January

4.

The Bank reported that the Board, at its regular session on 4 January 2018, approved the Annual Debt Plan, which does not include any new bond issues in 2018.

February

1.

At its Monetary Policy Meeting, the Board of the Central Bank of Chile voted unanimously to hold the monetary policy interest rate at 2.5% in annual terms.

6.

The Board reported that starting in February 2018 the questions and frequency of the Financial Brokers Survey (FBS) will be modified to correlate with the new Monetary Policy Meeting schedule and to incorporate both international best practices and suggestions by the survey participants themselves.

With regard to the content, new questions were added on the inflation outlook for the next three months, in addition to the current questions on inflation expectations in 12 and 24 months; expectations for the MPR at the next five Monetary Policy Meetings and MPR estimates in 12 and 24 months; and estimates of the exchange rate in 7 and 28 days.

With regard to frequency, the FBS will no longer be conducted every fifteen days, but rather will be published two business days after the publication of the Monetary Policy Meeting Minutes and three business days before the Monetary Policy Meeting.

March

20.

At its monetary policy meeting, the Board of the Central Bank of Chile voted unanimously to hold the monetary policy interest rate at 2.5% in annual terms.

May

3.

At its Monetary Policy Meeting, the Board of the Central Bank of Chile voted unanimously to hold the monetary policy interest rate at 2.5% in annual terms.

The Board dictated operating rule N°9 of the Manual of the Compendium of Financial Regulations on the constitution of the Technical Reserve required of commercial banks, in the form of deposits at the Central Bank of Chile, in accordance with Section III of Chapter 3.1 of the Compendium.

June

13.

At its Monetary Policy Meeting, the Board of the Central Bank of Chile voted unanimously to hold the monetary policy interest rate at 2.5% in annual terms.

21.

Through Resolution 2156-01-180614, the Board approved the suspension of the payment, by the Central Bank of Chile, of interest on bank reserves in national currency, starting in 2019. This measure was announced on 21 July.

This initiative was effected through the repeal of Section II on the “Payment of Interest on National Currency Reserves” contained in Chapter 3.1 of the Bank’s Compendium of Monetary and Financial Regulations, applicable to banks and savings and loan associations that are supervised by the SBIF, governing reserve requirements on national currency deposits and other liabilities with a maturity of 30 days or more.

This resolution will allow the Bank to update a regulation that has not been modified since 1992, bringing it in line with the reduction of inflation over the last 25 years and with current international practices, wherein the vast majority of central banks do not pay interest on bank reserves. The elimination of interest payment on reserves will enter into force on 8 January 2019, with the close of the first reserve period in the calendar year.

Bank reserves are used not as an active monetary policy instrument, but rather as a passive financial stability tool. In that sense, the elimination of interest on reserves will not lead to changes in the monetary policy strategy or implementation and will have only a marginal effect on banks’ funding costs.

July

24.

At its Monetary Policy Meeting, the Board of the Central Bank of Chile voted unanimously to hold the monetary policy interest rate at 2.5% in annual terms.

September

4.

At its Monetary Policy Meeting, the Board of the Central Bank of Chile voted unanimously to hold the monetary policy interest rate at 2.5% in annual terms.

October

18.

At its Monetary Policy Meeting, the Board of the Central Bank of Chile voted unanimously to increase the monetary policy interest rate by 25 basis points, to 2.75% in annual terms.

November

30.

At its regular session on 21 November 2018, the Board approved the 2019 Annual Debt Plan, which does not include any new bond issues in the year.

December

4.

At its Monetary Policy Meeting, the Board of the Central Bank of Chile voted unanimously to hold the monetary policy interest rate at 2.75% in annual terms.

A. INTRODUCTION

In line with the Bank’s transparency policies,¹/ this appendix reports on the annual international reserve management. The next section B describes the investment policies and benchmark structure used in managing reserves. Section C reports on external portfolio managers. Section D summarizes the risk management policies and the results of the international reserve management.

¹/ Board Resolution 1289-01-060831 of 29 August 2006.

