In the Official Gazettes of May 10 and 12, 2000, the Central Bank of Chile published several amendments to the Compendium of Rules on Foreign Exchange Operations, which may be summarized as follows:

1. Elimination of the one-year mandatory permanence term for foreign capital contributions and investments.

As of May 12, 2000, funds brought into the country in the form of capital contributions or to carry out investments in Chile may be freely repatriated at any time without being subject to any minimum term of permanence.

2. Amendments to Chapter VI of the Compendium, which regulates derivatives transactions carried out with individuals or entities domiciled abroad.

(a) Chapter VI now includes derivatives transactions related to Chilean pesos or "Unidades de Fomento" (a Chilean inflation-indexed, peso-denominated monetary unit, which is set daily in advance based on changes on the previous month’s inflation rate). Since these derivatives operations are now regulated under Chapter VI, Chilean counterparties are under the obligation to inform the Central Bank, on a monthly basis, on transactions carried out in the previous month.

(b) Chilean counterparties may freely use foreign currency maintained abroad to comply with their obligations. Chapter VI already provided that foreign currency for these purposes may be purchased in the Informal Exchange Market but must be remitted abroad through the Formal Exchange Market. In both cases, such payments must be informed to the Central Bank.

(c) Chilean banks are now expressly authorized to carry out derivatives transactions related to Chilean pesos and "Unidades de Fomento".

3. Finally, through the replacement of Chapter IV on May 10, 2000, stock brokers and securities dealers have been included within the entities which may be authorized by the Central Bank to form part of the Formal Exchange Market, which was formerly formed exclusively by banks and authorized exchange houses.

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Jimena Bronfman

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