11.09.2012
By Simon Miller
The Chilean finance minster has announced plans to boost foreign investor participation in its local debt markets.
Finance minister Felipe Larrain said the plans would bring it into line with other countries and attract foreign investors.
The Finance Ministry has approved two articles of law governing capital markets and would send them for approval to parliament said Larrain.
Currently only 1% of Chilean local debt was in the hands of foreigners while in other markets it was nearer 50% said the minister at the ChileDay investor conference in London.
Larrain continued: "We would like to significantly improve terms under which Chilean issuers can attract funds. Attracting institutional investors is very important and foreign participation in Chilean fixed income is very low at less than 1 percent."
In addition to attracting foreign participants, the reforms would also allow the government to lower its borrowing costs which remain relatively high. The finance minister said the difference between the yields of Chilean government bonds issued domestically came in at more than 50 basis points lower compared with those issued internationally.
Larrain estimated that reducing that spread would see around $10bn (£6.25bn) saved in debt servicing for the Chilean government.
The reforms would also amend tax treatment on capital gains, modifying withholding tax payment for non-residents and elevate the current requirement to trade bonds only on the stock market said Larrain. In addition, over-the-counter trading would be made easier but it would be mandatory to inform about price.
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