The Chilean market in local currency government bonds was not fully considered by international investors, with only 5% of foreign participation in the local bond market.

This was most likely due to the complex pro-rata based tax on transactions and existing regulations that did not fully recognise the omnibus account setup.

This resulted in a very low weight in the JP Morgan local currency government bond index (0.1%).


Keen to change the situation and open the bond market up to foreign investment, the Chilean Ministry of Finance worked with Euroclear to investigate how the situation could be improved.

Substantial efforts were made to rationalise the local market regulations and to undertake tax reforms.

Tax laws were changed in 2016, implementing record date based taxation.

The Chilean Central Bank also updated its regulation to fully recognise the International Central Securities Depositories (ICSD) omnibus account setup.


With the necessary reforms in place, Chilean government bonds became fully Euroclearable in 2017.

The first government bond in the new system was issued in January 2017 and saw a record participation of foreign investors (> 20%).

Following this, legacy government bonds were made Euroclearable from February 2017.

Bond index companies are currently considering increasing the weight for the Chilean government bond in their indexes.

In June 2017, the weight in the JPM index had already gone up to 2.0%.

"Our partnership with Euroclear has yielded this important milestone for our capital markets. Being able to tap into the liquidity provided by international investors is tremendously important for the continued development of our local market."


Rodrigo Valdes, former Minister of Finance of Chile further commented that "it should yield tangible benefits such as reducing the cost of borrowing, increasing liquidity in our local markets and furthering investment in our economy. By making our bonds Euroclearable, we have aligned our capital market infrastructure with the globally recognised standards that are synonymous with Euroclear’s robust, resilient and sound risk-management principles."

And the Chilean Banking Association's CEO, Ricardo Mette E. added: "it is in the best interest of Chilean banks to expand their base of potential investors to international markets by issuing securities that can be both purchased and settled via Euroclear […]. This will allow not only the issuers to expand their investor base, but also to take advantage of the resilient appetite for Chilean top-tier names from international investors."

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With only 5% of foreign participation in the local bond market, the Chilean Ministry of Finance was keen to find ways to improve the situation.