The Chilean peso is an important currency in South America because of Chile's reputation as a stable and leading economy in the region along with its active role as a participant in many free-trade agreements around the globe.
The peso is symbolised by $ and has a currency code of CLP. There is currently $5.64 trillion in circulation. A volume of approximately US$7.78 billion in Chilean pesos is traded daily on global foreign exchange markets. The currency is regulated by the Central Bank of Chile.
Single pesos are issued as coins, and the currency has banknotes of $1,000, $2,000, $5,000, $10,000 and $20,000. They feature images of important Chilean cultural and political leaders on one side and images of Chilean landscapes and fauna on the other.
The History Of The Chilean Peso
The territory that is Chile today is believed to have been inhabited for around 14,000 years. The dominant ethnic group in the region was the Mapuche, who occupied the central valley and mountainous regions of the country.
Before the Spanish colonisation of the country in the 1500s, the Mapuche lived in a hunter-gatherer society and traded mostly textiles, ceramics, livestock and some metals like copper and gold with neighboring cultures such as the Incas to the north. The region of Northern Chile was briefly conquered by the Inca emperor Tupac Yupanqui and the Inca reign there lasted for about 60 years (also prior to Spanish colonisation).
After the Spanish began colonising the region around 1540, they introduced trade in silver and intensified mining activities in search for gold and copper. In the mid-1500s, silver was found in the region of Potosi, Bolivia. It was shipped to Europe and used as a source for silver coinage.
With settlement in the region of South America, the Spanish established mints in Peru. Much of the mineral wealth and currency produced in the New World was shipped back to Europe to help finance the Spanish crown's debts. During Spain's colonisation of portions of the Western hemisphere in the 16th and 17th centuries, the silver Spanish 8 real coin came into common circulation in the Americas and around the world. The Spanish currency was known in the New World and elsewhere as the "peso."
Although what is now the Chilean capital of Santiago was established by Spanish explorer Pedro de Valdivia in 1541, the first Spanish mint in the region was established more than two centuries later, in 1749. The first items produced by the Spanish mint in Chile were half-ounce gold coins bearing the image of King Fernando IV.
In 1818, Chile gained its independence from Spain under the leadership of Bernardo O'Higgins and Jose de San Martin. From then onward, Chile began producing the Chilean peso at a value equivalent to 8 Spanish reales.
In the years immediately following Chilean independence, regional trade was hampered by political disagreements with Spanish royalist controlled territories elsewhere in South America. Chile expanded its trade to other regions such as the U.S., England and France.
In its early history, the country saw success in trading grains, copper, silver and potassium nitrate, and a shipbuilding industry.
The first banknotes were issued in Chile around 1840 under the authority of the province of Valdivia. Private banks began issuing banknotes in the 1870s. From the 1850s, the value of the Chilean peso was pegged to the value of the French franc at one to five based on a silver standard. In 1885, Chile took up the gold standard, pegging the peso to the British pound.
With the outbreak of WWI and the opening of the Panama Canal in 1914, Chile's economy weakened. In 1925, under the orientation of economic consultant Edwin Kemmerer, the country undertook a monetary reform and established a central bank and budget laws.
Following a battle with hyperinflation in the 1950s, Chile replaced its peso currency with the Escudo. It remained in place as the country's currency for more than a decade, but it was also subject to high inflation, and by 1975 the country restored the peso as its main currency.
From 1975, the Chilean government allowed the peso to float against other currencies in a crawling band system. Following an economic crisis in 1982, the country pegged the peso directly to the U.S. dollar. In 1984, it restored the crawling band system.
In 1990, the country's central bank was granted full operational autonomy, and in 1999, the Chilean government permitted the peso to float freely against other currencies. However, it allowed for occasional limited market intervention in the case of excess currency volatility.
Chile's monetary policy is carried out by the Central Bank of Chile's five-member board of directors at monthly monetary policy meetings. The schedule of the meetings is announced six months in advance. Since 1999, the Chilean Central Bank has followed an inflation targeting policy framework. The bank currently aims for an annual inflation target of 3% with a 1-percentage-point margin of tolerance on either side of the target.
The bank publishes its interest rate decision on the same day of its monetary policy meetings. Eleven days later, it publishes the full minutes of the meetings explaining its main analysis along with policy options considered by the bank´s board and the vote of each board member.
The bank also publishes a quarterly monetary policy report discussing the board's view of recent and expected near-term inflation trends and their consequences for the conduct of monetary policy. It also discusses medium- and long-term trends.
Economy of Chile
Chile is the world's 44th-largest economy ranked according to its gross domestic product. The country has a market-based economy known for strong foreign trade, sound economic policy and healthy financial institutions. Due to these characteristics, the country has one of the strongest sovereign bond ratings among nations in South America.
As part of its economic policy, the country has used a countercyclical budget policy to accumulate more than US$20 billion in surpluses in sovereign wealth funds held outside the country. These funds can be used to finance fiscal stimulus packages during economic downturn.
Top industries in Chile include copper, lithium, foodstuffs, fish processing, iron and steel, wood and wood products, transportation equipment, cement and textiles. The Chilean economy is particularly strong in exports, which represent approximately one-third of its GDP.
Commodities make up approximately three-quarters of total exports, with copper accounting for about 19% of revenues. The country's real growth has averaged more than 4% per year in the past decade, despite a slowdown in 2009 that was prompted by the global financial crisis. The country is known for its commitment to trade liberalisation, holding trade agreements with over 60 countries and regions including the U.S., European Union, Mercosur, China, India, South Korea and Mexico.
The country also committed to negotiating the Trans-Pacific Partnership trade agreement with 11 nations in the Western hemisphere and Asia. In 2010, Chile signed an agreement with the Organisation for Economic Cooperation and Development, becoming the first South American country to join the organisation.
Foreign exchange and financial trading in Chile are regulated by the Finance Ministry, the Central Bank of Chile, the Superintendency of Banks and Financial Institutions and the Superintendency of Securities and Insurance.
In 2015, the Chilean government eased regulations for large-scale foreign investment locally with the revision of its Foreign Investment Act. It eliminated the previous requirement of a contract with the government for certain direct investments over the amount of $5 million.
Major Chilean Peso Currency Pairs
Chilean Peso Bills And Coins
Since its introduction, the Chilean peso has been issued as coins, paper money and plastic polymer money. Chile's currency is printed under authority of the Central Bank of Chile and coins are manufactured at the Casa de Moneda, which is subordinated to the government. Coins in current use include 1, 5 10, 50, 100 and 500 pesos.
The Chilean Peso Around The World
The Chilean peso is regarded as a stable regional currency in South America due to the country's robust foreign trade. However, the peso can be strongly influenced by movements of currencies in neighboring countries, most notably Brazil, because of Chile's integration with the rest of the region. The use of the peso is mostly restricted to South America, though it signed a US$3.6 billion currency swap agreement with China as part of the country's efforts to expand trade to Asia.
Where Is The Peso Today?
Since the introduction of a floating exchange rate in 1999, the Chilean peso has maintained relative stability against other currencies. The Central Bank of Chile has been compelled to intervene in the country's currency market on some occasions to reinforce stability. Most notably, this occurred following terror attacks in the U.S. in 2001 and following election volatility in Brazil in 2002.
The institution also intervened to buy dollars during episodes of strengthening of the peso in 2008 and 2011. However, the bank refrained from intervening in the market in 2015 despite a sharp weakening of the local currency.
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