Chile watch: Bond issues, capital formation, COVID-19 loans

The overall size and number of corporate non-bank bond issuances in Chile has fallen this year to lows not seen since 2010.

Against a backdrop of heightened uncertainty, companies have instead tended to opt for bank financing, the central bank said in a June report.

Authorities are working on measures to ease the corporate debt issuance process, to help spur financing via the capital markets.

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Gross fixed capital formation in Chile will drop around 16% this year amid fallout from the coronavirus crisis, according to central bank estimates.

The central bank, in the report, expects gross fixed capital formation will bounce back 8.0% in 2021 and 4.7% in 2022.

A major proportion of investment in construction and public works has been reprogrammed for the next two years, the central bank said in a presentation.

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Chilean banks have so far approved more than 150,000 state-guaranteed soft loans under the government’s COVID-19 financing scheme, which got underway in early May, banking association Abif said.

This corresponds to more than US$8.8bn. Ninety-six percent of loans have gone to micro enterprises and SMEs – key job generators in Chile.

Around 10% of applications that contained the requisite financial details were rejected because they did not comply with state guarantee fund Fogape rules and 6% were rejected because they did not comply with banks’ internal policies.

More than 36,700 applications are in the evaluation phase.