1. What would be UBT’s country risk exposure if it where to establish itself in Chile
The political risk of Chile is minimum, which makes a very attractive country to start the Latin America Operations of UBT, since the dictatorial military regime led by Augusto Pinochet ended in 1990. After this period, a free elected president was installed and the economy has stabilized from 1991-1997 and has helped the country to secure the country towards a democratic and representative government. Growth slowed in 1998-99, but recovered strongly in 2000.
Chile has a well establish government that also reduces the political risk to enter the country. The government is divided in three branches: Executive, legislative, and judicial. Executive power with president directly elected; successive reelection not allowed. Presidential candidates must win a majority or face a runoff. Under a constitutional reform approved by Congress in February 1994, the presidential term was reduced from eight to six years, the traditional term.
In addition, Chile is a perfect country to establish a UBT division since it maintains relations with more than seventy countries. The restoration of democratic government in 1990, has reestablished political and economic ties with other Latin American countries, North America, Europe, and Asia. United States-Chilean relations have improved considerably since return to democracy and progress on issue of 1976 assassination in Washington of former Chilean ambassador to United States Orlando Letelier and United States citizen Ronnie Moffitt. Although shunning multilateral regional integration schemes, entered into bilateral tariff-cutting accords with individual Latin American countries–including Argentina, Bolivia, Colombia, and Mexico–in early 1990s, as well as negotiated framework trade agreement with United States in October 1990. Since joining the Mercosur Group in 1991, has played active role in promoting democracy within inter-American system.
Chile History Early History Before the arrival of the Spanish in the 16 th cent. , the Araucanians had long been in control of the land in the southern part of the region; in the north, the inhabitants were ruled by the Inca empire. Diego de Almagro, who was sent by Francisco Pizarro from Peru to explore the southern region, led a party of men through the Andes into the central lowlands of Chile ...
GDP: purchasing power parity: $ 153.1 billion (2000 estimate)
GPD real growth rate: 5.5% (2000 estimate)
GPD per capita: purchasing power parity: $10,100 (2000 estimate)
GDP composition by sector:Agriculture:8%
Population below poverty line:22%
Household income or consumption
by percentage sharelowest 10%: 1.2%
Inflation rate (consumer prices):4.5%
Labor force:5.8 million
Labor force by occupation:Agriculture:14%
Budget:Revenues: 16 billion
Expenditures: $17 billion
Major Industries:Cooper, foodstuffs, fish processing, iron and steel, wood products, transport equipment, cement, textiles.
Industrial growth rate:6%
Agriculture:wheat, corn, grapes, beans, sugar beets, potatoes, fruit, beef, poultry, wool, fish, timber.
Exports:$ 18 billion (fob 2000)
Export commodities:cooper, fish, paper, chemicals.
Imports:$17 billion (fob 2000)
Import commodities:consumer goods, chemicals, motor vehicles, fuels, electrical, machinery, food.
Debt – external:$39 billion (2000)
Economic aid – recipientODA, $40 million
Foreign Banks in Chile:
üABN, AMRO Bank
üAmerican Express Bank LTD
üBanco do Brazil
üBanco del Estado de Sao Paulo
üBanco de la Nacion Argentina
üBank of America NT&SA
. ": : -0, 2011 No 4: . Banking on security Slovakia - Istrobanka a. s. , has specified Vasco's Digipass security technology to safeguard its customers' remote access transactions made via the Internet and wireless devices. Digipass security allows the bank to strictly control account access, with dynamic passwords and two-factor authentication used to identify customers, while a digital signature ...
üBank of Boston
üBank of Tokyo – Mitsubishi LTD
üBBVA Banco BHIP
üChase Manhattan Bank NA
üRepublic National Bank of New York
2. What has been the effect of regulatory controls upon Chiles financial environment and how conductive is the environment for UBT’s entry?
Financially, Chile seems to be a good candidate for inception of UBT in Latin America, since after 1990, the financial system has recovered and bank profits, deposits, and loans have expanded rapidly by about 15% per year. In addition, the lack of additional regulations for international banks, which share the same regulations as local banks, is another important issue that makes Chile a very attractive country to begging our operations.
The 1997 Banking Act deregulated borrowing and lending in the Chilean banking sector. Private banking institutions may now engage in some industry regulation activities formerly reserved for the Chilean government. The Act also promotes cross-border transactions, transparency, and the application of objective criteria for new bank charters. In addition, it instituted a minimum of 8.0 percent equity to risk weighted assets to comply with the international standard of the Basel Committee on Banking Supervision. The Central Bank of Chile and the Superintendency of Banks regulate the banking industry. The Central Bank of Chile is an institution independent of the government and works to maintain the country’s currency stability and balance of payments. The Superintendency of Banks holds legal authority to charter banks and interprets and enforces laws as an independent government agency. Chile’s banking laws provide non-discriminatory treatment to protect domestic and foreign investors. The country’s banking regulations ensure free competition for financial institutions and stable and efficient capital markets. Corporate mergers throughout this decade have created a competitive environment in the banking industry. Furthermore, Chile current financial status is excellent with money supply of 3,905 billion pesos and total international reserves of US$ 15 billion.
Financial markets play a crucial role in the operation of modern market economies. They provide a return for those who have excess funds or savings, while making loan funds available to those who need additional money. Not only is the financial service industry one of the largest industry in Australia, but its actions also influence all other industries because of its key role in the economy. For ...
3. If UBT were to have a presence in Chile, what would be its lending prospects and competition?
The competition would be the 14 foreign banks previously mentioned, and the local banks that are attending UBT’s target market, which are the corporations. The corporate segment that is preferred for prospects are the mining sector, considering that UBT has previous experience in that sector from operations in Philadelphia, and the size of that sector 201,608.8 (‘000 metric tons); and the manufacturing sector.
4. What other markets in Latin America would a UBT presence in Chile serve?
In our opinion, UBT Chile should serve other Latin America markets such as Venezuela, and Peru. These countries contain markets of our interest such g, mining and oil drilling. In Venezuela, the petroleum sector dominates the economy, accounting for roughly a third of GDP, around 80% of export earnings, and more than half of government operating revenues. Venezuelan officials estimate that GDP grew by 3.2% in 2000. A strong rebound in international oil prices fueled the recovery from the steep recession in 1999. Furthermore, the Peruvian economy has become increasingly market-oriented, with major privatizations completed since 1990 in the mining, electricity, and telecommunications industries. Thanks to strong foreign investment and the cooperation between the FUJIMORI government and the IMF and World Bank, growth was strong in 1994-97 and inflation was brought under control. In our opinion, UBT Chile should serve other Latin America markets such as Venezuela, and Peru. These countries contain markets of our interest such g, mining and oil drilling. In Venezuela, the petroleum sector dominates the economy, accounting for roughly a third of GDP, around 80% of export earnings, and more than half of government operating revenues. Venezuelan officials estimate that GDP grew by 3.2% in 2000. A strong rebound in international oil prices fueled the recovery from the steep recession in 1999. Furthermore, the Peruvian economy has become increasingly market-oriented, with major privatizations completed since 1990 in the mining, electricity, and telecommunications industries. Thanks to strong foreign investment and the cooperation between the FUJIMORI government and the IMF and World Bank, growth was strong in 1994-97 and inflation was brought under control.
Market failure occurs when there is no economic efficiency within a market. Whereas government intervention is put in use when a market may not always allocate scarce resources efficiently in a way that achieves the highest total social welfare. Monopolies are one of the main causes of market failure. Monopolies are firms whom have eliminated all, if not, most competitors within that market ...