Should I Invest in Chile Currency? 4 Pros and Cons of the Chilean Peso

On the southwest coast of South America, neighboring Argentina, Bolivia, and Peru, is the country of Chile. It’s a stable country on a continent often rocked by political unrest and economic crises. One clear marker of its economic success is its robust currency. Although the currency shows promise and potential, there are also some risks. In this article, we will discuss the pros and cons of investing in the Chilean peso.


Pros of Investing in the Chilean Peso 

1. Chile Has a High GDP

2. Inflation Rates Have Been Steadily Falling

3. Chile Has Plenty of Natural Resources

4. Government Policies Encourage Economic Growth

Cons of Investing in the Chilean Peso 

1. National Income is Over-Reliant on Exports

2. The Economy is Vulnerable to Powerful Competitors

3. Corporate Governance is Behind International Standards

4. Huge Income Gap Causes Social Unrest

Pros of Investing in the Chilean Peso 

There are several reasons why investing in Chilean currency is a good idea.

1. Chile Has a High GDP

Chile has an impressive GDP, in part because of its low unemployment rates. In 2018, unemployment was 6.9 percent. It may stay around 6.5 percent in 2019 and 6.2 percent in 2020. The World Bank credits its prosperity to globalization, and Chile also has an impressive competitive lead in South America. Another reason for its economic performance is a low level of government corruption, and the Chilean government promotes economic freedom for entrepreneurs and corporations.

Chile’s economic success has a solid track record. In 2006, the country had the largest per capita GDP in Latin America. From 2009 to 2010, the Global Competitiveness Report gave it the highest competitiveness ranking in Latin America.

In 2010, Chile joined the Organization for Economic Co-operation and Development (OECD). Founded in 1961, the OECD encourages economic progress and world trade.  Chile became the first country in South America to join this intergovernmental organization. This is a huge honor because only 36 countries are members of this organization.

The World Bank has placed Chile high on its ease of doing business index three years in a row:

  • In 2104, it ranked 34th
  • In 2015, it ranked 41st
  • In 2016, it ranked 48th

2. Inflation Rates Have Been Steadily Falling  

The inflation rate in Chile has been declining over the years. The International Monetary Fund (IMF) estimated it at 2.4 percent in 2018, and economists only expect it to increase to 3 percent through 2019 and 2020. Finance Minister Felipe Larraín says that the country’s 1.7 percent fiscal deficit is the lowest in the past four years.

The Chilean government expects inflation to decrease after 2020. This is because the Treasury Department has a time frame for implementing a monetary policy to cut spending over the next four years.

3. Chile Has Plenty of Natural Resources

Chile has vast natural resources and dominates the copper market. It exports more copper than any other country in the world and also has a quarter of the world’s supply of lithium.

4.  Government Policies Encourage Economic Growth

The strength of the Chilean government is its friendly attitude towards free enterprise. One reason it ranks as one of the most affluent governments in Latin America is because of its liberal policies to encourage economic growth.

Cons of Investing in the Chilean Peso 

Despite the favorable qualities of Chile’s currency, there are also a few reasons why caution is advised when considering investing in the Chilean peso.

1. National Income is Over-Reliant on Exports 

Since Chile’s economy relies on exports, global market changes will impact its income. Currently, Chile is vulnerable to any changes in the copper market because this mineral is its number one export product. So, if demand for copper should fall, its currency will drop in value, too.

Unexpected problems could slow down the demand for copper and cause a drop in copper prices. This could occur if the United States or the European Union buy less copper or decide to get it from another source. International copper prices could also fall if major industrial countries like China reduce their demands for copper wiring.

Chile would also face economic difficulties if it has problems with copper production. Production or transportation of copper could face the following risks:

  • A natural disaster could occur.
  • There could be a decline in R&D.
  • Earthquakes could damage the road network.
  • The energy grid could have problems.
  • Energy costs to produce copper could increase.
  • Mining operations could calm to a standstill if there are labor disputes.

2. The Economy is Vulnerable to Powerful Competitors 

Chile could face a geopolitical risk if Argentina becomes a significant competitor.  Argentina is a South American sleeping giant with the world’s largest amount of natural resources. The Humid Pampas region, for example, is a vast agricultural area that produces high-demand crops. These include yerba mate, corn, wheat, and soybeans. And while the western and the southern regions are not as fertile, they are rich in oil and natural gas.

3. Corporate Governance is Behind International Standards

The government’s liberal attitude toward free enterprise has a downside. Corporate governance in Argentina is far behind international standards. Financial transparency is an issue. There are no requirements placed on remuneration committees and there is also insufficient data on executive compensation.

4. Huge Income Gap Causes Social Unrest

In Chile, there is an enormous wealth disparity between the rich and the poor. This results in huge social inequality. The taxation system favors the rich while handicapping the middle class and the poor. In 2011, Chile student-led protests shook the country. They protested against inequities in the education system. One issue, for example, was the lack of funding for new universities. As a result, a growing population of young people could not get a higher education. The protests also voiced discontent with the social inequality in the country.

