Chile’s government plans to capitalise on the country’s stability in an otherwise turbulent Latin American environment by promoting the capital, Santiago, as a financial centre for the region, to grow its commodity-powered economy. 

“The financial sector in Chile represents 5% of GDP, but we can double that and the number of people working in it [a figure that currently stands at about 200,000] through a sustained development [of Santiago as a financial centre],” says finance minister Felipe Larraín. 


Having asserted its role as the world’s largest supplier of copper, Chile is now making inroads in diversifying its economy. The country has become an agribusiness powerhouse, while developing its domestic services sector. In the financial sector, only São Paulo in Brazil and Mexico City have attracted more foreign investors than Santiago in the past decade, according to figures from greenfield investment monitor fDi Markets. However, the government believes there is room to develop the sector further, particularly when it comes to raising its regional and international profile. 

Cutting red tape

“Chile has better economic indicators than most Latin American economies and more competitive costs. There is critical mass in the financial market, thanks to a developed network of institutional investors such as pension funds. We can attract mid-sized companies that wouldn’t go to raise capital in London or New York. Besides, we have free-trade agreements with 64 countries, which combined make up 86% of the global GDP,” says Mr Larraín. 

The government is now pushing to approve measures aimed at accommodating the needs of foreign investors doing financial business in Santiago. These range from cutting the red tape associated with the status of non-resident investors to eliminating differences in the tax treatment of local and foreign financing, as well as adopting international practices in fixed income, and streamlining security issuance processes. 

Current efforts by the central bank to raise the international profile of the Chilean peso are boosting the government's efforts. The peso currently represents just 0.2% of the global foreign exchange market and “this should increase in the future”, according to central bank governor Mario Marcel.  

“The internationalisation of the Chilean peso is a necessary step to make any regional financial centre feasible," he adds. "It would strengthen the stability of the financial centre and mitigate risks. As opposed to other countries, at the moment in Chile there is no hard currency debt raised in the local market, and no peso bonds [otherwise known as ‘huaso bonds’] raised abroad. We are trying to change that. Besides, there are domestic and foreign investors with businesses in Chile that have to trade in foreign currency to comply with regulations, which generates costs, and that’s what we are also trying to change.” 

Filling the blanks

Santiago still has some way to go before reaching the status of regional financial hub, however. The city ranked 99th out of 104 in its first appearance in the latest edition of the Global Financial Centre Index by London-based research firm Z/Yen, way behind regional peers such as Mexico City (62nd), Buenos Aires (80th), São Paulo (82nd), Panama (86th) and Rio de Janeiro (87th). 

“The centres we have always rated [highly] – Buenos Aires, São Paulo and Rio de Janeiro – are all facing issues,” says Michael Mainelli, chairman of Z/Yen. “Globally, we see two blank areas: Africa and South America.  South America is a huge region that needs functioning financial centres and Chile could be like Zurich and Geneva in Europe. Geneva is a huge commodity trading centre, Zurich is a huge banking and insurance centre. There is no reason why Santiago couldn’t perform that function for South America, particularly as it is gaining a reputation for dependability, reliability and predictability.”

Santiago has set the ball rolling; the question now is, will investors race to catch it?