MercoPress. South Atlantic News Agency

Overseas investment cap for Chilean pension funds increased from 60% to 80%

Finance minister Felipe Larraín confident the measure will help the Chilean peso

Chile's central bank said on Thursday it would gradually raise foreign investment limits for pension funds to 80% from 60% as it seeks to counter the recent sharp appreciation of the Chilean Peso.

The bank said the limits would begin rising in December, with three successive increases coming every three months. The measure is seen as an instrument to take pressure from the Chilean peso sustained appreciation, exposed as most developing countries currencies to a massive inflow of US dollars.

The Chilean peso was broadly stable after the announcement at 479.90/480.40, already up 1.9% in Thursday trading following the US Federal Reserve's announcement of new monetary stimulus after the market closed on Wednesday.

The currency has soared nearly 14% since the end of June, prompting intervention warnings from Chilean authorities concerned about the competitiveness of local exporters.

President Sebastian Piñera said last month that he is not planning capital controls, and he would like to stem the peso's appreciation by encouraging more Chilean investment abroad. The central bank has said it was weighing intervention.

“This is a potent signal in the sense that we are increasing the Chilean economy financial integration overseas” said Chilean Finance minister Felipe Larraín.

He added the latest announcements will enable that the savings of the Chileans “can be invested in a more diversified option”, added Larraín who also anticipated that the decision would help balance capital flows, “with an impact on the US dollar in mid term”.