In addition, the tough OECD/IMF report on Chile’s tax system: tax exemptions cost the country $9,333 million; the witch hunt within the CChC; the fight at the Clinic the Counts dots Piñera’s inner circle; and three questions about wine and bag to Raimundo “Paila” Valenzuela.
Good! It’s coming a short week so I make a short introduction. Political tension, violence and uncertainty returned strongly. The World Bank lowered chile’s growth projection to -6.3% and warned that the government should find ways to retake fiscal consolidation after a period of high spending on economic stimulus and emergency social transfers.
It should be noted that the recommendation is not only for Chile, but in the current political context our country may have greater difficulty in implementing adjustments. We are less than two weeks away from the constitutional plebiscite and elections of all kinds are coming next year, culminating in presidential elections. It will be difficult to close the checkbook and adjust the expense.
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1-THE COST OF HAVING A WEAK TAX SYSTEM
It was put in figures by the OECD and imf in a series of reports requested by the Ministry of Finance this year, and the preliminary results of which the Third One published this Sunday.
The most lapidary conclusion of reports on Chile’s tax system is that tax exemptions cost the country US$ 9,333 million. They are divided into exemptions under the Income Tax Act (US$ 6.7 billion) and VAT (almost US$ 2.6 billion).
What are tax exceptions. They are those provided for by law in favour of certain taxpayers or certain activities, which are thus freed from the obligation to pay a certain tax.
Reports reveal that Chile meets only 5 of the 12 best practices worldwide regarding tax spending. It also alerts you to the problems of quantifying the actual cost they have to the state. An example is the lack of information on the distributional impact of tax expenditures.
The profits in the bag in the sights. The IMF and OECD focus on tax exemption to capital gains earned on the Stock Exchange. Experts stress that this exemption is not in other OECD countries and that the current calculations of how much the Fisco no longer receives under this special regime are obsolete.
The OECD and IMF reports will be the main inputs from the commission of 16 economists to convene the Treasury to analyze the tax system and its possible changes.
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2-CONTINUES THE BLEEDING OF THE SAIEH GROUP AND CORPGROUP IS ON ITS WAY TO DEFAULT
This week the deadline to pay the $17 million fee for CorpGroup Banking’s $500 million bond expires. Sources linked to creditors say that nothing has been made in the debt restructuring negotiations unless at the last minute Alvaro Saieh decides to inject funds from other sources, CorpGroup will default, under Chapter 11 of the U.S. Bankruptcy Act. During the week the risk classifier S&P lowered the bonus ranking and warned about the high probability of default. He warned that the company’s ability to pay “is uncertain.”
It would be the biggest default for a controller of one of Chile’s economic groups since the 1982 banking crisis. It should be noted that until a year ago Saieh was on the Forbes list. A local banker says a Saieh default will affect Chile’s business reputation and be tough on creditors.
What if it defaults. In the market they say that the international debt market would be closed and seriously complicate the viability of SMU and VIVO (their other companies) to issue debt or syndicated credits. And the rates would be much higher. It should be mentioned that BTG Pactual Chile is a partner of Saieh LIVE.
Follow the asset sale. In the week it was announced that SMU agreed to sell its OK Market convenience store unit to Mexico’s Femsa, which operates through Oxxo, for US$ 55 million. The pandemic exposed that SMU is way behind in online sales and does not generate enough cash or flows to reinvest, so it sees itIt makes sense. From the entrepreneur’s environment they ensure that the sale is not linked to CorpGroup’s problems.
The sale of Radio Duna is delayed. The two groups in question negotiating through BTG Pactual with Saieh could even join forces and present a united proposal. The operation should close in 3 weeks.
There are two groups of investors in a fight. One of them is investors close to current TVN President Anita Holigue. Competing to Holuigue to stay with the radio is the entrepreneur Gonzalo Restini, driver of the program “Privileged Information”. Among its investors would be Fernando Tisné, one of the partners of the money manager Moneda.
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3-THECULEBRON OF THE CLINIC THE COUNTS SPLASHES THE INNER CIRCLE OF PIÑERA
To the internal fight with the doctors, the Las Condes Clinic now adds the complaint against a former general manager and charges losses of $2.8 billion. They accuse Jaime Hagel and those responsible for authorizing the payment of a million-dollar debt ($4 billion) to an ophthalmological society related to the clinic within a few days of Cecilia Karlezi Solari’s (Falabella Group) taking over.
The connection with Sebastián Piñera. The lawsuit makes harsh criticism of the board’s role, which at the time included, among others, Andrés Navarro (partner and friend of the President), Herman Chadwick (cousin of the President and president of Enel Chile), and Alberto Eguiguren, the powerful and controversial lawyer.
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4-CHART OF THE WEEK
How much do teachers charge in the world? This ranking of 37 countries shows that Chile, Colombia and Costa Rica lead the region, but earn half or less than teachers in the countries leading the rankings.
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5-THREE QUESTIONS TO RAIMUNDO VALENZUELA
Who’s paila Valenzuela. At the time he was one of the great players of the local stock exchange but a couple of years ago he left the financial world and devoted himself full time to wine production, mostly in bulk. He is one of the world’s greatest players and the largest in Chile. RR Wines has had highs and lows: worldwide awards for quality and environmental fights at the local level. In this brief interview he tells us that quarantine gatilló a global demand boom, analyzes the future of the industry in post-pandemic Chile and responds to us if it misses the world of the Stock Exchange.
