The foreign exchange market Chile is regulated by the Central Bank of Chile. This market plays a major role in designing the monetary and foreign exchange policies of the country. Chile, like many other countries, follows the floating exchange rate system. It implies that the value of the Currency of Chile would be maintained by the prevailing market conditions.
At certain times when value of the national currency faces any downfall, the Central Bank of Chile takes appropriate measures to get hold of the condition. Operations in the foreign exchange market Chile are regulated by the Central Bank Law. According to the Chilean law, there are several types of foreign exchanges.
The law states that any kind of sale or purchase of foreign currency and any activity that needs letter of credit, note, checks, mail or wire transfer are considered as foreign exchange operation. If there is any agreement that involves provision of payment in foreign currency then that payment also comes within the foreign exchange operations in Chile. At the same time, if any kind of dealing in stock, bonds or commercial paper is done in foreign currency or the value is fixed in foreign currency, it is going to be treated as foreign exchange activity.
According to the Chile Central Bank Law, free trading in foreign currency is allowed in Chile but some particular operations are only meant for the formal foreign exchange market of Chile.
At the same time, the Central Bank has been provided with the power to impose some restrictions on some specific type of foreign exchange operations in Chile, but the time period of these restrictions is limited for one year only. The finance minister of the country enjoys the veto power regarding these restrictions and the Central Bank’s Council has the power to overrule the veto.
The Central Bank regulation also describes that the foreign currency related to the export and import operations should be transformed in the Chilean pesos and the transaction should be done through the formal foreign exchange market in Chile. Again, any kind of foreign loan or investment is bound to involve the formal foreign exchange market in the process.