Banking & Finance 2025 Comparisons

Recent economic cycles and regulatory changes have markedly influenced the loan market in Chile. Economic challenges, including slow growth and inflationary pressures, have led to higher interest rates and tighter credit availability, which in turn impact demand for loans. Currency volatility has shifted borrower preferences toward loans denominated in Chilean Pesos (CLP, or Unidad de Fomento (UF), which is Chile’s inflation-adjusted monetary unit serving as a stable value reference). In contrast, loan providers adopt more conservative lending practices.

Macroeconomic Developments and Lending Trends

The Chilean loan market has been characterised by a gradual recovery from the economic disruptions of the 2019 social unrest and the pandemic, persistent inflationary pressures, and a cautious yet steady easing of monetary policy. Following a period of contraction and subdued credit growth in 2023, the Central Bank of Chile (Banco Central de Chile, BCCh) began reducing its policy rate from a peak of 11.25% in 2023 to 5% by the end of 2024, with further cuts anticipated in 2025. Despite these reductions, lending rates remain elevated by historical standards, and the transmission of monetary easing to the real economy has been gradual.

Regulatory Evolution and Market Impact

The regulatory environment in Chile has continued to align with international best practices, with a strong focus on financial stability, transparency, and risk management. Some of the key regulatory developments are as follows.

Basel III implementation

The phased adoption of Basel III capital and liquidity standards has been a central pillar of regulatory policy. As of 2025, Chilean banks are subject to more stringent capital buffers and enhanced liquidity requirements, reinforcing the sector’s resilience but also encouraging more conservative lending practices, increasing compliance costs for lenders and tightening credit extension.

Financial Market Resilience Law (Law No 21,641)

Ongoing efforts to implement this law are aimed at enhancing the BCCh’s ability to respond to financial distress, developing the interbank repo market, and strengthening the mutual fund liquidity management framework. The digital transformation of financial services has accelerated, with fintech lenders and digital platforms gaining market share, particularly in consumer and SME lending. Regulatory frameworks have adapted to support innovation while safeguarding consumer protection and systemic stability.

Sustainable Finance and ESG Regulation

Regulatory authorities have promoted the development of green and sustainable finance, with new reporting requirements for insurance companies and increased scrutiny of ESG risks in bank portfolios. ESG There is growing demand for sustainable finance products, including green loans and bonds, driven by both regulatory incentives and investor expectations. Chile remains a regional leader in ESG finance, with banks and corporates increasingly integrating sustainability criteria into their funding strategies.

Overall, the market demonstrates a cautious yet evolving approach, with trends leaning toward syndicated loans, NBFI-led solutions, and fintech-driven innovations targeting underbanked sectors.

Global conflicts have heightened economic uncertainty in Chile, impacting sectors such as mining and energy through fluctuations in commodity prices and tighter credit terms. Inflation and monetary tightening have raised borrowing costs, shifting preferences to local currency loans. Lenders are more cautious, with greater focus on ESG and resilience planning. Syndicated loans and sustainable finance remain resilient, while alternative lenders are gaining ground.

The high-yield market in Chile has significantly influenced financing practices, not by sheer volume but by shaping pricing discipline and fostering structural innovation. Corporations in sectors such as energy, infrastructure, and retail have increasingly turned to international high-yield issuances to diversify their funding and secure longer maturities, prompting local banks to offer lighter covenants, greater refinancing flexibility, and hybrid structures. With global credit spreads high, Chilean companies have mainly used three strategies: tapping the local UF bond market for refinancing, conducting liability-management transactions internationally, and, in distressed cases, utilising U.S. Chapter 11 and DIP financing. The UF market has been crucial, as seen in SalfaCorp’s UF-denominated notes, which extended maturities with onshore instruments. Offshore, liability-management deals – often by Holdco issuers – have addressed maturity walls. In stressed scenarios, WOM’s restructuring highlights the impact of cross-border processes and US-style protections. The market has also driven higher coupons, flexible covenants, enhanced security, and ESG integration, setting benchmarks and standardising documentation in Chile.

The Chilean loan market has witnessed the emergence of alternative credit providers, including private debt funds, institutional investors, and regional non-bank lenders, whose presence is growing in sectors such as infrastructure, renewable energy, and mid-cap corporate financing. These entrants offer greater structuring flexibility, higher risk tolerance, and longer or mezzanine financing options that banks often avoid. In response, traditional banks have eased covenants, provided more borrower-friendly refinancing, and participated in club deals with non-bank lenders. This competition has spurred innovation, including unitranche structures, payment-in-kind features, and customised intercreditor arrangements.

The regulatory landscape, notably the 2023 Fintech Law (Law No 21,521), has established a robust framework for alternative finance, enhancing transparency and market confidence. The Financial Market Commission’s open banking initiatives further support secure data sharing and improved credit assessment. As regulation and digital adoption advance, alternative lending is set to remain a vital component of Chile’s credit market.

Sophistication of Financing Structures

The Chilean banking and finance market is undergoing a pronounced shift toward more sophisticated and flexible financing structures, driven by the evolving needs of borrowers and investors, as well as the increasing participation of international investors. Large corporations and infrastructure sponsors are adopting advanced structures and instruments that were previously common in developed markets. This evolution involves more complex intercreditor arrangements, which accommodate banks, institutional investors, and alternative credit providers within the same capital structures.

Adoption of HoldCo Structures

A key development is the widespread adoption of holding company (HoldCo) structures in acquisition and project finance, particularly in sectors such as energy, infrastructure, and telecommunications. HoldCo structures enable sponsors to ring-fence liabilities, manage tax costs, and layer various types of capital – such as senior, mezzanine, and subordinated debt – across different levels of the corporate chain. These structures are increasingly accepted by lenders and investors, provided that robust intercreditor arrangements and cash flow waterfalls are in place, allowing for diversified revenue streams and flexible debt-raising options.

Preferred Equity and Hybrid Instruments

There is a notable rise in the use of preferred equity and hybrid capital instruments, which appeal to sponsors and investors seeking to balance risk and return, particularly when traditional debt capacity is limited or concerns about dilution exist. These instruments, often used in conjunction with senior debt and common equity, feature tailored terms such as payment-in-kind interest, step-up coupons, and conversion rights, and are frequently combined with debt in hybrid financings to meet the needs of capital-intensive sectors.

