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Glossary

Assets:

All goods and rights of a company that are likely to be valued in money. Assets comprise all real estate properties of a company or institution, the source of which originated increases in liabilities. A set of real estate and personal assets that a person or entity owns.

Balance of Payments:

Account that records all economic transactions of a country with the rest of the world. Included therein are current accounts and equity accounts. An account that records the economic transactions of one country with the rest of the world, including the commercial account and equity accounts.

Balance of Trade:

Account that shows the difference between the exports and imports of goods from one country to the rest of the world.

Bid:

A process through which different offers are obtained for the awarding of a specific value.

Bilateral Agreement:

An agreement between two countries.

Cluster:

A “"cluster" may be defined as a set or group of companies located within a limited geographic area, that are mutually related in a vertical, horizontal or collateral manner around certain markets, technologies or productive capitals that interact together to improve their competitiveness with the support of management.

Commodity:

Raw material. English term applied to any homogeneous product sold in bulk, often traded in financial markets. Among the most common ones are gold, coffee, oil, copper, and cellulose.

Country Risk:

Risk associated with investing in a particular foreign country. Country risk is composed of a collection of risks other than those inherent in operations carried out by residents within the country. Country risk includes political risk, exchange rate risk, economic risk, sovereign risk and transfer risk.

Currency:

currencies and other financial instruments allowing a country to pay what it owes another. It comprises bank notes issued by foreign banks as bank balances expressed in foreign currency. They are rights upon foreign currencies, such as checks, bills, money orders, draws, balances in checking accounts, expressed in foreign currency and payable abroad.

Deflation:

A phenomenon characterized by a (percentage) decline of price level, CPI, in an economy.

Derivative:

A financial instruments designed based on an underlying asset, the performance of which derives from the evolution of the underlying asset. Examples of derivatives are Options (call and put), Futures, Forwards and Swaps.

Double Taxation Agreements:

Agreements subscribed between countries, and intended for foreign businesses to be exempted from paying taxes on the economic activity that they carry out in said place, since they already fulfill said obligation in their own country.

Dumping:

The sale of imported merchandise at a lower price than production cost or sale cost in the country of origin in normal conditions, causing or threatening to cause substantial damage to the respective production sector in the importing country.

Earnings:

The difference between income or revenue and costs, expressed in monetary units.

ECA:

Economic Complementation Agreement.

Encumbrance:

Burden, limitation, or obligation, imposed upon an individual or an asset by the owner thereof in order to guarantee own or third parties’ obligations. It is a limitation to the ownership of an asset for having furnished upon the other party a right in favor of a third party, such as, for instance, usufruct, mortgage, pledge, etc. This is taxes and obligations a natural person or legal entity is subject to for holding the right to operate, own, or trade, a good or service.

Exchange Rate:

Price at which the currency of one may be converted to the currency of another country.

Fixed Assets:

Goods that have been purchased for use in the operation of a company, and not for the purpose of selling or leasing to others.

Float Range:

The range within which international exchange rate may freely move when the international exchange policy is governed by a collar and floors mechanism. If the exchange rate coincides with the collar or floor of the Range, the exchange policy becomes become a fixed exchange rate one. Thus, if the rate of exchange is over the collar, the Central Bank sells currency so that the collars goes down into the price range. If the rate of exchange is below the range floor, the Central Bank buys currency so that the rate of exchange goes up towards inside the range.

FOB Price:

Value of merchandise for export when is shipped in the vessel, prior to leaving for its destination.

Forward:

A derivative contract thereby the parties agree to buy or sell a specified amount of an asset at a future set date at a given price. The forward contract, unlike the futures one, is a customized transaction between both parties, that s not traded in the market.

GNI:

Gross National Income. Defined as the value of the total income that local residents receive within a specified period of time.

GNP:

Gross National Product. Defined as the value of the total income that local residents receive within a specified period of time.

GRDP:

Gross Regional Domestic Product measures the production value of final goods and services at market price, attributed to production factors that are physically located in the country and supplied by its residents. It is numerically equivalent to value added, with value added measuring disbursement (labor, land and capital payment), while gross domestic product measures income (income from product sales).

Hyper-inflation:

High inflation episodes. According to Philip Cagan, this is defined the instance when inflation exceeds 50% a month.

IGPA:

General Stock Price Index that measures the price variations of all stocks registered on the Santiago Stock Exchange. This index is prepared using the stock equity (Stock Exchange) value of the different listed companies, classified into business sectors and sub-sectors within the index according to their activity.

IMACEC:

Monthly Economic Activity Indicator.

Indexation:

Adjustment to the value of a financial instruments to keep without any actual changes with respect to a variable (e.g. CPI).

