The Board of the Central Bank of Chile in its meeting of April 5 1997 resolved to open access to the Formal Exchange Market (made up of banks and authorized foreign exchange brokerage firms) for purchases of foreign exchange to make investments or pay expenses in Chile or abroad in foreign currency, to eliminate other restrictions on investment abroad and to renew the effectiveness of the rest of the foreign exchange restrictions on the entry of capital into Chile.
The decision of the Board is based on the convenience involved in the gradual deregulation of foreign exchange transactions and aims to expand and strengthen the Formal Exchange Market and increase the efficiency and simplicity of foreign exchange transactions.
The soundness of the economy has made the liberalization of capital outflows from the country possible. This liberalization includes:
- Elimination of restrictions on access to the Formal Exchange Market foreign currency for investments abroad (Chapter XII, Title I of the Compendium of Foreign Exchange Regulations). The list of transactions which can be made without approval from the central bank is expanded to: taking deposits, granting credits, investing in shares or companies, setting up branches or subsidiaries and the participation in agreements for the exploration and development of natural resources abroad. The new regulations also permit the inclusion under the foreign investment rules of foreign investments with foreign exchange proceeds from exports.
- Reduction of administrative controls and restrictions on investment abroad such as prior authorization, periodical reporting requirements and prohibitions on the transfer, encumbering or disposing of such investments. Nevertheless, investment in terms of inward and outward flows of foreign exchange to and from Chile will be monitored.
- Allowing the capital, profits and returns from investments abroad to enter the country without being subject to the 30% one-year cash deposit obligation with the Central Bank of Chile, provided the original investment and its continuity up to liquidation is proven.
- Liberalization of access to the Formal Exchange Market, enabling the purchase of foreign currency related to foreign travel expenses, medical expenses, contributions and instalments to international organizations, remittances to students, pensions, real property leases, purchase of or subscription to books, magazines or other publications and other investments made in Chile. This is a major change because it allows a person to acquire foreign currency in the Formal Exchange Market and freely use it, provided the concept of use is not otherwise regulated by the Central Bank. This change has facilitated communication between the Formal Exchange Market and the Informal Exchange Market.
Concurrently, the Board of the Central Bank considered the advantage of maintaining until April 19 1998 the restrictions on the entry of foreign capital into Chile (mainly prior approvals, registration and reserve requirements) with the aim of keeping in effect policies that according to the Central Bank maintain the stability of the local currency and a proper level and structure of foreign financing.