ESG Integration, Syndication and Digitalisation

Sustainable finance is increasingly important, with borrowers integrating ESG criteria into financing strategies through green and sustainability-linked loans and bonds, often tied to specific ESG targets. Syndication, club deals, and private placements are becoming more common, providing access to larger capital pools and diversified funding. Digitalisation and fintech collaborations are streamlining processes, reducing costs, and enabling more customised financial products, particularly benefiting SMEs and retail borrowers. The market is thus shifting toward flexible, multi-layered structures aligned with international best practices, thereby enhancing funding options for growth and projects.

Regulatory and Market Momentum

Chile has made significant progress in ESG (Environmental, Social, and Governance) and sustainability-linked finance, establishing itself as a regional leader in these areas. A major milestone was the introduction of T-MAS, the national taxonomy for environmentally sustainable economic activities, which guides investors in channelling funds toward green and socially responsible projects. The government and financial regulators have actively promoted sustainable finance, aligning local standards with international best practices and meeting the increasing demand of investors for responsible investment products.

Key regulatory advancements include the ongoing implementation of the Sustainable Finance Roadmap by the Financial Market Commission (CMF), which has mandated new disclosure requirements for banks, insurers, and listed companies regarding climate and ESG risks. The CMF has also pushed for the integration of ESG criteria into risk management and credit assessment, encouraging financial institutions to embed sustainability into their core operations.

Growth in Sustainability-Linked Lending

The Chilean loan market has experienced strong growth in sustainability-linked loans (SLLs) and green loans, with the Ministry of Finance committing up to 38% of public debt to green, social, and sustainability-linked instruments. Chile was the first sovereign in the Americas to issue sustainability-linked bonds (SLBs) with ambitious climate and social KPIs, such as greenhouse gas reduction, renewable energy, gender diversity, and biodiversity protection. Commercial banks have expanded ESG offerings, with SLLs now common in large corporate financings, often featuring terms tied to ESG performance. Banks such as Itaú Chile and Banco del Estado de Chile have adopted sustainability finance frameworks, supporting lending in renewable energy, clean transportation, affordable housing, and financial inclusion, while setting higher standards for ESG lending through external verification and impact reporting.

Prevalent Product Areas and Industries

• Energy and infrastructure: The renewable energy sector is the most active in ESG and sustainability-linked lending, reflecting Chile’s ambitious decarbonisation agenda and its status as a global leader in solar and wind power. Project finance for green hydrogen, transmission lines, and clean energy infrastructure frequently incorporates sustainability-linked features.
• Mining: As the world’s largest copper producer, Chilean mining companies are under increasing pressure from global investors to demonstrate ESG leadership. Sustainability-linked loans and bonds are being utilised to finance projects that enhance water management, decrease carbon intensity, and foster community engagement.
• Real estate and construction: Green loans are increasingly used to fund sustainable building projects, with eligibility often tied to certifications such as LEED or local green building standards.
• Agribusiness and food production: Lenders are supporting sustainable agriculture through loans linked to environmental stewardship, resource efficiency, and social impact metrics.
• Financial sector: Chilean banks are not only offering ESG-linked products to clients but are also integrating ESG criteria into their own funding strategies, including the issuance of green and social bonds.
• Overall, these developments show that ESG considerations are no longer a niche, but rather a central feature shaping financing structures and investor expectations in Chile.

Banks

In Chile, only entities authorised under the General Banking Law (DFL N°3 of 1997) and supervised by the Financial Market Commission (CMF) may conduct core banking activities, including fund collection and credit granting. Banks must be special-purpose corporations, meet capital, governance, and risk management standards, and comply with the Compendium of Financial Regulations.

Non-Bank Lenders

Non-bank lenders, including leasing and factoring companies, can provide financing without a banking license, as long as they do not accept deposits. However, they must comply with corporate laws and, when applicable, adhere to the requirements of Fintech Law. The Fintech Law also regulates alternative credit providers, requiring registration and oversight by the CMF.

Foreign lenders can freely provide loans to Chilean companies, both cross-border and locally, but cannot conduct deposit-taking or regulated banking activities without a local license. They often participate in syndicated loans, project finance, and direct lending, with transactions typically governed by foreign law and subject to Chilean conflict of law rules. Loans may be in foreign or local currency, with freely negotiated terms. Interest payments to foreign lenders are generally subject to withholding tax, while principal repayments are not taxed. Chile has no capital controls, although large transactions must be reported to the Central Bank, which retains unused emergency powers.

Foreign lenders may freely receive security interests and guarantees from Chilean obligors. There are no statutory restrictions or additional formalities imposed solely due to the lender’s foreign status. Security documents governed by Chilean law must comply with local perfection requirements, such as registration in the relevant public registries (eg, the Conservador de Bienes Raíces for mortgages, the Registro de Prendas for pledges without conveyance).

The enforcement of security by foreign lenders is carried out under the same procedures that apply to domestic creditors, whether judicial or extrajudicial. In practice, foreign lenders can obtain and enforce security in Chile without facing additional restrictions compared to local financial institutions.

Chile maintains a free foreign exchange regime, which means no capital controls limit the entry or repatriation of funds. Companies and individuals are free to agree on the currency of their financing and repayment obligations, whether in Chilean pesos or in foreign currency. Exchange rates are determined by market forces without intervention from the government, except in exceptional cases of macroeconomic instability. The Central Bank’s Compendium of Foreign Exchange Regulations (Compendio de Normas de Cambios Internacionales) allows residents and non-residents to freely contract, pay, and transfer foreign currency for most transactions, including loan disbursements and repayments. However, certain transactions – such as cross-border loans exceeding USD10,000 – must be reported to the Central Bank for statistical monitoring (Chapter XIV). There are no exchange controls or restrictions on the remittance of principal, interest, or enforcement proceeds, provided reporting requirements are met.

Overall, foreign currency exchange in Chile operates on the basis of transparency and reporting, rather than control or limitation. This has provided investors and lenders with confidence that their capital and repayments can be freely transferred in and out of the country.

