External Debt Characterization of Non-Banking Companies in Chile

Jorge Fernández B., Fernando Pino M. and Francisco Vásquez L.

Economic Statistics Series from Central Bank of Chile

Abstract: The World Bank's Quarterly External Debt Statistics (QEDS) database for different economies shows that the external debt of Chilean non-banking companies has increased steadily since 2012, reaching 45% of GDP in 2017, matching that of developed economies and placing itself above the average of other emerging economies. One difference between Chile and others EME is the importance of Foreign Direct Investment (FDI)-related loans. In Chile, 46% of the external debt is represented by FDI related debt while 34% corresponds to external bonds. FDI related debt originates between related parties and, by this feature, tends to be characterized by a lower risk of renewal different from that of, for example, a bank loan. On the other hand, using micro data, it is possible to identify that firms with dollar accounting hold two-thirds of external bonds. In these firms there is no currency mismatch by dollar denominated liabilities. The rest of the external bonds are held by firms with Chilean peso accounting and with low individual currency mismatch. Since 2015, external debt has been stable at around US$120 billion and the variation in debt to GDP ratio is mainly explained by movements in the exchange rate.

Date: 2020-07
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