In the first half of 2018, the Board received the results of a peer review by the Bank for International Settlements (BIS) on the Central Bank’s international reserve management. The recommendations submitted by the BIS included improving some specific aspects of governance associated with reserve management, in order to increase delegation to different hierarchical levels, to more clearly establish accountability, and to expedite the decision-making process, all in line with international best practices.

Subsequently, in the second half, the Board approved changes to the investment policy, reducing the number of portfolios from three to two (one liquidity and one diversification portfolio) and adjusting the currency allocation and the duration of the financial instruments that are in the new benchmark.

B. Investment Policy and Benchmark Structure

The international reserve investment policy is centered on liquid financial assets that meet the legal requirements established for reserve management.

The policy is designed based on the impact on earnings and risk on the Central Bank’s balance sheet and the characteristics of potential foreign exchange liquidity needs, oriented fundamentally toward the preservation of capital in the face of possible market fluctuations.

The management objectives of the investment policy are as follows: (i) to hold foreign exchange reserves in highly liquid instruments, which can be called in the briefest period possible without incurring significant transaction costs, so as to be able to cover residual short-term external debt if necessary; (ii) to invest in instruments that present limited financial risks, in order to limit the risk of generating capital losses; (iii) to minimize the volatility of the value of the Bank’s equity as a result of changes in the exchange rates of the investment currencies vis-à-vis the peso, with the goal of reducing any negative effects on the Bank’s balance sheet; and (iv) to reduce the cost of holding reserves at the margin. This last objective led to the creation of a portfolio oriented toward achieving higher absolute returns in the long run.

Total international reserves are made up of the investment portfolio plus the cash portfolio (transaction account balances held by the General Treasury, public companies, and banks) and the other assets portfolio (IMF special drawing rights, or SDRs, certified gold, and other assets). The cash portfolio is allocated to covering expected funding requirements in the short term and is the preferred source for handling the daily funding requirements deriving from withdrawals from the foreign currency accounts maintained at the Central Bank by commercial banks and the public sector.

The investment policy also allows the use of eurodollar futures and U.S. Treasury bonds with maturities of 2, 5, and 10 years, to improve the efficiency of reserve management.

B.1 Benchmark Structure of the Investment Portfolio

The benchmark structure of the investment portfolio establishes the basic parameters that guide the currency composition, duration, credit risk distribution, type of instrument, and the respective benchmarks used to measure performance.

The benchmark structure defines three investment portfolios: the short-term liquidity portfolio, the medium-term liquidity portfolio, and the diversification portfolio (table 1).

The short-term liquidity portfolio represents 24% of the investment portfolio, and its currency structure is 100% U.S. dollars. The benchmark contemplates Treasury bills issued by the United States, with a residual maturity of up to one year. The target duration is approximately three months. Investments can also be made in bills, bonds, discount notes, floating-rate notes, commercial papers, FIXBIS, and STRIPS²/, with a residual maturity of up to one year, from eligible issuers that represent sovereign, supranational, and agency risk. Investments are also allowed in deposits with a maturity of up to three months provided that they do not exceed 10% of the portfolio. The short-term liquidity portfolio is designated, first and foremost, to be available for the potential use of foreign exchange reserves. In this portfolio, investments in currencies other than the U.S. dollar are not allowed.

²/ Separate Trading of Registered Interest and Principal Securities: cero-coupon securities backed by U.S. Treasury notes and bonds.

The medium-term liquidity portfolio accounts for 61% of the investment portfolio, and its reference structure comprises 60% U.S. dollars, 25% euros, 7.5% Canadian dollars, and 7.5% Australian dollars. This benchmark includes sovereign securities issued by the United States, Germany, Canada, and Australia, with a residual maturity of one to five years. The target duration is approximately 25 months. Investments can be made in fixed- and floating-rate notes, nominal bonds, inflation-indexed bonds, MTIs,3/ and STRIPS, with no restriction on residual maturity, from eligible issuers that represent sovereign, supranational, and agency risk. The main objective of the medium-term liquidity portfolio is to cover the Central Bank’s balance sheet. This portfolio allows investments in currencies that are not included in the benchmark, provided they are hedged against one of the benchmark currencies.

³/ Medium-term Instruments: Medium-term fixed-income securities issued by the Bank for International Settlements (BIS).

