How to Invest in Chile

2047

This guide is for intrepid investors who are wondering how to invest in Chile and its capital markets. Curious about investing in other frontier markets? Check out a list of our guides here.

Chile is one of the most developed countries in Latin America, with a GDP per capita safely above $20,000 and a high ranking across global rankings. It’s one of the safest frontier market countries to invest in according to our metrics, with a top 30 ranking across the 192 countries we track. Yet it remains a frontier market due to its geography and relatively small market. For investors looking for Latin American exposure, Chile’s economy is a diamond compared to some of the coal seen in the region.

Santiago Exchange (Bolsa Comercio Santiago) Snapshot:

In operation since: 1917

Location: Santiago, Chile

Market hours: 09:30 to 17:00 in Summer (from November to March), and until 16:00 in the Winter; this is to match US trading hours

Currency: Peso (CLP)

Market Capitalization (as of year-end 2014): $233 billion USD

Listed companies (as of 14 March 2016): 321 locally listed companies total, but only 246 are liquid

Taxes: For foreigners, 0% Capital Gains Tax in high liquidity stocks, 35% Dividends Tax

Main Index: Indice de Precio Selectivo de Acciones (IPSA), the 40 most traded stocks on the exchange

ChileIPSAIPSA Index, from 2011-2016

Secondary Index: Indice General de Precios de Acciones (IGPA), a market-cap weighted index of the most of the largest stocks, currently includes 70 stocks

Can foreigners invest in Chile?

Yes, and the exchange even has a nice primer on Chile and its exchange aimed squarely at foreigners, which can be found here. Unlike many of the other stock markets in Latin America, there also seem to be English versions of most websites, making it easy for non-Spanish speakers.

How the Santiago Exchange is Structured:

The Santiago exchange is the main exchange for trading in Chile, and houses multiple asset types including equities, fixed income, and money market products. While our focus is on the locally listed equities that trade in Chilean Peso, the exchange also lists a large number of foreign equities and ETFs for trading that are traded in USD.

In the equity markets, retail investors dominate the market with institutional investors playing a much smaller role compared to more developed markets. In 2014, pension funds, mutual funds, and insurance companies made up less than 10% of the market share in local equities.

How to Invest in Chile’s Santiago Stock Exchange:

Option #1: Open an account with a local stock brokerage

As a relatively developed country, the process for investing in Chile’s Santiago Stock Exchange is similar to procedures in North America or Europe. You need to open a stock brokerage account with a licensed broker on the exchange, who will walk you through the process if you contact them.

A list of all the brokers operating on the Santiago Exchange can be found on their website, here.

To decide on which firm to choose, here are the largest firms ranked by market share in 2014:

  1. Banchile (15.1%)
  2. Larra (12.2%)
  3. BTG (11.5%)
  4. Santander (9.8%)
  5. IM Trust (7.1%)
  6. BCI (6.2%)
  7. Merrill (4.5%)
  8. MBI (4.4%)
  9. Euroamer (3.8%)
  10. Security (3.8%)

We couldn’t find a brokerage that seemed to cater to foreign investors and you may need to visit a branch in person to complete the process. We recommend contacting a number of brokers to find one that is amenable to foreign investors.

Option #2: Invest in Chile through an account in Peru, Colombia, or Mexico via MILA

MILA (Mercado Integrado Latinoamericano) is an integrated stock market across Chile, Colombia, Mexico and Peru. Over 60 different brokerages and intermediaries are approved to trade on a common platform accessible to investors from all four countries.

MILA was started in 2010 by Chile, Colombia and Peru but Mexico joined in 2014 and companies from there began trading last year. This was a huge development since Mexico’s membership effectively doubled the size of the market and made MILA a competitor to Brazil’s Bovespa exchange as the main market for South America.

However, there are still many issues that MILA has yet to overcome when trying to unite four different markets under a trading platform. While volumes have continued to grow, they still make up only a small percentage of the volume on the Santiago Exchange.

If you already have an account in Colombia, Mexico, or Peru at a brokerage firm that is authorized to trade in MILA, you’re already set to trade in Chile! Conversely, if you open an account in Chile, you should look for a broker registered with MILA and then conveniently trade across all four markets.

There is significant upside here in this as there is hope that current regulatory and operational issues will be resolved in the future.

Leave a Reply