Chilean law does not impose restrictions on how a borrower may use the proceeds from loans or debt securities. The use of funds is typically determined by the contractual terms agreed upon between the borrower and the lender. It is common for financing documents to include covenants that limit the application of proceeds to specific corporate purposes, project development, or the refinancing of existing obligations.

However, proceeds cannot be used for activities that are unlawful under Chilean law, such as money laundering or the financing of terrorism. Lenders are required to comply with anti-money laundering and know-your-customer obligations.

Aside from these contractual and regulatory considerations, there are no broad restrictions that prevent Chilean borrowers from freely applying loan or bond proceeds in line with their financing needs.

Chile recognises both agent and trust concepts, each with distinct local characteristics. Administrative agents are commonly used in syndicated loans, where one lender manages disbursements and rights on behalf of others; this role is enforceable under Chilean law through contractual arrangements.

Additionally, collateral agents, expressly recognised by law, frequently hold guarantees for all creditors in syndicated and project financings.

The concept of trust also exists, but it is not used in financing transactions because it is regulated differently than in common law or other Latin American jurisdictions.

Loan transfers in Chile are primarily executed through the assignment of credits, which requires a written agreement and becomes effective against the debtor upon notice or consent. Syndicated loan agreements typically include standard assignment and transfer provisions to facilitate this process.

A key issue in syndicated lending is whether the assignment of a lender’s participation automatically transfers the benefit of associated security interests, including both real (in rem) and personal (in personam) guarantees.

Real Guarantees (Garantías Reales)

These include mortgages over real estate, water rights, and certain concessions, as well as pledges over movable assets or rights. Chilean law follows the principle that accessories follow the principal obligation, so the assignment of a credit generally includes its security, unless otherwise agreed. Article 1902 of the Civil Code confirms that assignment of a credit includes its accessories, such as interest, penalties, and guarantees. However, for the transfer of real guarantees to be effective against third parties, specific formalities must be met:

• mortgages – the assignment must be registered in the Real Estate Registry where the property is located; and
• pledges – the assignment of a pledge must be recorded in the Pledge Registry (Registro de Prendas) or, in the case of certain types of pledges (prenda sin desplazamiento), in the relevant public registry.

Personal Guarantees (Garantías Personales)

Personal guarantees, such as sureties (fianzas) or corporate guarantees, are also accessory to the principal obligation. Assignment of the underlying credit typically transfers the benefit of the personal guarantee, unless the guarantee restricts assignment or requires the guarantor’s consent. Guarantee agreements, especially from sponsors or related parties, often require prior written consent for assignment. Security documents in syndicated facilities typically permit the free transfer of guarantees; however, this should be confirmed on a case-by-case basis.

Agency and Security Agent Structures

To facilitate the transferability of loans and the associated security package in syndicated transactions, it is standard practice to appoint a collateral or administrative agent to hold security interests for all lenders. This allows new lenders to benefit from existing security without re-registration or re-execution.

Novation as an Alternative Mechanism

Novation is recognised but rarely used, as it extinguishes the original obligation and may result in loss of accessory rights unless expressly preserved. Assignment remains the preferred transfer mechanism.

Debt buybacks by borrowers or sponsors are generally allowed under Chilean law, with no statutory prohibitions, provided the terms of relevant financing agreements are followed. Loan and bond documents may impose conditions such as notice periods, consents, or breakage costs. For publicly offered debt securities, buybacks must comply with securities regulations, including disclosure and equal treatment of bondholders, and are typically executed via tender or exchange offers reported to the Comisión para el Mercado Financiero. Debt buybacks are a recognised liability management tool, subject to contractual and, for public securities, regulatory requirements.

Chilean law does not formally regulate “certain funds” as in the UK; instead, deal certainty in public acquisition finance is achieved through contractual undertakings. Financing commitments are structured to remain available at closing, subject to certain conditions, including the accuracy of representation, legality, and proper execution. In private deals, tailored conditions precedent and commitment letters allocate risk, with documentation adapted from international standards to meet local requirements.

Security interests must be registered to be effective against third parties, though full agreements are not publicly filed. No Chilean case law specifically addresses certain funds; contractual practice prevails.

Recent legal and commercial developments in Chile have necessitated adjustments to financing documentation.

ESG

There is a growing focus on ESG and sustainability-linked finance. Agreements increasingly incorporate sustainability-linked covenants, reporting obligations, and key performance indicators. The Chilean Taxonomy for Environmentally Sustainable Economic Activities now provides clear criteria for green projects, influencing disclosure standards in financing contracts.

Data Protection and Cybersecurity

The recent approval of Chile’s new Data Protection Law (inspired by the EU’s GDPR) and the Cybersecurity Framework Law have required parties to address data privacy and information security in their legal documentation. Key changes include:

• clauses on the lawful processing, storage, and transfer of personal data, with explicit consent requirements and data minimisation principles;
• obligations to notify lenders and regulators of data breaches or cybersecurity incidents, and
• warranties regarding the implementation of robust cybersecurity policies and compliance with regulatory standards.

Enhanced AML and Economic Crime Regulations

Recent reforms have expanded the scope of AML and economic crime legislation, increasing the number of predicate offences and strengthening corporate criminal liability. Legal documentation has been updated to include:

• broader representations and covenants regarding compliance with AML, anti-corruption, and anti-terrorism financing laws;
• enhanced KYC (know-your-customer) and ongoing monitoring obligations;
• termination rights and indemnities in the event of breaches of these obligations.

New Lenders

On the commercial side, the increased participation of non-bank lenders and private credit funds has led to the inclusion of more flexible intercreditor arrangements and transfer provisions, reflecting international practice. At the same time, rising interest rates and inflationary pressures have prompted parties to renegotiate margin adjustment mechanisms and prepayment provisions to manage volatility.

Legal Framework

Chilean law strictly regulates the maximum interest rates that can be charged on credit operations, as outlined in Law No 18,010, which governs credit transactions and other monetary obligations. The law’s primary objective is to protect borrowers from excessive or abusive interest rates, ensuring transparency and fairness in the lending market.

Maximum Conventional Interest Rate (Tasa Máxima Convencional, TMC)

The central mechanism for limiting interest rates in Chile is the “tasa máxima convencional” (TMC). The TMC is calculated and published monthly by the Comisión para el Mercado Financiero (CMF). The rate is determined based on the average rates charged by banks and financial institutions, with adjustments according to the type of loan, its amount, currency (CLP, UF or foreign currency), and term.