The diversification portfolio represents 15% of the investment portfolio, and its benchmark structure comprises 20% U.S. dollars, 20% Chinese renminbi, 20% South Korean won, 12% New Zealand dollars, 10% euros, 10% pounds sterling, 5% Swiss francs, and 3% Japanese yen. With the exception of the renminbi, this benchmark includes sovereign securities issued by the United States, South Korea, New Zealand, Germany, the United Kingdom, Switzerland, and Japan, with a residual maturity of five to ten years. In the case of the renminbi, the benchmark is associated with the deposit rate on three-month bank deposits denominated in Chinese renminbi and traded offshore. The target duration of the portfolio is approximately 55 months. Investments can also be made in any and all instruments approved under the most recent Current Policy Manual for the Management of Foreign Exchange Reserves, with no restrictions on terms (or residual maturity) or currencies. The diversification portfolio is managed on the basis of a risk budget. Deviations from the benchmark are limited to an average monthly ex ante tracking error of 100 basis points (bp) per year,⁴/ which cannot exceed 150 bp at any given time. The main objective of holding these assets is to increase returns at the margin so as to reduce the existing gap between the cost of the Bank’s liabilities and the returns on its investments.

⁴/ The tracking error identifies the incremental risk incurred by a portfolio, relative to the benchmark, when it takes positions outside the benchmark. For the purposes of management, limits can be imposed on this incremental risk, and these limits are known as a risk budget.

The investment portfolio has mechanisms for rebalancing the subportfolios to ensure that their relative size remains in line with the benchmark.

B.2 Benchmark Structure of the Cash Portfolio

The investments in the cash portfolio match the currency and term structure of expected disbursements on the Bank’s balance sheet. The currency composition of the cash portfolio is thus tied to the currency composition of expected disbursements and deposits and withdrawals in accounts held at the Central Bank by commercial banks and the public sector. The benchmark is calculated on the basis of the overnight, weekend, and time deposit rates of the reference currencies, as a function of the characteristics of expected disbursements.

B. 3 Portfolio Performance in 2018

As of 31 December 2018, the investment portfolio stood at US$34.8686 billion, while the cash portfolio held US$3.8642 billion. Taking the sum of these two portfolios plus other assets,5/ total international reserves closed the year at US$39.8606 billion. This balance was US$877.9 million higher than at year-end 2017. The growth is explained by an increase in the cash portfolio of US$987.2 million and in the other assets portfolio of US$93.1 million, which was partially offset by a decrease in the investment portfolio of US$202.4 million. The reduction in the investment portfolio is mainly due to the depreciation of the investment currencies against the U.S. dollar, while the increase in the other assets portfolio derives from transactions with the IMF. In the case of the cash portfolio, the growth is due to an increase in foreign currency deposits, mainly U.S. dollars, held by local banks at the Central Bank.

⁵/ The other assets portfolio is mainly composed of monetary gold and IMF special drawing rights (SDRs).

With regard to the value of the investment portfolio, US$8.3086 billion was in the short-term liquidity portfolio, US$21.1401 billion was in the medium-term liquidity portfolio, US$5.3067 billion was in diversification portfolio, and US$6.4 million was in current accounts. At year-end, there were also investments in onshore Chinese government bonds, through investments in a BIS Investment Pool denominated in renminbi (BISIP CNY), for a total of US$106.9 million. In addition, at year-end a share of the diversification portfolio was managed by two external managers, as described in section C of this appendix.

Of the US$33.7144 billion in the internally managed portfolio,⁶/ 84.9% was invested in sovereign risk, 12.7% in supranational risk,⁷/ 0.2% in agency,⁸/ and 2.2% in bank risk. Relative to year-end 2017, there was an increase in exposure to supranational risk and a decrease in exposure to sovereign risk.

⁶/ Excluye del portafolio de inversiones la participación en la cuota del BIS y los recursos administrados externamente.
⁷/ Supranational institutions are multilateral financial institutions, whose articles of agreement are signed by the governments of two or more countries.
⁸/ Agencies are financial institutions with specific objectives; they are fully or partially backed by the government of the country in which they are established.

