By: Mauricio Halpern | Vicente Vergara

The financial tensions resulting from the coronavirus disease 2019 (COVID-19) pandemic have motivated the Chilean Central Bank (“BC”) and Financial Market Commission (“CMF”) to enact an Emergency Economic Plan (the “Plan”), which provides support to the country’s most vulnerable workers, companies and families. The Plan authorizes US$24 billion in new loans and further capitalizes the Small Business Guarantee Fund (“FOGAPE”), a state-run fund to support small entrepreneurs.

As part of the Plan, the following measures have been adopted and/or announced to date:

1. Capitalization of Banco Estado: An extraordinary capitalization of Banco Estado (Chile’s most important public bank) in the amount of US$500 million for a period of 12 months has been approved and increases Banco Estado’s capacity to grant loans to a total of US$4.4 billion (Law No. 21,225).

2. Measures adopted by CMF: To safeguard the solvency and liquidity of its audited entities, CMF has announced several measures, including:

  • Mortgage relief: Authorizes borrowers who were in compliance with their mortgages when the State of Emergency was declared to reschedule up to three mortgage payments to after the original maturity date of the loan, without being treated as renegotiations under banking regulations.
  • Consumer loan payment relief: Extends consumer loan payment deadlines for individuals and small and medium businesses for up to six months, without being treated as renegotiations under banking regulations.
  • Relief to banks related to disposition of assets received as payment: Extends the term for banks to dispose of the assets they have received in payment of past due debts 18 months to avoid sales at prices lower than regular market prices (CMF Resolution No. 2432 of March 25, 2020).

3. Measures adopted by the Central Bank: On April 8, the Central Bank of Chile announced a package of measures to provide liquidity and support free flow of credit. The cornerstone of these measures is the authorization of new credit facilities for banks to incentivize continued financing and refinancing of loans to individuals and companies. The measures are the following:

  • Creation of a special credit line to increase loan placements (“FCIC”): The Central Bank created a special credit line facility of up to 3 percent of the base portfolio for banks that have placed commercial and/or consumer loans.
  • Creation of a liquidity credit line (“LCL”):  The Central Bank also created a credit line denominated in Chilean Pesos corresponding to the average reserve requirement in Pesos for each bank. Access and use of the LCL will be subject to the same conditions – including increased placements – established for the FCIC. The Central Bank has allocated US$4.8 billion to the FCIC and LCL.
  • Creation of an additional credit line: The initial funds allocated to the FCIC and LCL may increase because the Central Bank is expected to expand it with an additional facility that grants four-year loans to banks, depending on the increases in placements, with an additional multiplier effect for loans granted to small and medium business. The additional line has room to expand the initial lines of credit by up to four times, equivalent to US$19.2 billion, which would bring the total to approximately US$24 billion.
  • Loans to non-banking entities: In the coming days, the Chilean Congress will discuss legislation to authorize the Central Bank to offer some of these services to non-banking entities (such as Credit Cooperatives) provided they comply with higher regulatory standards and supervision.

4. Credit lines to small and medium business and individuals: On April 12, 2020, Chilean President Sebastián Piñera announced a program for loans by banks to individuals and small and medium businesses. The government proposes to significantly expand the Small Business Guarantee Fund (“FOGAPE”) with an expansion of government guarantees for bank loans of up to US$3 billion, allowing banks to lend to companies with annual sales up to  approximately US$33.5 million (1 million UF). The fund currently is authorized to make loans to companies with annual sales of up approximately US$11.8 million (350,000 UF). The central elements of such loans will be the following:

  • Amount: Loans are authorized for up to the equivalent three months of sales in a normal period (October 2018-October 2019) for companies with annual sales of up to approximately US$33.5 million (1 million UF).
  • Term: Loans will be payable in installments over a period between 24 and 48 months after an initial grace period of 6 months.
  • Rate: Loans will subject to a maximum interest rate of the Chile Monetary Policy Rate (TPM) + 3 percent. This is currently equivalent to a real interest rate of around 0 percent.
  • Eligibility: To be eligible, a borrower must not be in bankruptcy and may not be 30 days past due as of March 30, 2020, or as of October 30, 2019 for companies with annual sales of less than approximately US$844,000 (25,000 UF).
  • State guarantee: Increases the coverage of state guarantee on such loans to between 60-85 percent of the loan amount (the exact percentage to be determined according to the company’s annual sales).
  • Rescheduling of preexisting debts: Participating banks – all local banks have adhered to the framework set by the government – must postpone installment payments or the maturities of pre-existing debts to relieve companies’ financial burden and maximize the injection of fresh resources into the economy.

If you have any questions regarding these new requirements and their implications, please contact any member of DLA Piper’s team in Santiago, Chile, or your DLA Piper relationship attorney.


Please also visit our Coronavirus Resource Center and subscribe to our mailing list to receive alerts, webinar invitations and other publications to help you navigate this challenging time.

This information does not, and is not intended to, constitute legal advice. All information, content, and materials are for general informational purposes only. No reader should act, or refrain from acting, with respect to any particular legal matter on the basis of this information without first seeking legal advice from counsel in the relevant jurisdiction.