On April 8, Chilean President Sebastián Piñera presented the second stage of his economic emergency plan, originally announced a couple of weeks ago. The plan complements the measures taken by the Central Bank (BCCh, in Spanish) to strengthen liquidity in the financial markets, and by the Financial Markets Commission (CMF) to make regulations more flexible and offer companies better access to loans. 

The Government’s plan has two principal focal points. The first focuses on “protecting families by creating a US$ 2 billion fund to deliver more benefits and create more jobs for vulnerable individuals and families.” The idea is to provide assistance to the country’s 2.6 million informal workers who have neither employment contracts nor unemployment insurance. 

The second axis “is to help our entrepreneurs, SMEs and businessmen who need assistance by setting up financing lines with State guarantees,” explained Piñera. He also stressed that the measure “will allow financing loans to be made to companies for up to US$ 24 billion dollars.” 

The objective of the new State-guaranteed credit line is to limit the extraordinary credit risk arising from the state of emergency and make it easier for banks to lend companies working capital for up to 48 months, with a grace period of up to 6 months, and for an equivalent amount of up to 3 months’ worth of sales. 

The president also explained that “banks lending resources to companies eligible to benefit, backed by State guarantees, must reprogram all the debtor’s pre-existing credits and postpone any amortization of their old credits until the new loans are fully paid off.” 

Lastly, Piñera announced that they are working on a permanent system to protect independent workers who bill for their services, given the current catastrophic situations.

Here is the presentation drawn up by the CMF concerning the measures implemented by this institution and in other parts of the world to tackle the spread of the coronavirus; and Circular No. 3013-848, issued by the Central Bank containing the new Chapter 5 of the First Part of the Compendium of Monetary and Financial Norms (“CNMF”), relative to the General Conditions applicable to Current Bank Accounts opened in the Central Bank of Chile.

After the meeting of the Senate Finance Committee with representatives from the CMF and the Association of Banks and Financial Institutions (ABIF, for its acronym in Spanish), Senator Ricardo Lagos Weber (PPD – opposition), said that the role of the private banking sector “has not been sufficiently supportive, taking into account that in the last week alone, they have received more than USD 4 billion at preferential rates from the Central Bank.

Along these lines, CMF vice president Christian Larraín told senators that they are analyzing making a series of modifications to the Guarantee Fund for Small Business Owners (Fogape, in Spanish), to help banks calculate how much credit to grant small companies by using this mechanism based on their assets.

CMF president Joaquín Cortez also announced that the National Consumer Service (Sernac, in Spanish) has approved remote contracting, a measure that the banks have been calling for as this will allow banks to reprogram mortgage loans faster.