Sovereign risk includes investments in the United States (59.5%), Germany (17.4%), Canada (5.2%), Australia (4.0%), South Korea (3.0%), Japan (2.5%), Poland (1.8%), New Zealand (1.3%), France (1.1%), United Kingdom (1.0%), Spain (0.9%), Switzerland (0.8%), Ireland (0.6%), Austria (0.5%), China (0.2%), Singapore (0.2%), and Norway (0.1%). Supranational risk is made up issues by the BIS (73.1%), the European Investment Bank (19.2%), the International Bank for Reconstruction and Development (3.1%), the Inter-American Development Bank (2.2%), the International Finance Corporation (1.4%), the Asian Development Bank (0.6%), Eurofima (0.3%), and the European Bank for Reconstruction and Development (0.2%). Agency risk is concentrated in one issue from Landwirtschaftliche Rentenbank (Germany). Finally, bank risk comprises deposits denominated in U.S. dollars and Chinese renminbi, in banks in France, Switzerland, and China.

At year-end 2018, the cash portfolio stood at US$3.8642 billion.

The currency composition of total reserves and the investment portfolio is given in tables 2a and 2b.

C. EXTERNAL PORTFOLIO MANAGEMENT PROGRAM

At year-end 2018, a portion of the investment portfolio was managed by two external managers: BlackRock Institutional Trust Company N.A. and Amundi Asset Management. The firms were brought on in February and October 2016, respectively, with a mandate of US$500 million each. Both firms manage a long-term global government fixed-income mandate, with a structure equivalent to the internally managed diversification portfolio.

The external portfolio managers also manage a share of the diversification portfolio, based on the same guidelines and risk budget defined for the internally managed diversification portfolio.

The priority objectives of the external management program are twofold: (i) to provide an active benchmark for the internally managed diversification portfolio; and (ii) to add value to the international reserve portfolio.

D. RISK MANAGEMENT AND RETURNS FROM INTERNATIONAL RESERVE MANAGEMENT

D. 1 Risk Management in International Reserve Management

International reserve management includes criteria for limiting liquidity, credit, market, and operational risk.

To reduce liquidity risk, the Bank manages a portfolio composed mainly of fixed-income instruments traded in deep and highly liquid secondary markets. Investments in bank deposits are limited to the cash portfolio (primarily overnight deposits) and the short-term liquidity portfolio.

With regard to credit risk, limits are applied to bank, sovereign, supranational, and agency (external financial institution) risk, as well as to the counterparties used (table 3).

The investment guidelines establish other criteria and restrictions as complementary measures to limit credit risk, including eligibility criteria for issuers, operations, and intermediaries and rules on the treatment of derivatives (tables 4, 5, and 6).

Market risk is contained through the diversification of investment currencies, instruments, and maturities and through the measurement and control of limits on exposure to duration and currency risk described above.

The average daily value at risk (VaR)⁹/was 1.65% in 2018 (1.58% in 2017). The average tracking error was 13.3 basis points.

⁹/ The VaR is based on a parametric model with an annualized daily horizon, a confidence level of 84% (one standard deviation), and a decay factor of 0.94.

Operational risk is controlled through the separation of functions and responsibilities at the institutional and hierarchical levels, the application of efficient controls to mitigate it, and the use of computer applications that adhere to market quality standards. Initiatives were carried out to improve the standards of operational continuity, and a contingency unit was maintained to guarantee the operational continuity of both the international reserves and the fiscal resources in the event of problems with the physical or technological infrastructure of the Central Bank building.

D.2 Return on International Reserve Management

In 2018, the total return on reserve management was 1.70% measured in the currency of origin of the investments. Measured in U.S. dollars, the return was –0.35%. The return in local currency on fixed-income instruments was exceeded by the negative exchange rate effect deriving from measuring the reserve returns in U.S. dollars. The return differential relative to the benchmark structure was –2.6 bp. For the 2007–2018 period, reserve management recorded an average return differential of 4.9 bp (table 7).