Scope: The TMC applies to most credit operations, including consumer loans, commercial loans, and credit card debt.

Publication: The CMF publishes the applicable TMC for different loan brackets and terms on its website and in the Official Gazette.

Currency and Term: The cap varies depending on whether the loan is denominated in CLP, indexed units (UF) or foreign currency, and whether the term is short or long.

Legal Consequences of Exceeding the Cap

If a lender charges interest above the TMC, the excess interest is legally void. The borrower is only required to pay up to the maximum allowed, and any excess paid can be reclaimed. Furthermore, charging interest above the TMC may expose the lender to civil liability and, in cases of willful misconduct, criminal sanctions for usury.

Exemptions

The only exemptions to the TMC are those expressly established in Article 5 of Law 18,010. These include:

• loans agreed with foreign or international banks or financial institutions;
• loans agreed or expressed in foreign currency for foreign trade operations;
• operations conducted by the Central Bank of Chile with financial institutions; and
• loans where the debtor is a bank or a financial company.

It is important to note that there is no exemption based on the size of the borrower or the amount of the loan.

The TMC applies equally to all borrowers, including large corporations, unless the operation falls within one of the specific exceptions listed above.

Judicial Review and Consumer Protection

Chilean courts have consistently upheld the application of the TMC, showing little tolerance for attempts to circumvent the cap through disguised fees or charges. The Consumer Protection Law (Law No 19,496) further reinforces these protections, requiring clear disclosure of the total cost of credit and the effective annual rate (EAR).

In Chile, disclosure requirements vary depending on the contract type and parties involved. Public debt securities must be registered with the Comisión para el Mercado Financiero, and a public deed with the indenture – detailing financing terms, use of proceeds, covenants, and defaults – must be executed, binding both investors and the regulator.

For consumer lending, banks must provide standardised information on total credit cost, interest rates, fees, and repayment schedules to ensure transparency and comparability. Privately negotiated corporate or syndicated loans generally lack public disclosure requirements, but security interests, such as mortgages or pledges, must be registered to be enforceable, thereby revealing the existence of collateral.

Payments of principal made to lenders are exempt from withholding tax in Chile. Interest payments to foreign lenders, however, are generally subject to withholding tax at a standard rate of 35%. This rate may be reduced to 4% if the lender qualifies as a foreign bank or a recognised foreign financial institution, provided that certain regulatory conditions and reporting obligations are met. In cases where the loan is made under any structured arrangement, the reduced 4% tax rate is not applicable, even if the lender qualifies as a foreign bank or a recognised foreign financial institution. This includes situations where the interest is ultimately passed on or transferred to a foreign beneficiary who would not be entitled to the reduced tax rate had they made the loan directly.

Applicable double taxation treaties may also lower the effective rate. Chile has a wide network of income tax treaties. Currently, there are more than thirty-five tax treaties in effect, including treaties with the United States, the United Kingdom, China, Japan, and most economies in Europe and Latin America. Chile’s tax treaties can reduce the tax burden of foreign lenders resident in a tax treaty jurisdiction, particularly in relation to withholding taxes. Careful review of treaty benefits eligibility is common in cross-border loan structuring.

The tax treatment of other payments to foreign lenders, such as fees or commissions, depends on the specific nature of the payment and must be determined on a case-by-case basis. Chilean borrowers are responsible for withholding and remitting the tax to the tax authority at the time of payment.

In practice, loan documentation typically includes gross-up clauses that require the borrower to cover any withholding tax, ensuring the lender receives the full agreed-upon amount.

In addition to withholding tax on interest, lenders should be aware of stamp tax obligations in Chile. All credit operations documented in Chile, including loans, promissory notes, and similar instruments, are subject to a stamp tax calculated as a percentage of the principal amount, which is collected upon execution of the loan documentation. For term loans, the tax applies at a rate equal to the lesser of:

• 0.066% per month or fraction of a month until maturity; and
• 0,8%.

Loans payable on demand or with no stated maturity are subject to stamp tax at a rate of 0.332%. This tax is generally borne by the borrower, but it is a relevant cost for structuring financings.

Thin capitalisation rules can also increase the cost of borrowing. Interest payments made in a year by a Chilean borrower to a foreign lender that is a related person are generally subject to a thirty-five per cent tax in the portion related to the amount of debt that is in excess of a three-to-one debt-to-equity ratio measured at year’s end. This tax is imposed on the borrower and not the foreign lender. The borrower can deduct the amount of tax withheld from the tax payable on the excess interest payments.

Security interests also trigger formal requirements. Mortgages over real estate must be executed before a notary and registered in the Real Estate Registry, which involves registration fees. Pledges and other forms of collateral may require registration in specialised registries, such as the Civil Registry or the Registry of Commerce, with fees payable for each filing. These costs are relatively modest but must be factored into transaction planning.

Guarantees granted by Chilean entities are not subject to additional taxes beyond the registration charges associated with the underlying collateral. However, all parties must comply with anti-money laundering obligations and reporting requirements to the Central Bank for cross-border transactions exceeding the statutory threshold.

A loan may be deemed to be issued by a related person if it is guaranteed by a foreign person that is related to the borrower. Thin capitalisation and transfer pricing rules may apply in such a case.

Interest, commissions, and fees paid to foreign lenders in Chile are generally subject to a 35% withholding tax, which may be reduced to 4% if the lender is a recognised foreign bank or financial institution meeting specific regulatory and reporting requirements.

Non-bank lenders typically face a higher rate unless a double taxation treaty provides relief. Additionally, a stamp tax applies to credit operations documented in Chile, increasing financing costs. Mitigation strategies include leveraging tax treaties, ensuring lender qualification for reduced rates, and utilising gross-up clauses to allow borrowers to bear the withholding tax costs. Careful structuring is essential.

Assets and Forms of Security in Chilean Financing Transactions

Types of Collateral Commonly Used

In Chile, a wide range of assets can be offered as collateral to lenders.

The most typical forms of collateral include:

• real estate – and, buildings, and other immovable property;
• movable assets – equipment, machinery, vehicles, inventory, and other tangible personal property;
• receivables – rights to payment under contracts, including accounts receivable and future cash flows;
• shares and securities – equity interests in companies, bonds, and other marketable securities;
• money – monies deposited in current or savings accounts; and
• concession rights and intangibles – rights under public concessions, intellectual property, and other intangible assets.

