CHILE

President Arturo Alessandri Palma initiated a series of projects to bolster Chile’s economy

Princeton professor Edwin Kemmerer aided Palma in establishing the role and structure of the Bank

Opened January 11, 1926

ORIGINAL STRUCTURE

Governor and Vice Governor Board of Directors

Elected by President of the Republic, Chilean commercial banks, foreign banks, representative associations, and the shareholding public

Autonomous from the government by supervised by Superintendent of Banks

DEVELOPMENT

2nd bank law: empowered the Central Bank to grant credits to the State and other state bodies

3rd bank law: expanded the Bank’s powers in terms of controlling credit and setting reserve requirements

4th bank law: created a Monetary Council and gave the Bank authority to set more expansive monetary policies

CHILEAN FINANCIAL INSTITUTIONS:THE CENTRAL BANK OF CHILE

The Current Structure Autonomy Flexible Horizontal Organization

General Manager General Counsel General Auditor

THE FUNCTIONS OF THE CENTRAL BANK OF CHILE

Emission Regulation of the

amount of money in circulation and credit

Regulation of the financial system and the capital market

Faculties to ensure the stability of the finance system

Bank functions as fiscal agent

Attributes in international issues

Faculties in terms of foreign exchange operations

Statistical functions

THE CENTRAL BANK OF CHILE ORGANIZATION AND

FRAMEWORK

The Board Conclusion

Why the need for an autonomous central bank?

FOUNDING OF SANTIAGO STOCK EXCHANGE

Founded November 27, 1893 Many of the original members were mining

companies

DEVELOPMENT

Crashed with the rest of the world during the Great Depression in the 1930s

Persisted in decline under oppressive government rule until 1973

In 1973, Marxist president Salvadore Allende was assassinated and a movement toward economic reform began

MOVEMENT TOWARDS FREE ENTERPRISE

The movement toward free enterprise which began with Allende’s assassination encouraged: Economic liberalization Decentralization External trade Respect for private property

This movement encouraged capitalism and pulled the stock exchange out of recession

RECENT HISTORY

Since 1973, Chile has experienced substantial growth

Chilean companies began trading internationally through the use of ADRs

New challenges Keeping pace with technology Attracting new investors Developing the depth of securities traded

INVESTING IN CHILE

Chile has a very secure and attractive market for investors

Open Economy solid institutional framework macroeconomic stability credible policymaking

INVESTMENT POLICY

Does not differentiate between local and foreign investors

Increase of Foreign Direct Investment Many foreign companies have established a

base in Chile bilateral investment-protection double-taxation treaties

FOREIGN DIRECT INVESTMENT

Major impact on Chile’s economic expansion Over 3,000 companies from 62 countries

held direct investments United States 24.2% Spain 20.8% Canada 18.5% United Kingdom 8.3%

Different Sectors mining $23.5 billion utilities $14.4 billion financial services $6.69 billion telecommunications $6.9 billion

MARKET CONDITIONS

Most stable economy in Latin America monetary policies of Banco Central de Chile fiscal policies of the Ministry of Finance

Two Sectors Service-based 51% Industry-based 35.5% Agriculture 5.5%

IMPORTS

2009 U.S. Dollar Amount = 39.75 billion Commodities

Petroleum and Petroleum Products Chemicals Electrical and Telecommunications Equipment Industrial Machinery Vehicles Natural Gas Etc.

EXPORTS

2009 U.S. Dollar Amount = 53.74 billion Commodities

Copper Fruit Fish Products Paper and Pulp Chemicals Wine Etc.

CHILE’S MAIN TRADING PARTNERS

Import Export

Trading Partners

0%

5%

10%

15%

20%

25%

ChinaU.S.JapanSouth KoreaBrazilMexico

Trading Partners

0%

5%

10%

15%

20%

25%

U.S.ChinaAr-gentinaBrazilSouth Korea