Chile well positioned as a "refuge market"Published: August 4, 2009
Chile's optimal financial conditions have been responsible for the largest inflow of foreign investment for the period of January to June in the last eight years.
In the midst of the financial crisis, investors have decided to look for safer places to shelter their money. According to the Foreign Investment Committee (Cinver), a total of US$ 4.391 billion was authorized for investment in the first semester of this year, the largest amount registered for the period since 2001. Of the total amount, 54% entered the country in the first trimester.
It should be noted, however, that these figures only take into account investments authorized through the Decree Law 600 (DL 600); a special investment mechanism administered by Cinver. According to government sources, another US$ 644 million entered the country's financial system through Chapter 14 of the Compendium of Foreign Exchange Regulations, which is administered by the Central Bank.
The figures give an indication as to the preference of investors in periods of turbulence. Wal-Mart's US$ 2.8 billion outlay was the largest single investment though June of this year.
"Chile has emerged as a safe and trustworthy destination in the eyes of investors and this is fundamental in a crisis year. The numbers prove it: the first peak of foreign investment was in 1999, the same year as the Asian financial crisis", explained Liliana Macchiavello, Executive Vice-President of Cinver.
Following the collapse of the major investment banks and the millions lost in the Madoff case, many Chileans have also decided to repatriate their investments.
"Chileans have clearly moved their capital back into the country. There is some degree of risk aversion, yes, but there is also a desire to be closer to the people that are managing your money, explains Vicente Bertrand, a partner at IM Trust.
There has also been a marked change in the destination of the foreign capital which has entered the country this year. Of the 38 foreign investment applications submitted so far this year, 48% have been focused on the service sector (financial, retail, real estate, etc), with only 13% destined for the traditionally more important mining sector. Another sector which has stirred a great deal of interest is renewable energy.
Source:diario.elmercurio.cl