D.3 Securities Lending Program

In the period, a securities lending program was maintained with the Bank’s international reserve custodians. This consists in lending instruments owned by the Bank to primary dealers, who must put up collateral equivalent to 102 or 105% of the value of the instrument being loaned, as contractually established. Primary dealers are financial institutions designated by the treasury offices of the issuing countries, for the placement and distribution of their debt securities. The contractual relationship with the lending agent—that is, the custodian—incorporates a clause stipulating that in the event of default by the debtor, the custodian will be responsible for the totality of the positions loaned, thereby transferring the risk from the debtor to the custodian bank. In addition, the custodian keeps the custodial positions in separate accounts on its balance sheet, so there is no credit risk. In 2018, this program generated income for the Bank equivalent to 0.8 bp of total foreign exchange reserves.

INTRODUCTION

As fiscal agent, the Central Bank of Chile manages resources in the name and on the account of the General Treasury. These resources are part of the Economic and Social Stabilization Fund (ESSF) and the Pension Reserve Fund (PRF).

The following sections describe the institutional context in which this fiscal agency operates. They also report on the investment policy, the fund structure, the reporting system, the management results, and the costs of managing the resources.

INSTITUTIONAL FRAMEWORK

In September 2006, Law N° 20,128 on Fiscal Responsibility created the ESSF and the PRF. Under this law, the Ministry of Finance issued Executive Decree 1383 (which was modified via Decree 1618), whereby the Central Bank is vested with the representation of the General Treasury for investing all or part of the ESSF and PRF resources, once the Bank has formally accepted the fiscal agency agreement in accordance with its Basic Constitutional Act.

Through Resolution 2130-01-180215, the Board acknowledged the new strategic asset allocation of the PRF, communicated to the Bank by the Finance Ministry in Letter 207, dated 7 February 2018.¹⁰/ The fund’s new strategic allocation includes reductions in the share of sovereign bonds and government-related assets (from 48 to 23%), inflation-indexed sovereign bonds (from 17 to 5%), and corporate bonds (from 20 to 13%), with an increase in the share of equity (from 15 to 40%) and the incorporation of three new asset classes, namely, U.S. agency mortgage-backed securities (MBS) (6%), high-yield bonds (8%), and real estate assets (5%).

¹⁰/ In December 2018, through Resolution 2191-03-181213, the Board accepted the new performance guidelines associated with the investment of PRF resources, which are established in Finance Ministry Letter 2424, dated 6 December 2018.

The new investment policy also stipulates that the currency risk, vis-à-vis the Chilean peso, associated with the fixed-income assets (55%) will be hedged, under a currency hedging program.

The Board accepted the Finance Ministry’s request to gradually implement the new PRF investment policy, with the support of an international consulting firm, in accordance with the indications of the transition guidelines.¹¹/. The process of selecting the consulting firm was conducted by Bank, which contracted RVK Inc. in May 2018. The selection of the external managers for the U.S. agency MBS and high-yield bond asset classes was conducted between June and November 2018, as described below. In accordance with the transition guidelines, the second phase of implementing the new PRF investment guidelines encompasses the selection and contracting of external managers to manage the real estate asset portfolio and to implement the currency hedging program, a process that will begin in 2019.

¹¹/ Through Resolution 2161-02-180705, the Board accepted the transition guidelines for converging to the new PRF benchmark composition, in accordance with Finance Ministry Letter 1032, dated 19 June 2018.

INVESTMENT POLICY AND OBJECTIVES

The investment policy objectives for the fiscal portfolios and the associated risk-return profile reflect decisions made by the Finance Ministry. The Central Bank must manage the fiscal resources in accordance with the relevant decrees and performance guidelines.

The performance guidelines contain the investment criteria, which define a benchmark and place restrictions on fiscal portfolio management.

The benchmark structure implicitly incorporates risk-return objectives established by the Finance Ministry. The results of the fiscal portfolio management is assessed against these benchmark portfolios.

For the ESSF portfolio managed internally by the Central Bank of Chile, the benchmark portfolio established in the performance guidelines is made up of the following asset classes: bank assets;¹²/ U.S. Treasury bills and sovereign bonds; and inflation-indexed sovereign bonds (table III.1). The bank asset and treasury bill portfolios use benchmark indices by Merrill Lynch. The sovereign bond share of the portfolio and the inflation-indexed sovereign bond portfolio are compared against selected Bloomberg Barclays currency indexes.

