Will the Chilean Peso ever recover?

Political turmoil across Latin America in the second half of 2019 has caused several national currencies to fluctuate considerably in recent months; not least the Chilean Peso (CLP), which, at the time of writing, sits at an unstable CLP$813 to the US Dollar (USD). Furthermore, it remains probable that there will be further deterioration as we head towards more mass demonstrations across the country in March and April – either side of the highly-anticipated constitutional referendum.

Many international professionals who hold assets in CLP are understandably anxious: devaluation of the CLP affects not only savings, but also compulsory pension contributions, such as the AFP.

Faced with these concerns, it is important to consider several possible long-term scenarios. Most hope that the CLP will eventually return to its former value (around CLP$660 to the USD in February last year). However, depending on a number of political outcomes over the next few months, this may never happen. Indeed, further decline is at least as likely as potential recovery.

Figure 1 – USD to CLP Chart 2019-20. Source: XE (https://www.xe.com/currencycharts/?from=USD&to=CLP&view=1Y)

So, how can international professionals mitigate the risk placed on their assets despite such uncertainty?

Below, two of our most experienced financial advisers, Jonathan Haskell and Edwin Huysing, suggest a few steps you can take in order to protect your personal wealth from currency fluctuations:

 

[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column][vc_empty_space][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”grid” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern” css=”.vc_custom_1582652006568{padding-top: 8px !important;padding-bottom: 10px !important;}” z_index=””][vc_column width=”1/4″][vc_single_image image=”463″ img_size=”150×150″ alignment=”center” style=”vc_box_shadow_circle_2″ onclick=”custom_link” qode_css_animation=”” link=”https://www.ci-associates.com/our-team/”][vc_column_text]

Jonathan Haskell

Partner Senior Wealth Manager

[/vc_column_text][/vc_column][vc_column width=”3/4″][blockquote text=”The CLP has been very volatile in recent months. In my opinion, it is unlikely to return to what it was for months or even years to come. I would advise my clients not to sell their CLP assets but, equally, not to increase them. The best thing you can do is consolidate more of your assets overseas in a more stable international currency – either USD, Pound Sterling (GBP) or Euros (EUR) – by investing in a regular savings or retirement plan in one of those currencies. That way your finances will be less exposed to the significant ups and downs that frequently affect Latin American currencies at times of political uncertainty, such as the one we are experiencing at the moment.” show_quote_icon=”yes”][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column][vc_empty_space height=”62px”][/vc_column][/vc_row][vc_row rtl_reverse=”yes” css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”grid” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern” css=”.vc_custom_1582654551099{padding-top: 8px !important;padding-bottom: 10px !important;}” z_index=””][vc_column width=”2/3″ offset=”vc_hidden-sm vc_hidden-xs”][blockquote text=”I would try to keep minimal savings in Chile. For practical reasons, it’s difficult to extract 100% of your assets as an expatriate, but you should try to keep only what you require in the short-term or in case of emergencies in CLP. If you own property or other significant fixed assets in Chile, I would advise you to transfer a larger proportion of your savings overseas as you will be particularly vulnerable to currency fluctuations at the moment. Now is the time to do so, before the CLP is affected by yet more political change. However, there’s no single solution for everyone, so it’s important to speak to your financial adviser before making any decisions.” show_quote_icon=”yes”][/vc_column][vc_column width=”1/3″ offset=”vc_hidden-sm vc_hidden-xs”][vc_single_image image=”467″ img_size=”150×150″ alignment=”center” style=”vc_box_shadow_circle_2″ onclick=”custom_link” qode_css_animation=”” link=”https://www.ci-associates.com/our-team/”][vc_column_text]

Edwin Huysing

Senior Wealth Manager

[/vc_column_text][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”grid” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern” css=”.vc_custom_1582652006568{padding-top: 8px !important;padding-bottom: 10px !important;}” z_index=””][vc_column width=”1/2″ offset=”vc_hidden-lg vc_hidden-md”][vc_single_image image=”467″ img_size=”150×150″ alignment=”center” style=”vc_box_shadow_circle_2″ onclick=”custom_link” qode_css_animation=”” link=”https://www.ci-associates.com/our-team/”][vc_column_text]

Edwin Huysing

Senior Wealth Manager

[/vc_column_text][/vc_column][vc_column width=”1/2″ offset=”vc_hidden-lg vc_hidden-md”][blockquote text=”I would try to keep minimal savings in Chile. For practical reasons, it’s difficult to extract 100% of your assets as an expatriate, but you should try to keep only what you require in the short-term or in case of emergencies in CLP. If you own property or other significant fixed assets in Chile, I would advise you to transfer a larger proportion of your savings overseas as you will be particularly vulnerable to currency fluctuations at the moment. Now is the time to do so, before the CLP is affected by yet more political change. However, there’s no single solution for everyone, so it’s important to speak to your financial adviser before making any decisions.” show_quote_icon=”yes”][/vc_column][/vc_row]

 

If you are concerned about the state of your personal finances amidst the recent political unrest or for any other reason, please get in touch with one of our specialist financial advisers by booking a free consultation below.

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