Chilean banks come through the financial crisis relatively unscathed. Recent transactions have been mainly focused on debt restructuring, so as to avoid major defaults and systemic risk.
The non-copper export sector saw lower demand and currency fluctuations, though, and Chile's salmon industry suffered heavy losses from viruses that killed most of its potential harvest. Another problem was access to liquidity in dollars, coupled with a closed market for long-term derivatives that has obliged Chilean banks to add incremental rate provisions to a non-accustomed market. In addition, the Central Bank issued regulations on derivatives that suspend set-off when banks are in distress, which have restricted the ability to enter into hedge agreements with foreign banks. Banks have used issuance of convertibles and capital increases to reinforce their capital base. From 2010 onwards, they will have to apply stricter rules on provisions.
It looks like 2010 will be a recovery year, with syndicated financing for new investments, in the infrastructure and power sectors as well as acquisition finance. The election of a market-oriented President of Chile may have a positive impact on banking transactions.
Pedro García