Forms of Security and Applicable Legal Instruments

The form of security depends on the nature of the asset:

• mortgage (hipoteca) – used for real estate, certain mining rights, water rights, aircraft, and vessels (the mortgage is a real right that grants the lender a preferential claim over the mortgaged property);
• pledge (prenda) – several types of pledges for movable assets and rights:
• civil pledge – requires delivery of the asset to the creditor;
• commercial pledge – used for commercial obligations; may also require delivery;
• pledge without conveyance (prenda sin desplazamiento) – the debtor retains possession; commonly used for equipment, inventory, receivables, and shares; and
• special pledge over securities – for shares and other securities, often in favour of banks or financial institutions; or
• assignment of receivables (cesión de créditos) – used to secure rights to future payments or cash flows.

Perfection Requirements and Formalities

Each form of security has specific perfection requirements, as outlined below.

• Mortgage:
1. must be granted by public deed before a Chilean notary;
2. registration in the relevant Real Estate Registry (Conservador de Bienes Raíces) is mandatory;
3. priority is determined by the order of registration; and
4. if not registered, the mortgage is not effective against third parties and cannot be enforced.
• Pledge without conveyance:
1. executed by public deed or private instrument authorised by a notary;
2. registration in the Registry of Pledges Without Conveyance (Registro de Prendas sin Desplazamiento) maintained by the Civil Registry Service;
3. for assets subject to other registries (eg, vehicles), an annotation must be made in the relevant registry;
4. priority is based on registration order; and
5. lack of registration means the pledge is not opposable to third parties.
• Pledge over shares and securities:
1. executed by public deed or private instrument;
2. notification to the issuing company is required for shares;
3. for bearer securities, physical delivery to the creditor is necessary;
4. for order securities, endorsement in guarantee is required;
5. for share pledges, registration in the company’s shareholders’ ledger is required; and
6. for money deposited into accounts, notice to the bank is generally needed to perfect the security.
• Assignment of receivables:
1. executed by public or private instrument;
2. notification to the debtor is required for the assignment to be effective against the debtor and third parties; and
3. registration may be required for certain types of receivables (eg, those arising from public concessions).

Consequences of Non-Compliance

Failure to comply with the applicable perfection requirements generally renders the security interest ineffective against third parties. This means that, in the event of insolvency or enforcement, the lender will not have priority over other creditors and may lose the benefit of the collateral. In some cases, the security may be entirely unenforceable.

Timing and Costs

Timing

• The process of executing and registering security interests can vary. Mortgages and pledges without conveyance typically require several days to a few weeks, depending on the efficiency of the notary and registry offices.
• Assignments of receivables and pledges over shares can often be completed more quickly, especially if no registration is required.

Costs

• No taxes are imposed on the creation or perfection of security interests, but notarial and registration fees apply.
• Fees vary depending on the value of the secured obligation and the registry involved. For example, real estate registry fees are typically a small percentage of the secured amount, subject to minimum and maximum thresholds.
• Additional costs may include legal fees, translation, and legalisation of documents if foreign parties are involved.
• The borrower generally bears these expenses and must be considered when structuring a financing.

Absence of the Floating Charge Concept

Chilean law does not recognise the concept of a “floating charge” as it exists in common law jurisdictions, such as the US, England, or Australia. In those systems, a floating charge allows a lender to take a security interest over a shifting pool of present and future assets, with the debtor retaining the ability to deal with those assets in the ordinary course of business until the occurrence of a crystallisation event. In Chile, the legal framework is grounded in civil law principles, which necessitate specificity and clarity when establishing security interests. This means that, in practice, lenders seeking comprehensive security packages must combine several types of security agreements to cover the borrower’s relevant asset base.

Security Over Present and Future Assets

While Chilean law does not permit a single, universal security interest over all present and future assets of a company, it does allow for the creation of security interests over a broad range of asset classes, both present and, in some cases, future. However, each type of asset must be individually identified or at least determinable at the time the security is granted.

No Crystallisation Mechanism

There is no legal mechanism in Chile for the “crystallisation” of a floating security interest into a fixed charge upon default or insolvency. Each security interest remains limited to the assets specifically described in the relevant agreement and perfected according to law.

Market Practice and Structuring Solutions

To approximate the effect of a floating charge, Chilean market practice often involves:

• granting pledges without conveyance over broad categories of movable assets, with language designed to capture after-acquired property within the defined class;
• using security agent structures to hold security on behalf of all lenders, facilitating the administration and enforcement of multiple security interests; and
• periodically updating security agreements or registering supplemental agreements to capture new assets as the borrower’s asset base evolves.

Permissibility of Guarantees

Chilean law permits companies to grant guarantees in favour of third-party obligations, including downstream (parent to subsidiary), upstream (subsidiary to parent), and cross-stream (between sister companies) guarantees. This flexibility is widely used in both domestic and cross-border financing structures, particularly in syndicated loans, project finance, and acquisition finance transactions.

Corporate Benefit and Corporate Purpose

The main legal limitation on granting such guarantees is the requirement that the transaction must fall within the corporate purpose (objeto social) of the guarantor and must not be contrary to its corporate interest (interés social). Chilean courts and doctrine have generally interpreted the corporate purpose requirement strictly, especially for upstream and cross-stream guarantees, as these may not provide an obvious direct benefit to the guarantor. If a guarantee is granted outside the corporate purpose, it may be declared null and void.

Standard market practices to mitigate this risk have been outlined below.

• Expressly include the granting of guarantees for group companies or affiliates within the corporate purpose clause of the company’s bylaws (estatutos sociales).
• Obtain specific shareholder or board approval for the granting of the guarantee, particularly where the benefit to the guarantor is indirect or less evident. Typically, the granting of guarantees requires approval from the board of directors, and in some cases, shareholder approval may be advisable to mitigate potential challenges. In addition, companies must comply with related-party transaction rules when providing guarantees in favour of affiliates.
• Document the rationale and expected benefit to the guarantor, such as access to group financing, improved terms, or preservation of group value.
• Obtaining legal opinions confirming that the guarantee is within the corporate purpose and has been duly authorised.
• Including representations and warranties in the finance documentation regarding due authorisation and compliance with corporate purpose.

