Chile Seeks to Enhance Derivatives Market

Chile’s finance ministry is seeking to enhance the local derivatives market by eliminating uncertainty regarding how they are taxed. Finance minister Felipe Larrain says in a statement that currently investors have no way of knowing if an option will be classified as a hedge or speculation for tax purposes. “We want to make sure Chilean companies, especially smaller ones, have access to hedges with the legal certainty that it will be treated as a hedge and not as speculation because they pay different tax rates,” he adds. He explains that this uncertainty undermines the development of a key market for the financial system and that by eliminating uncertainty, the derivatives market will gain depth and liquidity, improving financial risk management.