¹²/ Bank deposits.

For the PRF portfolio that is directly managed by the fiscal agent, the investment policy that was in effect in 2018 establishes a portfolio composition made up of the following asset classes: sovereign bonds and other government-related assets; and inflation-indexed sovereign bonds (table III.2)¹³/. The associated benchmark indices are Bloomberg Barclays global indices.

¹³/ The shares by asset class shown in table III.2 represent a transitional benchmark allocation for the PRF portfolio managed by the Bank.

The ESSF and PRF investment guidelines define eligible currencies, issuers, and instruments as those included in the respective benchmarks, and they exclude any and all instruments from Chilean issuers or denominated in pesos.

Under the current guidelines, the management mandate controls the main portfolio risks through risk budgets. The internally managed ESSF and PRF portfolios establish an ex ante tracking error of 50 basis points (bp) per year.

Finally, the investment guidelines for both funds establish specific rules and limits on exposure, including eligibility criteria for issuers, operations, instruments, and intermediaries and rules on the treatment of derivatives (tables III.4 and III.5 at the end of the appendix).

STRUCTURE OF FISCAL PORTFOLIOS

At year-end 2018, the market value of the ESSF and PRF portfolios managed directly by the fiscal agent was US$13.2043 billion and US$6.0541 billion,¹⁴/ respectively, which is invested in line with the benchmark composition established in the current investment guidelines (table III.3).

¹⁴/ The market value of the ESSF on 31 December 2018 was US$14.1338 billion, of which US$13.2043 billion is managed internally by the Bank, while US$929.6 million is managed by external portfolio managers under an equity mandate. The market value of the PRF at year-end 2018 was US$9.6632 billion, of which US$6.0541 billion was managed internally by the Bank, while US$3.6092 billion was managed by external portfolio managers under corporate bond and equity mandates.

REPORTS

The Fiscal Agency Decree and the performance guidelines define the content and frequency of the reports that the Bank must submit to the Finance Minister and the General Treasurer of Chile. As a general rule, the custodian bank, in its middle office role, provides the necessary information for preparing reports. Based on this information, the fiscal agent must report daily, monthly, quarterly, and annually on the status of the resources under management. The daily reports provide information on the market value of each portfolio, under items sorted by currency and asset class. The monthly, quarterly, and annual reports contain more detailed information on the portfolios. These reports describe changes in financial markets, discuss compliance with investment caps, provide details on the changes in the market value of each fund, and report on the absolute and differential returns obtained.

The Central Bank also measures the custodian bank’s performance and compliance with the investment guidelines; and monitors and assesses the information provided by the custodian, using its own calculation methods based on systematically recorded information.

The fiscal agent must also report annually to the Finance Minister and the General Treasurer on the custodian bank’s performance.

MANAGEMENT RESULTS

In 2018, the ESSF resources managed internally by the Bank generated an absolute return measured in dollars of 0.21%, which implies a positive differential return of 8.8 bp, relative to the benchmark performance, where both returns are calculated using the time-weighted rate of return (TWRR). Using the same methodology, the PRF resources managed by the Bank generated an absolute return measured in dollars of –1.60%, which implies a positive differential return of 10.4 bp relative to the benchmark performance. The depreciation of the majority of the investment currencies against the U.S. dollar had a significant effect on the absolute return of both portfolios. In the case of the ESSF portfolio ESSF managed directly by the fiscal agent, this effect was offset by interest earned in the period, while in the PRF portfolio managed internally by the Bank, interest earned did not offset the negative exchange rate effect.

EXTERNAL MANAGEMENT SELECTION PROCESSES

Through Board Resolution 2130-01-180215, the Bank acknowledged the new strategic asset allocation of the PRF and accepted the Finance Ministry’s request for the Bank, as fiscal agent, to gradually implement the new PRF investment policy. In 2018, the Financial Markets Division, with support from an external consultant, carried out two selection processes for contracting external portfolio managers to implement the U.S. agency MBS and high-yield bond mandates.

