We started Celfin from nothing in 1988. With Salomon Brothers,
we listed the first Latin American country fund on the New York
Stock Exchange. The New York exchange and the Latin American
ones were totally separate at that time. So what we did was
revolutionary in creating the Chile Country Fund – a
closed fund that exists to this day – that invested in
Jorge Errázuriz: The birth of a market
The growth of private pension funds in Latin America has been the single most significant development for the region’s capital markets, says Celfin Captial founder Jorge Errázuriz
That was the first international connection between the NYSE
and the Chilean stock exchange. Our next step was in 1990, when
we listed the first Latin American company on the NYSE through
an American Depositary Receipt format.
There hadn’t been any Latin American company
listing on the NYSE since the 1960s. It was for the telephone
company. Today it’s Telefónica, but at the
time it was part of an Australian company called Bond.
They needed to raise at least $50 million.
We’re talking about a sum that today seems pretty
small. It needed $50 million for investment projects, and the
controlling shareholder wasn’t allowed to put the
money in because there was a limit.
But in Chile it was impossible to do a $50 million listing
in 1990. So that led on to the idea of listing on the NYSE,
which meant changing the law and working on issues such as
capital gains tax.
From there, a whole wave of capital inflows started. In
Chile’s case, many more companies listed on the
New York exchange. And then there were Colombian, Peruvian and
Brazilian firms that used the ADR format. Since then everything
has changed. In Chile it’s possible to raise $500
million, to do $1 billion, where the international placement is
marginal – it could be 20% – where the
pricing is local, where the liquidity is local, where
international accounts invest directly in Chile and where, most
importantly, the savings are in Latin America.
In 1990 we looked to New York and London as sources of
capital. Today we can look internally, at Chile, Peru, Colombia
and Brazil. There’s a lot of long-term capital,
coming from pension funds that are able to finance local
investment projects, capital raisings and bond issues.
And now we are integrating Latin America’s
financial markets. That raises the question as to whether the
North American investment banks are needed any more. The truth
is they’re not: they are complementary.
That’s where the tie-up between Celfin and BTG
Pactual came from. We have integrated with them creating a
Latin American investment bank, for Latin America, with the
ability to sell bonds in Latin America, in the US, in Europe
and in Asia. An integrated bond and equity market is starting
to be built. What’s still needed is an instrument
to be offered publicly – a bond, a share, or another
security – that can be sold in Chile, and
automatically registered as a public offering in the other
markets. That’s what we are going to move forward,
with the authorities, and with other stakeholders.
The next step is financial integration of the Latin American
capital markets. What’s needed is greater
homogenization of the accounting and tax rules as well as the
custodial processes. If in one country they settle in T plus
two days, then everyone needs to have the same rules. So if
another settles in T plus three, then it’s a
We need the same playing field. Intuitively,
it’s logical and simple: the same ball, the same
rules. The difficulty comes when there are differences in the
tax rules, which complicates things because that requires
government and parliamentary input. But if there is political
will, then this project to integrate our bond and equity
markets will go forward. And there is political will among
these four countries. LF
Jorge Errázuriz is vice-president of BTG Pactual
Chile. He was interviewed by Katie Llanos-Small.