In Resolution 658E of June 25 1998, the Central Bank of Chile amended the Compendium of Foreign Exchange Regulations of the Central Bank by reducing from 30% to 10% the mandatory deposit requirement or Encaje on foreign exchange brought into Chile as investments, loans or capital contributions.
Chapter III, Title I of the regulations provides that foreign currency brought into Chile as investments, loans or capital contributions will be subject to a mandatory deposit with the Central Bank, except:
- capital contributions used to contribute or increase the capital of the Chilean company or obtain control of the administration or management; or
- if during the last 12 months the amounts brought into Chile do not exceed US$100,000.
The deposit does not accrue interest. Alternatively, foreign investors may purchase a promissory note issued by the Central Bank with the obligation to immediately resell it back under certain conditions. This involves a financial cost similar to the cash deposit. Investments or capital contributions subject to Decree Law 600 are exempted from the mandatory deposit.
Francisco JIllanes and Rodrigo Sepúlveda.