Euroclear has opened a new channel for foreign investors to access Chilean corporate debt through its Euroclearable link with the country.
It is the latest milestone between Euroclear and Chile’s Ministry of Finance, made possible due to changes in the legal framework and tax treatment of these securities, which allow them to be compatible with international standards.
The Euroclearability of domestic corporate debt will also give Chilean local corporate issuers access to a wider investor base and deeper liquidity pools, which ultimately can realise a reduction in the overall volatility of borrowing costs.
“The latest enhancement will provide the market with a new level of capability in the corporate sector, which could include ESG issuances amongst others,” said Stephan Pouyat, global head of capital markets and funds services, Euroclear. “ESG issuance is expected to become a core pillar as illustrated by Chile’s Ministry of Finance issuing its first local Social Bond last year which captured record foreign participation.”
Euroclear first opened access to Chile’s government bond market in 2017, allowing foreign investors to settle peso-denominated bonds through Euroclear Bank’s account with Deposito Central de Valores (DCV), the Chilean central securities depository (CSD).
Over the past few years, the Brussels-based international CSD has opened new links with numerous emerging and frontier markets, enabling both foreign and domestic investors to tap wider liquidity pools.
According to study by PwC in 2019, for countries that have recently obtained Euroclearability, the potential gain from lowering borrowing costs is associated with a GDP boost of $3.8 billion over 10 years.
In August last year, Euroclear appointed TEB Securities Services as the account operator for its new link to Turkey, enabling international investors to hold and settle Turkish government debt securities through their existing Euroclear accounts.