General Legal Framework

Chilean law does not contain a statutory prohibition on a company (the target) granting guarantees, security, or other forms of financial assistance for the acquisition of its own shares or those of its parent company. This is a notable distinction from many European jurisdictions, such as Spain or the UK, where strict financial assistance rules apply. In Chile, the concept of “financial assistance” as a legal restriction is not expressly regulated.

Corporate Purpose and Corporate Benefit

Despite the absence of a specific statutory prohibition, the granting of guarantees or security by the target in connection with the acquisition of its own shares is subject to general corporate law principles, with the most relevant limitations as follows.

• Corporate purpose (objeto social) – he transaction must fall within the company’s stated corporate purpose as set out in its bylaws. If the provision of financial assistance is not expressly or implicitly included in the corporate purpose, the transaction may be challenged and declared void.
• Corporate benefit (interés social) – directors must act in the best interests of the company. If the financial assistance does not provide a clear benefit to the target, directors may be exposed to liability for breach of their fiduciary duties.

Shareholder and Board Approvals

To mitigate risks, it is standard market practice to:

• obtain express board approval, with directors documenting the rationale and expected benefit to the company;
• in cases where the benefit is indirect or less evident, seek shareholder approval at a general meeting, especially if the transaction could be considered outside the ordinary course of business or the company’s corporate purpose; and
• amend the company’s bylaws, if necessary, to expressly authorise the granting of guarantees or security for group or acquisition financing.

Related Party Transactions

If the acquirer is a related party to the target, the transaction may be subject to the related party transaction rules under the Chilean Corporations Law (Ley de Sociedades Anónimas). This would require additional approvals, enhanced disclosure, and, in some cases, fairness opinions or independent director review.

Regulatory and Statutory Restrictions

Certain Chilean entities, including banks, insurance companies, pension funds, and other financial institutions, are subject to sector-specific regulations that may restrict or require prior regulatory approval for granting security or guarantees. When security or guarantees involve related parties under the Chilean Corporations Law, a more rigorous approval process is required. This may necessitate approval from the board, independent directors, and shareholders, along with additional disclosures and fairness opinions. All transactions of this nature must align with the company’s corporate purpose and interests. Directors are responsible for ensuring proper authorisation to avoid potential liability.

Consents and Approvals

Depending on the company’s bylaws and the nature of the transaction, board or shareholder approval may be necessary. Existing contractual arrangements, such as negative pledge clauses or joint venture agreements, may also require third-party consent before granting new security or guarantees.

Costs and Taxes

Establishing security interests typically incurs notarial and registration fees, which are generally modest but can rise for high-value transactions. Credit operations may trigger a stamp tax, currently at 0.066% per month (capped at 0.8% of the principal), with possible exemptions for refinancing. Involving foreign parties may require document legalisation, an apostille and translation into Spanish, which increases time and costs.

Central Bank Reporting

For cross-border financings exceeding USD10,000, reporting to the Central Bank is mandatory under the Compendium of Financial Regulations; however, this does not restrict the granting of security. The reporting obligation usually falls on the Chilean borrower or local financial institution.

General Principles and Procedures for Releasing Security Interests in Chile

The release of security interests in Chile is a formal process that must follow the same legal and registration requirements as their creation. The process varies by security type, but all releases must be documented and, where applicable, registered to be effective against third parties.

Mortgages

A mortgage is released through a public deed of cancellation executed by the creditor (and sometimes the debtor), which must be registered with the relevant Real Estate Registry. The release is only effective against third parties once registered. The process may take several days to weeks, depending on the efficiency of the notary and registry.

Pledges

• For civil and commercial pledges requiring asset delivery, release occurs by returning the asset and, if needed, executing a cancellation document.
• For pledges without conveyance, release is formalised by a public deed or notarised private instrument, followed by cancellation in the Registry of Pledges Without Conveyance and, for certain assets, in other relevant registries.
• For pledges over shares or securities, release involves written notice to the issuer, return or cancellation of certificates, and recording the cancellation in the shareholders’ ledger. For bank account pledges, the debtor or institution must be notified.

Assignment of Receivables

Release is documented through a written notice to the debtor and, if applicable, by cancelling the registration. Notifying the debtor and third parties is crucial to prevent double payments.

General Considerations

Security is released upon full repayment or mutual agreement, with the creditor providing formal documentation. In syndicated loans, the security agent co-ordinates the release. Notarial and registration fees apply but are generally modest.

In Chile, the priority of security interests is governed by the Civil Code and special laws, establishing a statutory order of preference (prelación de créditos) among creditor classes. Secured creditors generally have priority over unsecured creditors; however, the specific ranking depends on the type of security and the nature of the claim. First-class credits, such as court costs, employee wages, and certain taxes, have the highest priority (even over secured creditors) in insolvency. Second-class credits are those secured by pledges over movable assets, with priority based on the order of perfection (registration or delivery). Third-class credits are secured by mortgages over real estate, ranked by registration order in the Real Estate Registry. Unsecured credits rank after all secured and privileged claims.

The effectiveness and priority of security interests require compliance with perfection requirements: mortgages and pledges are prioritised by registration order, while assignment of receivables depends on notification or registration. Failure to perfect or register may result in loss of priority or unenforceability.

Chilean law recognises contractual subordination, allowing creditors to agree to subordinate their claims, provided the agreement is executed before a notary and then notarised (protocolizado). Such agreements are binding and respected in insolvency, except where they conflict with statutory priority for privileged claims. Intercreditor and subordination agreements can vary priority among lenders, but cannot override the mandatory order for first-class credits.

Priming Liens Under Chilean Law

Chilean law recognises certain statutory liens, known as “priming liens,” which arise automatically and take priority over a lender’s security interest – even if the lender’s security is duly perfected and registered. These liens, established in the Civil Code and special statutes, are especially significant in insolvency, enforcement, and foreclosure situations.

