It wasn't so long ago that fund managers, investors and equity analysts joked that Chile was like a popular make of cockroach trap that worked by luring the critter inside a box whose door wouldn't open outwards.
An individual or mutual fund could invest in Chile, but repatriating dividends or capital gains was a tricky, expensive business and often not worth thae eVort.
However, there have been advantages to this for Chile. By locking up inward portfolio investments, making the Wxed-rate market unattractive as an arbitrage play, and discouraging Chilean companies and banks from over-exposing themselves to short-term foreign credits, Chile has been able to control Xows, stabilize the peso and inXation, and prevent capital Xight disasters such as those that afflicted Mexico, Thailand, Russia, and Brazil.
In the past two years, interest rates have dropped to around 6%, the peso has been floated and the financial markets have been globally integrated, giving the central bank and Wnance ministry the conWdence to relax their stance and make the country more attractive to foreign investors. The latest easing, announced by the bank on May 11, involved the elimination of the one-year permanency rule, by which foreign securities investors had to leave their capital in the country for at least 12 months.