–How the double combo of the Social Burst and pandemic was lived in the wine industry
–Different things. The social outburst affected very little, just a low-sales thing. The pandemic increased consumption strongly around the world. People take more at home. The big ones are the restaurants and hotels. But this has been offset by e-commerce. In addition, the great beneficiary in Europe and the United States has been the Big Box (BIB) in 3-litre boxes. In supermarkets they prohibited buying more than 3 items of each product then consumers instead of buying 3 750cc bottles bought 3 3-litre boxes. They liked this and it’s gone on. The main suppliers are bulk wines from Chile, Spain.
–Changes that are to stay in the market
–E-commerce helps medium and small companies. BIB helps producers in bulk. Also as people are drinking more wine now go in search of lighter and fresher wines, so there is a great demand for the Pinot Noir and sauvignon Blanc.
–The role of the sector in post-pandemic Chile
–Adapting to the new times. Today the environmental issue is very important. There are several vineyards that are passing sanctioning processes by the Superintendency of the Environment. The other important effect is that more and more vineyards are being started due to the low profitability of the business. Farmers are replacing vines with cherries and walnut trees.
–Bonus track: Do you feel like returning to being an active participant in the world of the stock exchange?
“Never, I’m old enough for that, even more so with volatility unsuited for people my age
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6-NO TACOS OR TIES
–The House of Witches inside the Chilean Chamber of Construction. The wounds of the last election are still open. Six weeks ago, the group that controlled Chile’s most powerful and wealthy business chamber a decade ago ensured continuity with the victory of its list, headed by Antonio Errázuriz, by just two votes.
A month ago at El Semanal we told you that, among other things, opposition to the board claims for the musical chairs in the board and the millions they take. It is an old school of influences and blocks, with little transparency. The charges are very well paid and give power fees. In addition, many are accompanied by payments for participating in the directories of the holding company (AFP Habitat, ILC, With future, by way of example). Our publication would have genean internal investigation to find out who was leaking the information. The letter we publish here was not sent to all partners and some see it as a strategy to intimidate critics.
“Chileans are becoming less and less happy. The latest IPSOS global survey shows that Chile falls 15 points in its perception of happiness in a year. And the interesting thing is that we’re a special case. The survey reveals that despite Covid-19, the average prevalence of happiness in the world has hardly changed. Chile is one of the few countries where declaring how happy people feel shows significant changes. In addition to Chile, this group includes Peru, Mexico, India, the United States, Australia, Canada and Spain.
“People have strongly resented the level of uncertainty at which they have lived for a long time. Chile has not only faced the pandemic like the rest of the world, but has undergone a double crisis process: the social crisis and the health crisis. We now look at the result in our state of mind, in this case associated with the level of happiness, of a year of profound changes in our lives, income, jobs and ways of relating to other people,” says Alejandra Ojeda, Public Affairs Manager at Ipsos Chile.”
The countries where happiness increased by more than eight percentage points are China, Russia, Malaysia and Argentina. Read the full report here.
The collapse in the value of Chilean companies. More than half of those that are part of the IPSA (the stock market index) are traded below their book value. I mean, they’re worth less on the stock market than their assets are worth.
Some examples: Quiñenco, the holding company of the Luksic Group is transferred to 48% of its book value; Cencosud at 73%; 53% ILC; Entel at 78%; Arauco Park 90%; Colbún at 76%. That means that the assets of the controllers have also suffered and we will see several lower their place in the Forbes ranking.
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7-AGENDA
–Annual meeting of the World Bank and imf. Start on Friday the 16th and it’ll be Zoom. On behalf of Chile, the President of the Central Bank of Chile, Mario Marcel, and the Minister of Finance, Ignacio Briones, will participate.
–Wednesday 14-16 October: Michelle Bachelet takes centre stage at ENADE Argentina. We told you a week ago, but we had the dates changed. The former President will be one of the stars of the IDEA Colloquium in Argentina (the equivalent of ENADE). It will take place for 3 days, between October 14th and 16th. The four axes of this edition are: the International Scenario that will cover geopolitics to know the trends that will contribute the elements to think about Argentina; Economics; Innovation; and Society and Culture, which will include Justice, Poverty and Education.
–Tuesday 13: Central Bank. It will publish the results of the October Monthly Economic Expectations Survey (EEA) and the Third Quarter Bank Credit Survey.
–Wednesday 14: October Monetary Policy Meeting. The statement is released on Thursday. There will be curiosity about what the Council says about the surprise jump in inflation in September.
–Thursday 15: the Weekly Joint Indicators.
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8-COUNTER DIALOGUES: INVESTMENTS AND MONEY IN THE POST-PANDEMIC
I left them with an advance in last week’s edition, but here they have the full program and as a holiday, with all the time in the world to watch and analyze it.
In a new chapter of El Mostrador Dialogues, BlackRock’s CEO for Latin America was one of the guests, along with Andrea Cuomo, responsible for Julius Baer’s Southern Cone. We talk about the future of money and investment in the post-pandemic world. Both agreed that there are new demands for investment to be sustainable and inclusive.
That’s all for this week. If you have any comments or information to share with us, write to ivan@elmostrador.cl or follow me on Twitter @ivanwese and Instagram @ivanwese. Sign up for El Semanal HERE.