Key Types of Priming Liens

The most material priming liens include:

• employee claims – wages, severance, and social security contributions owed to employees have first-class priority, paid before any secured or unsecured creditors;
• tax claims – statutory priority is granted to certain tax obligations, such as unpaid property taxes and social security contributions (for instance, real estate tax liens can prime even registered mortgages);
• judicial costs and fees – court costs and judicial expenses related to collateral preservation or realisation may take precedence over secured creditors;
• mechanic’s and materialman’s liens – contractors or mechanics who improve or repair property may have statutory liens that override pre-existing security interests; and
• utility and public service charges – in some cases, charges for utilities or public services provided to a property may be prioritised over existing mortgages or pledges.

Mitigating Priming Lien Risks

These statutory liens cannot be contractually waived or subordinated. Lenders mitigate risks through due diligence, covenants requiring compliance with privileged obligations, ongoing monitoring, reserve accounts or escrows, and, where possible, insurance to cover privileged claims.

Secured lenders in Chile may enforce collateral when obligations are due and unpaid, with procedures varying by the type of collateral and the terms of the security agreement. Mortgages require judicial foreclosure and a public auction, while pledges may be enforced judicially or, if permitted, through extrajudicial actions, such as intervention or collecting amounts and applying them to the payment of the debt.

Guarantees are enforced against guarantors after the debtor defaults, with procedural protections. Personal guarantees require court action, while demand guarantees may be payable upon first demand, if agreed. Enforcement is subject to statutory procedures, debtor rights, and priority claims, with practical challenges including judicial delays and costs.

Recognition of Foreign Governing Law in Contracts

Chilean law generally recognises the choice of a foreign law as the governing law of a contract, provided that the agreement has a reasonable connection to the chosen jurisdiction and that the application of such law does not violate Chilean public policy or mandatory rules. In practice, cross-border financing agreements often opt for New York or English law, and Chilean courts have consistently upheld these choices in commercial matters.

Submission to Foreign Jurisdiction and Exclusive Chilean Competence

Submission to a foreign jurisdiction is also permitted. Chilean courts will respect valid jurisdiction clauses, although they retain competence over matters considered subject to exclusive Chilean jurisdiction, such as rights over real estate located in Chile or insolvency proceedings involving Chilean companies. In these cases, local law and courts cannot be displaced.

Waivers of Sovereign Immunity in Chilean Law

Waivers of sovereign immunity are recognised under Chilean law and are commonly included in financing agreements with state-owned entities. Courts have accepted such waivers provided they are expressed clearly and unequivocally, although certain core sovereign acts remain non-waivable under constitutional and public international law principles.

Foreign court judgments can be enforced in Chile after recognition by the Supreme Court through an exequatur proceeding, which ensures reciprocity, proper service, finality, and no conflict with public policy, without retrial of the merits. Once recognised, judgments are executed via standard procedures. Foreign arbitral awards are enforceable under the New York and Inter-American Conventions, requiring application to the Santiago Court of Appeals, which verifies formal requirements and public policy compliance. Chilean courts generally adopt a pro-enforcement stance for both foreign judgments and arbitral awards, provided procedural safeguards and public policy are respected.

Foreign lenders’ rights under Chilean loan or security agreements are generally protected; however, enforcement can be affected by insolvency proceedings, which impose an automatic stay and require creditors to participate collectively. Statutory claims, such as labour and taxes, rank ahead of secured creditors. Proper perfection and registration of security interests are essential; otherwise, lenders’ rights may be unenforceable or subordinated. Judicial procedures, especially for mortgages, can lead to delays due to required foreclosure and auction processes.

Impact of Insolvency Reorganisation Proceedings on Secured Creditors in Chile

The commencement of insolvency proceedings in Chile has a direct impact on a lender’s ability to enforce loans, security, and guarantees. In particular, insolvency reorganisation proceedings grant the debtor an automatic stay that prevents individual enforcement actions by creditors. As a general rule, this means that secured lenders cannot foreclose on their collateral outside the insolvency process and must instead participate in the collective proceeding administered by the insolvency court. However, if the debtor considers that the assets over which the securities are granted are not essential to their economic activities, secured creditors maintain their right to enforce their guarantees outside the insolvency proceedings. During reorganisation, secured creditors may also be bound by the terms of a restructuring agreement approved by the required creditor majorities and confirmed by the court.

Secured Creditor Rights and Priority in Liquidation Proceedings

In the event of liquidation proceedings, secured creditors retain a preferential right over the proceeds of their collateral; however, this priority is subject to certain statutory claims, most notably labour obligations, social security contributions, and certain taxes, which take precedence. In liquidation, secured assets are generally sold and the proceeds distributed according to the statutory priority scheme.

Enforcement of Guarantees and Practical Considerations for Lenders During Insolvency

Guarantees follow the same principle: they may be enforced, but if the guarantor itself is subject to insolvency proceedings, the creditor must assert its claim within that process. In practice, insolvency significantly delays recovery and can affect the value of the collateral, which is why lenders in Chile place emphasis on proper perfection of security and contractual protections before default occurs.

Statutory Priority of Claims in Chilean Insolvency Proceedings

In Chile, the order of payment of creditors in insolvency is governed by the Bankruptcy and Insolvency Law. First in priority are expenses of the insolvency process itself, which include court costs and fees of the liquidator or administrator. Next are labour-related claims, including wages, severance payments, and unpaid social security contributions, all of which enjoy a statutory preference over secured and unsecured creditors. Certain tax obligations owed to the Treasury also take precedence over secured claims.

Distribution of Proceeds Among Secured, Unsecured, and Subordinated Creditors

Secured creditors are then paid from the proceeds of the specific collateral over which they hold perfected security interests, after satisfaction of the higher-ranking statutory claims. If the value of the collateral is insufficient to satisfy the debt, the secured creditor participates in the insolvency as an unsecured creditor for the balance. Unsecured creditors, including trade creditors and lenders without collateral, are paid on a pari passu basis with whatever proceeds remain. Finally, subordinated creditors are satisfied only after all other claims have been paid in full, which in practice often means they recover little or nothing.

Distinction Between Liquidation and Reorganisation Proceedings

This order only applies in the case of liquidation proceedings. In reorganisation proceedings, the payment conditions will be the ones agreed upon by the creditors in the relevant reorganisation plan. In any case, note that labour-related claims, social security and certain tax obligations are not subject to the reorganisation plan.

