| Headline: Chile: Escape from the roach motel Source: Euromoney Date: June 2000 Author: Mark Mulligan It wasn't so long ago that fund managers, investors and equity analysts joked that Chile was like a popular make of cockroach trap that worked by luring the critter inside a box whose door wouldn't open outwards. An individual or mutual fund could invest in Chile, but repatriating dividends or capital gains was a tricky, expensive business and often not worth the effort. However, there have been advantages to this for Chile. By locking up inward portfolio investments, making the fixed-rate market unattractive as an arbitrage play, and discouraging Chilean companies and banks from over-exposing themselves to short-term foreign credits, Chile has been able to control flows, stabilize the peso and inflation, and prevent capital flight disasters such as those that afflicted Mexico, Thailand, Russia, and Brazil. In the past two years, interest rates have dropped to around 6%, the peso has been floated and the financial markets have been globally integrated, giving the central bank and finance ministry the confidence to relax their stance and make the country more attractive to foreign investors. |