Category: Chile

Germany’s K&S, the world’s third-largest potash producer, has agreed to buy 99.3% of Latin America’s largest salt producer, Chilean Sociedad Punta de Lobos, for $480 million. K&S said it plans to make an offer for the outstanding shares in the near future.

Spain’s second-largest bank, Banco Bilbao Vizcaya Argentaria (BBVA), has bought a 51% stake in Chilean financial firm Forum for $104 million. Forum is Chile’s largest auto financing firm with a 12.4% share of the local market and more than 90,000 clients. Current shareholders will retain the remaining 49% of the company’s capital.

The International Finance Corporation (IFC), the private-sector arm of the World Bank, has committed $6.5 million to the Fondo de Inversión Forestal Lignum, a $39.4 million Chilean private equity forestry fund, recently launched to enable small and medium landowners to maximize the value of their landholdings. The Lignum Fund and the proposed forest-backed securitization are innovative financial instruments that offer an alternative capital market funding source for the forestry sector.

Chilean pulp, paper and paperboard manufacturer Compania Manufacturera de Papeles y Cartones (CMPC) has issued $135 million worth of local inflation-linked bonds. The bonds, which mature in 2027, were issued in Unidades de Fomento (UF), Chile’s inflation-linked currency unit. The money raised from the issue will be used to fund expansion. The company operates in Chile, Argentina, Mexico, Uruguay and Peru.

The Chilean government has confirmed that there has been a new gas find in the southern region of the country. Studies will be carried out to evaluate how to extract and commercialize the discovery. The find is a result of exploration work that began in 2003 in Tierra del Fuego. If it proves to be high yielding, the new gas field will be a welcome boost to Chile’s energy needs. Currently, the country imports 22 cubic meters of gas daily from neighboring Argentina but has suffered repeated shortages in recent times due to rising demand within Argentina.

Chile’s Central Bank has raised the benchmark lending rate a quarter of a percentage point, from 4.75% to 5%, in line with market expectations. Chile’s stronger economic growth and annual inflation of around 4% has prompted the Bank to push up the overnight lending rate to its highest level since March 2002. Last month the Bank held the rate unchanged, offering some hope for local exporters who have been hit by the strength of the peso against the US dollar.

Chile has approved a plan to increase pension payouts to the lowest-income members of society by 10%. The pension hike will be partly funded by maintaining Chile’s VAT at 19% next year instead of lowering it as was previously planned. This will give the government $622 million to help pay for the plan, which is part of a larger project of social protection put forward by the new government. The pension reform is President Bachelet’s first legislative success since taking office on March 11.

The Chilean government will seek to keep the VAT rate at 19% in 2007 to help fund social programs, according to President Michelle Bachelet, indicating the new government is set to tackle under-funded pensions among other priorities. The rate was set to fall next year unless Congress approves to maintain it. Each percentage point on VAT is worth US$600 million to the government. Bachelet was elected last month as the first female president in Latin American history.

Telefonica CTC Chile, the country’s largest telecom operator, sold $100 million in local bonds to refinance debt, its first sale in the local market for eight years. The paper pays 4.14 percent and comes due in 2012. The rate it paid was 118 basis points above benchmark sovereign debt as high demand pushed it down from the original 4.4 percent the company offered to investors.

Meanwhile Chilean mobile telecoms company Entel says it has agreed to sell its US long-distance subsidiary Americatel USA, valued at $62 million, to US private investment firm Platinum Equity. Entel will receive $49.6 million in cash (minus any company debt) in return for 80% of Americatel’s stock. Entel has reportedly been trying to sell Americatel for some time in the face of strong competition in the US market. The sale of the unit means that Entel no longer has any interests in the US.