In Chile, reorganisation proceedings typically last three to five months, while liquidations can extend from one to three years, depending on the complexity of assets and the number of creditors.

Creditor recoveries vary: secured creditors fare better, especially in reorganisations that preserve collateral, but outcomes depend on the plan’s feasibility.

In liquidations, secured creditors recover from collateral sales; however, statutory preferences for labour and tax claims reduce the available amounts. Unsecured creditors often recover little. Overall, Chilean insolvency procedures are orderly and transparent, but recoveries are generally modest due to delays, statutory priorities, and forced asset sales.

Out-of-court restructurings under Chilean law enable financially distressed companies to negotiate private workouts with creditors, including debt rescheduling, covenant amendments, debt-for-equity swaps, or new funding arrangements. These arrangements occur outside formal insolvency proceedings and lack an automatic stay, allowing creditors to potentially still enforce their claims during negotiations.

Such restructurings are most effective when main creditors cooperate, often involving temporary forbearance if the borrower is transparent and credible. While there is no statutory pre-packaged restructuring framework, out-of-court agreements can avoid formal insolvency if creditor consensus is strong. If over 75% of creditors by class agree, court approval can bind all creditors.

In Chile, borrower insolvency triggers an automatic stay upon court decision, halting individual enforcement and requiring all creditors, including secured ones, to join collective proceedings, which can delay recoveries and weaken negotiation leverage. Statutory priority claims – such as labour, social security, and certain taxes – rank above secured creditors, potentially eroding collateral value even for perfected security. Guarantees or security granted shortly before insolvency may be clawed back if deemed detrimental to creditors, thereby adding to the uncertainty. Lenders also face practical challenges, such as lengthy proceedings and forced-sale values, prompting them to perfect security early, monitor compliance, and include protective covenants.

Project finance is central to Chile’s financing market, supporting large-scale infrastructure and energy projects with robust participation from domestic and international lenders, development banks, and multilateral institutions. Renewable energy – particularly solar and wind – drives activity as Chile pursues carbon neutrality, while mining also relies heavily on project finance for new developments, expansions, and supporting infrastructure. Infrastructure concessions, including highways and airports, reflect Chile’s established public-private partnership model.

Recently, green hydrogen and lithium projects have attracted international investment and are expected to grow in prominence. Chile’s project finance market is sophisticated, internationally aligned, and features diverse lender participation.

Chile’s public-private partnerships operate under the Concessions Law, enabling private entities to finance, build, operate, and maintain public infrastructure through a system administered by the Ministry of Public Works. Projects are awarded via public tenders, with private concessionaires recouping investments through user fees, availability payments, or subsidies.

The legal framework ensures investor protections, including step-in rights, dispute resolution, and termination payments, while imposing limits on contract modifications and maintaining strict regulatory oversight. Despite challenges such as political scrutiny and risk allocation complexities, the concession model remains central to Chile’s infrastructure policy and attracts significant project finance.

Parties to project documents in Chile have significant flexibility in choosing governing law and dispute resolution forums. Large cross-border financings often use New York or English law and international arbitration (typically ICC or UNCITRAL), with Chilean courts generally recognising foreign law clauses and arbitral awards unless they are contrary to public policy. However, contracts involving the state or regulated sectors like energy and mining are usually governed by Chilean law and may require local jurisdiction to ensure regulatory compliance and enforceability. Ultimately, project finance transactions often combine local law contracts with foreign law-governed financing agreements, reflecting regulatory and lender expectations.

Foreign entities can generally own real property and water rights in Chile, with the main restriction being a prohibition on ownership in border zones (within ten kilometres of the frontier) unless presidential authorisation is granted. Mineral rights remain state property and may only be exploited via concessions or contracts under Chilean law. Foreign lenders may secure interests over real estate and water rights if local legal requirements are met and registration is completed. Enforcement of security is available through Chilean courts, subject to local procedures and priority claims, such as labour and tax obligations.

Project companies in Chile are typically established as corporations (sociedad anónima) or joint stock companies (sociedad por acciones), offering flexibility for shareholder arrangements and effective ring-fencing of assets and liabilities. These entities must comply with the Corporations Law and Commercial Code of Chile, and lenders generally require them to operate solely as special purpose vehicles.

Foreign investment is broadly permitted, with full foreign ownership allowed except for land in border areas, which needs presidential approval. Investment flows exceeding USD10,000 must be reported to the Central Bank. Chile’s extensive treaty network ensures additional protections, including international arbitration, fostering a stable environment for project finance.

Chilean project finance utilises a mix of domestic and international bank debt, multilateral and export credit agency support, and capital markets instruments. Banks provide long-term syndicated loans, while agencies such as IDB Invest, IFC, and CAF offer direct lending and credit enhancements, particularly in the energy, mining, and infrastructure sectors. Project bonds, often issued under New York law, are used in infrastructure and energy, backed by stable revenues. Alternative funding includes streaming and royalty agreements in mining, prepayment or offtake financing from commodity traders, and private equity through direct investment or mezzanine capital. Structures are sector-specific and align with international standards.

Natural resources projects in Chile, notably mining, energy, and forestry, operate under a robust regulatory framework. The state owns subsurface resources, such as copper and lithium, and grants exploitation rights through concessions or contracts. Water rights, once granted, become private property but are subject to use and environmental rules. Mineral exports face minimal restrictions, except for lithium, which is tightly controlled by the state through CORFO agreements or licenses, reflecting its strategic value. While beneficiation is not mandatory, policies are increasingly promoting value-added industries, especially those related to lithium. Projects must also comply with strict environmental, social, and governance (ESG) standards.

Projects in Chile must comply with a robust framework that covers environmental, health, and safety, as well as community consultation requirements. The Environmental Framework Law and Environmental Impact Assessment System require projects with significant environmental effects to obtain approval via an Environmental Impact Declaration or Study, overseen by the Environmental Assessment Service.

The Superintendency of the Environment monitors compliance and enforces sanctions. Occupational health and safety standards, risk prevention, and accident reporting are mandated by the Labour Code, with oversight from the Ministry of Labour and Superintendency of Social Security.

Community consultation, especially with indigenous groups, is required under ILO Convention 169, co-ordinated by the Ministry of Social Development and integrated into the environmental assessment process, ensuring regulatory compliance and social license.