Chilean Economy and Financial System

1

• Chilean Economy and Financial System

2
CHILEAN ECONOMY GROSS DOMESTIC PRODUCT (Year on
year change)

12.3
10.6
10.6
7.3
8.0
7.6
7.0
7.4
6.6
5.9
5.7
5.6
3.7
3.5
3.4
-1.1
Source Central Bank of Chile.
3
CHILEAN ECONOMY SELECTED MACROECONOMIC
INDICATORS (Year on year change)
GROSS DOMESTIC SAVINGS/GDP
AGGREGATE INVESTMENT (1) / GDP
26.9
26.8
26.5
25.8
26.5
26.5
23.8
22.3
24.1
23.8
21.8
21.5
21.1
21.4
21.1
22.6
20.9
20.9
19.0
20.2
91 92 93 94 95 96 97
98 99 00E
91 92 93 94 95 96 97
98 99 00E
(1) F ixed Capital Investment plus variation in
stocks Source Central Bank of Chile.
4
CHILEAN ECONOMY CONSUMER PRICE INDEX (Year on
year change)

26.4
27.3
21.5
21.4
18.7
17.4
12.7
12.7
12.2
8.9
6.6
6.0
4.7
5.2
3.0
2.3
Source Central Bank of Chile.
5
CHILEAN ECONOMY CENTRAL BANK INTEREST REFERENCE
RATE

14
12
10
8.5
8.5
7.8
7.0
7.25
7.0
6.5
6.5
6.0
5.5
5.7.5
5.0
5.25
1998
1999
2000
Source Central Bank of Chile.
6
CHILEAN ECONOMY BALANCE OF PAYMENTS
Source Central Bank of Chile and Banco Edwards
estimates.
7
CHILEAN ECONOMY CURRENT ACCOUNT AND RESERVES

CURRENT ACCOUNT/GDP ()
INTERNATIONAL RESERVES NET (USD Bill.)
18.8
17.8
-0.1
15.8
15.5
15.1
14.8
-0.3
13.5
9.8
-2.0
-2.1
9.0
-2.3
6.6
-3.1
-4.8
-5.1
-5.7
-5.7
1991 1992 1993 1994 1995 1996
1997 1998 1999 2000E
1991 1992 1993 1994 1995 1996
1997 1998 1999 2000E
Source Central Bank of Chile.
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CHILEAN ECONOMY

• Summary of recent events

Economic Fundamentals Show Continuing Momentum
Ongoing Steps Intended to Strengthen Economy

• 2000E GDP Growth of 5.9
• 1999 Inflation at 2.3
• High investments and savings levels, above 20 of
  GDP
• Stable fiscal situation
• Stable rating outlook (A-)
• Positive political environment

• Adoption of free exchange rate regime in
  September 1999
• 8.5 real interest rate cuts since 3Q98
• Interest rate levels compatible with economic
  reactivation
• Privatizations and concessions
• Housing tax incentives
• Fiscal discipline commitment for year 2000

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CHILEAN ECONOMY

• Recent indicators show signs of economic recovery

Exports(3)
Money in Circulation
Targets


Consumer Goods Imports
Economic Growth(2)


(1) All data YOY monthly growth. (2)
IMACEC. (3) Industrial Exports.
10
CHILEAN FINANCIAL SYSTEM

• Solid and stable financial system
• Asset quality superior to regional peers
• Strict regulatory environment
• Consolidation and globalization underway

11
CHILEAN FINANCIAL SYSTEMRANKING OF TOP 10 BANKS
(1) Net of Interbank Loans. Source
Superintendency of Banks and Financial
Institutions
12
INDUSTRYS STRUCTURAL CHANGE
Consolidation underway
Share of Loans Held by Foreign Banks
Share of Loans Held by Top Five Private Banks
Dec 95
December 1995
December 1995
December 1999
December 1999
(1) Excludes interbank loans. Source
Superintendency of Banks and Financial
Institutions.
13
CHILEAN FINANCIAL SYSTEM

• Substantial consolidation opportunities remain in
  Chile

Loan Market Share(1) as of March, 2000
Source Superintendency of Banks and Financial
Institutions. (1) Excludes interbank loans.
14
SYSTEMS PROFITABILITY EVOLUTION
ROAA
ROAE (1)
19.8
1.5
18.0
1.4
17.4
1.4
17.4
1.3
16.1
1.2
15.7
13.4
1.3
1.0
1.0
12.5
11.5
0.9
0.8
10.4
9.2
0.7
1991 1992 993 1994 1995 1996 1997
1998 1999 1Q99 1Q00
1991 1992 993 1994 1995 1996 1997
1998 1999 1Q99 1Q00
Source Superintendency of Banks and Financial
Institutions.
(1) Shareholders equity considers capital and
reserves plus net income.
15
SYSTEMS CREDIT QUALITY RATIOS
1.90
1.72
1.51
1.00
1.20
1.02
0.95
Past Due Loans / Total Loans
0.91
0.81
1992 1993 1994 1995 1996 1997
1998 1999 1Q00


Allowances
330
3.2
to Total Loans
to Past Due
2.9
2.9
2.7
201
263
2.1
2.2
186
168
167
1.7
1.7
167
156
1.6
146
1992 1993 1994 1995 1996 1997
1998 1999 1Q00


1992 1993 1994 1995 1996 1997
1998 1999 1Q00


Source Superintendency of Banks and Financial
Institutions.