For many international professionals, the Chilean Peso (CLP) has little or no relevance to their long term future. The accumulation of assets in CLP, either intentionally or unintentionally (via plans such as the AFP) can present a significant and unnecessary risk to personal wealth. Many hold the hope that the CLP will return to its previous value at some stage but it is important to consider that this may not occur at all. The following guidelines are designed to help you to reduce the impact of local events on your overall wealth:
1. Consolidate core assets in a global currency: Latin America has a long history of political uncertainty, currency volatility and periods of high inflation. Therefore, it is generally recommended that international professionals hold a large proportion of their financial assets outside of Latin America in a stable global currency such as the USD.
2. Set-up regular automated savings to your chosen global currency: Currency movements are notoriously difficult to predict from one day to another. Setting up automatic regular monthly savings is the best way to steadily transition local currency to your chosen global currency (eg USD). You will likely pass through moments of both high and low exchange rates but the regularity and automation of the process will average out the exchange rate over time.
3. Keep short term savings in local currency: It is generally recommended that your emergency fund and any short term savings that are intended to be spent in Chile are retained in CLP.
4. Look at the bigger picture: Consider your total exposure to Chile, not just the money you hold in the bank. If you own property in Chile or you are employed in Chile then you already have significant exposure to the country and its currency. In this situation you should consider placing a larger proportion of your financial assets in a more stable currency and Jurisdiction.
5. Sit on the fence: If in doubt, hedge your bets and keep 50% of your assets in Chile/CLP and 50% elsewhere in a more stable global currency.
These guidelines are not designed to speculate on the short term value of the Chilean Peso but rather to ensure that your long term wealth is protected against unnecessary risks.
We do not know what the future holds for Chile but we do know that taking these simple steps will put your finances on a more stable foundation. More importantly it will alleviate the stress you may feel regarding your personal finances, allowing you to concentrate on other important parts of your life.
It is important to acknowledge that every single person is different and so there is not one correct answer for everyone. The correct strategy for you should be viewed in the context of your own personal circumstances.
EBG International will be happy to discuss your personal strategy with you in greater detail. Please contact us to arrange a personal review meeting.