Based on the assessments formulated during the two selection processes, the Finance Ministry, via Letter 2252 dated 16 November 2018, authorized the Bank to contract BNP Paribas Asset Management USA Inc. and Western Asset Management Company LLC to act as external portfolio managers for the U.S. agency MBS mandate; and BlackRock Institutional Trust Company N.A. and Nomura Corporate Research and Asset Management Inc. as external portfolio managers for the high-yield bond mandate. According to the planned schedule, the start date for investing the new mandates was set for January 2019.

COMPENSATION OF THE FISCAL AGENT

According to the stipulations of Article 9, letter (a), of the Fiscal Agency Decree, the Central Bank is entitled to charge an annual fee for the direct expenses and costs incurred in carrying out its assigned functions.

For the period from 1 January to 31 December 2018, the Finance Ministry set the annual fee at US$1,153,146.70 for the ESSF and US$1,115,870.80 for the PRF. These amounts are consistent with the Central Bank’s Basic Constitutional Act, which stipulates that the Bank shall not finance the General Treasury. The fees paid to the fiscal agent represent 0.9 bp and 1.8 bp of the total resources managed by the Bank for the ESSF and PRF, respectively.

PARTICIPATION WITH OTHER INSTITUTIONS

Because the information handled by the Central Bank is fundamental for good decision-making at the national level, the institution participates on a number of commissions and councils where its opinion is needed. These are discussed below.

Commission on Price Distortions

The National Commission on Price Distortions is in charge of investigating the existence of price distortions on imported goods. It is a technical body composed of representatives from public institutions in the economic sector. Its task is to advise the President of Chile on the application of antidumping measures, countervailing duties, and safeguard measures. The Commission operates independently from the Bank, although the Technical Secretariat resides within the Bank as stipulated in Law 18,525. Its functions include gathering background information for investigations, preparing technical reports, channeling communication among the parties involved, and carrying out pertinent notifications.

The Central Bank Board appoints two members and two alternates to sit on the Commission. The members are Francisco Ruiz Aburto and Rodrigo Alfaro Arancibia; their respective alternates are Marcus Cobb Craddock and Beatriz Velásquez Ahern.

In 2018, the Technical Secretary provided support services to the Commission, which met nine times. In the period, the Commission decided to open three investigations and recommended the application of one provisional measure. At year-end, there were no measures in effect.

Chilean Copper Commission (Cochilco)

The Board is responsible for appointing two representatives to Cochilco,15/ who serve a two-year term.¹⁶/

¹⁵/ Pursuant to paragraph (d) of Article 4 of Decree Law 1349 of 1976.
¹⁶/ The appointment can be renewed, and it can also be revoked before the end of the two-year term.

In 2018, Carmen Gloria Escobar Jofré and Pablo Cristián Mattar Oyarzún were appointed to replace Francisco Ruiz Aburto and Miguel Fuentes Díaz, respectively. In both cases, the term of office runs through 24 October 2020.

Competition Tribunal (TDLC)

The Competition Tribunal (*Tribunal de Defensa de la Libre Competencia*, or TDLC) is made up of five Judges and two Alternates.¹⁷/ The President of Chile appoints the President of the Tribunal, who must be a certified lawyer, choosing from a list of candidates provided by the Supreme Court following a public call for nominees. The Board of the Central Bank is responsible for appointing a Judge / Legal Counsel and a Judge / Economist, as well as an Alternate Judge / Economist, following a public call for nominees. The Board also provides the President of the Republic with a short list for choosing a Judge / Legal Counsel and a Judge / Economist, as well as an Alternate Judge / Legal Counsel, following a public call for nominees.

¹⁷/ Article 6 of Statutory Decree N° 1, of 2005, issued by the Ministry of Economy, Development, and Reconstruction (DFL N° 1).

Once chosen by the competent authority, the judges are appointed via Executive Decree, issued by the Ministry of Economy, Development, and Tourism and countersigned by the Finance Minister, for a period of six years, with a staggered replacement of judges every two years.

