Banco de Chile

Corporate Treasury & FX in Colombia, Chile & Peru

Report date: 
4 Mar 2025

Commentary

Amongst treasurers, Latin America does not have a great reputation. Even if we have come a long way from the past of military dictatorships and very difficult regulations, it remains more complicated than many other regions. Peru, Colombia and Chile all have seen significant turmoil in the recent past.

So – where do we stand today? It says a lot that, on this call, the peers’ main concern was about whether to use local or foreign banks, and whether the FX rates for foreign remittances were better onshore or offshore. 

Of course, there are causes for concern, especially about the direction of the economy in each country. Peers gave different views on this, especially in Colombia. But, generally, the problems companies face are manageable:

  • The biggest complaint was about the financial transaction tax in Colombia: as its name suggests, the “cuatro por mil” is a 0.4% tax on every money transfer above a monthly threshold. This can represent a significant cost when cash is being moved between banks, even within the same entity. There is a workaround which involves the use of a fiduciary: this does not work for transfers with third parties, and it blocks the cash for 24 hours. Another alternative for cross border international payments between subsidiaries is to settle them offshore.
  • All peers are working to improve working capital. Factoring and supplier finance solutions are available, but factoring is felt to be expensive. 
  • Other avenues for improving working capital include trying to use more modern payment methods. There was a feeling that these countries are maybe less...

 

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Topics covered in this report: 
Tax, Bank Relationships, Working Capital, Factoring, Payments - domestic, Payments - cross border, Payments-digital, payroll, Cash Repatriation, Hedging FX
Service providers discussed in this report: 
Banco Davivienda, Banco de Chile, Banco de Bogotá, Banco de Credito del Peru, Bank of America, JP Morgan, BBVA, Santander, Citi, Yappy

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FX & Treasury in Chile

Report date: 
31 Oct 2022

Commentary

For many years, Chile has been the poster child for Latin America: after a very difficult period in the early 1970s, it has become a haven for economic and political stability, with an economy which works well, few or no exchange controls, and an environment which is more business friendly than virtually any other country in the region.

The scenario has been somewhat tarnished since 2019, with violent public protests against rises in the cost if living, and a contentious referendum on changing the constitution – changes which were rejected by a large majority. However, in fairness, it must be said that the current constitution dates from the rule of General Pinochet, and the reaction of all political parties appears to have been that the proposal was too radical, and needs to be modified to reflect the wishes of the electors.

Against this background, all participants in the call confirmed that Chile is business friendly. For one, it has become a major market, while several others have made significant recent investments and acquisitions there. No participant has any serious doubts about the country or its future, and all view the absence of FX controls as greatly simplifying their lives.

However, all is not roses, mostly due to slow progress in administrative areas:

  • There is a lot of bureaucracy. In particular, FX trades must be reported to the central bank, even though they are all allowed.
  • The country seems to be slower than most in adopting digitalised banking. Wet signatures are required for virtually every payment and transaction, with no exceptions, even during COVID. This adds a layer of cost and inefficiency, which is surprising – Argentina and Brazil score better on this.
  • Most foreign banks seem to have a weak presence. Citi operates through a partnership with a local bank, Banco de Chile. This works quite well, but you have to ask, for example, to get the benefit of group pricing or to access Citi’s banking platforms. These are available through Banco de Chile, but they do not necessarily advertise the fact.
  • Many other foreign banks are present, notably Santander and HSBC. But it does not seem to be a focus market for them. 
  • The regulations are onerous, and
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Topics covered in this report: 
Hedging FX, FX, Bank Relationships, KYC, Cash Pooling - cross border, Cash Pooling - domestic
Service providers discussed in this report: 
HSBC, Citi, Santander, BBVA, Bank of America, JP Morgan, Scotia, Banco de Chile, Banco BCI, BancoEstado, BancoSecurity, 360T, FXall, Deloittes

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