Overview of Chile Currency

The question, “What is the currency of Chile?” is often asked by foreign currency investors, corporate executives, and business travelers. They want to know details about Chilean money and the Chilean peso to US dollar conversion rates.

As a financial or business investor, you may have several reasons to want to learn more about Chilean money:

  • The Chilean government has open-minded global trading policies.
  • The Chilean government has an approachable attitude toward foreign investments and often ranks high on the ease of doing business index by the World Bank.
  • The Chilean government has transparent monetary regulations.
  • The Chilean government encourages foreign investors interested in negotiating new financial transactions.

As a corporate executive or business owner, you may have several reasons to want to know about the currency rates in Chile:

  • You may want to send money to Chile via a money transfer service to close a business transaction.
  • You may be interested in foreign investments, like building an international hotel in scenic Puerto Montt or buying Chilean government bonds.

As a business traveler, you may be investing your time and money on a planned trip and want to know about the currency exchange rate and the local currency.

  • You may want to know how much travel money you will need.
  • You may want to know if you can use a debit card, credit cards, or traveler’s checks.
  • You may want to know how much cash in the local currency you will need to carry with you.

History of Chile Currency

The Central Bank of Chile first issued pesos in 1817. This changed in 1960 and then again in 1975. Chile currency and exchange rate only fluctuate slightly. Changes in valuation of the national currency may be because of several factors:

  • Changes in international trade or foreign exchange markets
  • Changes in Chile’s economy
  • Changes in the monetary policies of major copper importing countries

Chile has a simple financial solution to maintain financial stability. The Unidad de Fomento is a unit of currency in Chile that regulates the exchange rate with the Chilean peso. When inflation is low, the Unidad de Fomento stays constant.

Chile Currency Symbol

CLP to USD conversion or vice versa is not as problematic as it may seem—despite the use of the same currency symbol. The Chile currency for the Chilean peso symbol is an S with one or two vertical bars. This is just like the United States money symbol for United States dollars. However, the International Organization for Standardization (ISO code) prevents confusion between the two currencies.

The United States currency code, based on ISO 3166-2, uses the letters “US.” Meanwhile, the Chile currency code, based on ISO 4217 uses the letters “CLP.”  Therefore, the ISO designates the currency of the United States as US$ and the currency of Chile as CLP$. Still, error and confusion do occur: Some business travelers mistakenly refer to Chilean money as the Chilean dollar.

Appearance, Denomination, and Circulation of Chile Currency

One side of Chilean banknotes shows the country’s political champions and cultural icons. The other side displays images of fauna and landscapes. At the present time, the currency of Chile has a circulation of $5.64 trillion, with about US 7.78 billion in pesos trading in the foreign exchange market.

The Banco Central De Chile issues a variety of peso coins and notes. The most frequent coins in circulation are $1, $5, $10, $50, $100, and $500.  Centavo coins are rarely used because 1 or 5 centavo coins are considered worthless outside a bank.  The larger denominations are notes ranging from $1,000 to $20,000.  Specifically, they are demarcated as $1,000, $2,000, $5,000, $10,000, and $20,000.

Chile Currency Exchange Rates 

As of this writing, one United States dollar (USD) converts to 696.11 Chilean peso. The importance of keeping track of international currency exchange rates depends on your types of investments. If you’re a trader interested in potential gains from changes in currency exchange rates, then a currency history chart will be useful. It tracks the changes in the Chile currency exchange rate with other currencies. Understanding the Chile currency to dollars ratio will give you a long-range perspective.

If you’re sending money to pay for goods in a business deal, need to transfer money to partners there, or plan to make a business trip to beautiful Chilean cities like Puerto Montt or places like Easter island than a US dollar to Chilean peso currency converter is all you’ll need.

Chile Currency Tips for Business Travelers

The Chilean language is Spanish, but many Chileans speak English. The Chilean government system is a representative democratic republic.

Understanding the currency used in Chile will help you get around more easily and travel more safely.

  • Chile charges reciprocity fees of $131 for US visitors upon entry. The Chilean government makes an exception if a US visitor, say a Chilean studying in the US, has a Chilean passport.
  • When traveling by taxi, pay with cash.
  • Hotels, restaurants, shops, theaters, and other places accept Visa, Mastercard, American Express and other credit cards. Using debit cards with the Visa/Mastercard symbol will work.
  • Carrying the local currency will help you with tips. Tipping is voluntary, and it’s easy to be generous because the Chilean peso to dollar ratio benefits your budget. Service workers earn little and appreciate tips. If you take a day-tour coach, 15.000 CLP is considered a good tip. If someone helps carry bags to your rooms, 1,000 CLP is considered a good tip.
  • You don’t have to convert currencies in your head or on a napkin. You can use a currency converter mobile app like Onanda to keep track of how much you’re spending.

Investing in the Chilean Currency

Chile may be over-reliant on copper, face geopolitical risks from Argentina, have questionable corporate policies, and may experience occasional social unrest, but the pros far outweighs the cons.

Chile remains one of the leading investment destinations in the world because it has one of the biggest, most successful economies in South America. Its stable currency will serve you well if you’re thinking of a foreign currency investment or planning long-term investments for business.