In 2018, the Board issued a public call for nominees for the appointment of two Judges. Under the Tribunal’s staggered replacement schedule, the appointments of Jaime Arancibia Mattar as Judge / Legal Counsel and María de la Luz Domper Rodríguez as Judge / Economist would end on 12 May 2018.

The Board appointed Daniela Gorab Sabat as Judge / Legal Counsel and María de la Luz Domper Rodríguez as Judge / Economist. Both appointments are for terms of six years, starting on 12 May 2018, in accordance with Executive Decree 101 issued by the Ministry of Economy, Development, and Tourism on 4 July 2018.

Technical Investment Council (CTI)

The Board is authorized to appoint a member and an alternate to the Technical Investment Council, pursuant to Article 168 of Title XVI of Decree Law 3500 of 1980, on the pension system reform, and Articles 58-E and 58-H of Law 19,728, which establishes mandatory unemployment insurance.

In 2018 the Board appointed Álvaro Andrés Rojas Olmedo as member, replacing Rodrigo Andrés Cerda Norambuena, and Nicolás Gonzalo Álvarez Hernández as alternate, replacing Catherine Carolina Tornel León. Both appointments run through 10 June 2020.

Technical Commission Created under Article 6 of Law 18,480

This Technical Commission is responsible for reviewing applications for reconsideration of the input tax credit for exporters, as stipulated in Article 6 of Law 18,480, which establishes a system for refunding taxes and duties assessed on the cost of inputs for small nontraditional exports.

The members of this Commission will be proposed by the entities they represent and then appointed through a resolution issued by the Ministry of Economy, Development, and Tourism, which must be published in the Official Gazette. The Central Bank Board has the capacity to appoint a representative to this Commission, in accordance with the stipulations of Article 6 of the aforementioned law.

In 2018, the Board proposed to the Minister of Economy, Development, and Tourism the appointment of María Pilar Pozo Fraile, to replace Ivette Alejandra Fernández Delgado, as the Bank’s representative on this Technical Commission¹⁸/ María Isabel Méndez Ferrada serves as alternate.

¹⁸/ On 29 January 2019, the Ministry of Economy, Development, and Tourism issued Exempt Ministerial Resolution 17, appointing María Pilar Pozo Fraile as the Bank’s representative to the Law 18,480 Technical Commission. The resolution was published in the Official Gazette on 6 February 2019.

Technical Commission Created under Article 4 of Law 18,634

This Technical Commission is responsible for reviewing applications for inclusion or exclusion on a list, established by Finance Ministry Decree, of the capital goods covered under Law 18,634, which sets up a scheme for deferred payment of customs duties, tax credits, and other tax benefits.

The Central Bank Board has the capacity to appoint a representative to this Commission, in accordance with the stipulations of Article 4 of the aforementioned law.

In November 2018, María Pilar Pozo Fraile was appointed to serve as the Bank’s representative on this Technical Commission, replacing Ivette Alejandra Fernández Delgado. María Isabel Méndez Ferrada was appointed as alternate in 2015.

Advisory Commission for Financial Inclusion

The Bank has representatives from two divisions who participate on this Advisory Commission: Corporate Affairs and Financial Stability. The meetings held over the course of the year were organized around the Commission’s three key issues: financial education, access to and use of financial tools, and financial consumer protection.

The Bank played an important role as a permanent advisor to the Advisory Commission on Financial Inclusion, which was responsible for formulating the National Financial Education Strategy, which was submitted to President Michelle Bachelet in January 2018. The objective of the National Strategy is to establish a commitment with public and private actors and civic society to achieving a better understanding of financial concepts and products, including those associated with pensions, so as to promote skills and attitudes that contribute to the well-being of families and communities, while also diffusing information on finance-related rights.

Under the coordination of the Finance Ministry, and with the Bank as a permanent advisor, the Commission includes representatives from the Ministry of Social Development, the Ministry of the Economy, the Ministry of Education, and the Ministry of Labor and Social Security. In addition, permanent invitations to participate are extended to the Superintendent of Banks and Financial Institutions, the Chairman of the Financial Market Commission, the Superintendent of Pensions, the Superintendent of Social Security, the Director of the National Consumer Service, the Director of the Social Security Institute, and the Director of the Solidarity and Social Investment Fund.