Inflation:

Percentage rise in the consumer price index.

Investment Promotion and Protection Agreements:

Agreements signed by two countries to provide favorable investment treatment to one another when either one invests in the other country.

IPSA:

The Selective Stock Index, IPSA, measures the price variations of the 40 most liquid (heavily traded) stocks listed on the Santiago Stock Exchange. Companies are selected on a quarterly basis in March, June, September, and December. The index basis is reset at 100 at the beginning of each year.

IRR (TIR in Spanish):

A standard measure of profitability the interest rate that when used to discount future returns (cash flows) is equal to the present value of the investment.

Joint Venture:

A partnership between two or more companies, either public or private, to invest capital in a business venture.

Liquidity:

The ease with which a financial asset may be traded in the market without any substantial change in price. An asset is regarded a liquid when it can be readily converted into cash.

Market Access:

The ease with which foreign suppliers of goods and services are able to enter and operate in the market of a given country. Factors that determine the degree of market access include trade barriers.

Monetary Unit:

The denomination of a country’s legal currency, which can usually be exchanged for gold or other currencies. Monetary unit also refers to accounts or values of the International Monetary Fund, which due to its international function must include the values of currencies from several countries. The monetary unit used by the International Monetary Fund is the Special Drawing Right (SDR).

Monopoly:

Market structure where a single company supplies a good.

Nominal Interest Rate:

The return on savings that will be obtained in the future for a given sum of money saved in the present.

OPA:

Tender Offer. A securities market operation through which a company publicly expresses its intent to purchase a part or all of the stock in a company that is listed in the stock exchange. The operation aims at all those holding shares in the company, whom are offered a certain purchase price for each one of the shares. The purpose of the tender offer (OPA) is to take over the company that is the object of the offer. This offer may by friendly (agreed with the directors of the tendered company) or hostile ( without any agreement).

Per Capita Income:

Income per inhabitant. A country’s total annual product divided by the number of inhabitants.

PPO:

A public purchase offer when a company publicly expresses its willingness to purchase a part or all of the stock in a company that is listed in the stock exchange at a given price per share. The offer is aimed at all those holding shares in the company. The purpose of the public purchase offer is to take over the company that is the target of the offer. This offer may by friendly (agreed with the directors of the target company) or hostile (without any agreement).

Price Range:

A system that sets forth specific maximum and minimum prices for certain agricultural products in order to limit medium-term volatility in prices.

Public Expenditure:

The funds paid by the government to buy goods and services, to pay social security, interest, transfers, and make investments.

Real Interest Rate:

The inflation-adjusted interest rate or return on savings or investments.

Reserve on Investment:

A mandatory deposit system for investment funds; it is reserve requirement limited to entries to foreign investment portfolios in Chile and intended to reduce, to a minimum degree, speculative trends; this system directly benefits investors as it reduces the risk of financial fluctuations. A special reserved made up by the AFP’s (Pension Fund Companies) to answer for minimum profitability.

Risk Country:

Risk that is assumed when keeping or committing resources in some foreign country, for eventual impediments to recover them due to factors globally affecting the appropriate country, other than credit risk and other risks inherent to the operations carried out with its residents, the accounting analysis and recognition of which is made disregarding considerations related to potential difficulties in repatriating of the resources, and which are alien to the counterparties liquidity, solvency o performance. Risk country comprises the sovereign risk and transfer risk. As for credit operations, the former corresponds difficulties that might arise when exercising actions against the borrower or the ultimate debtor for sovereignty reasons, while the former refers to the debtors general inability of a country to comply with their obligations with foreign creditors due to lack of currency.

Risk (Credit) Rating:

For fixed income -- bills, promissory notes, bonds and debt -- the credit rating is used to measure the solvency of a borrower. Solvency refers to the likelihood the borrower will repay the interest and principal it owes. This rating uses a series of letter combinations AAA means maximum solvency and C warns of a high risk of default. Between these two extremes is a series of letters that indicate differing degrees of solvency. Investors worldwide rely on these ratings when deciding whether or not to buy an issue and often make buy or sell decisions based only on this rating.

Risk Factor:

Elements that may have an effect on the expected result of investment, production, sales, etc. Risk factors may positively or adversely affect any expected results.

Risk Rating:

Within fixed income, that is, bills, promissory notes, bonds and obligations, the rating is used to measure the solvency of an investor. This solvency refers to that the issuer pays the promised interest and, eventually, returns the money borrowed. This rating uses a series of letter combinations: AAA means maximum solvency, and C warns of the high risk of delinquency. Between these extremes is a series of letters that indicate the different degrees of solvency. Investors world round rely on this rating when deciding to but this or that issue. Furthermore, sometimes that only buy or sell based on this rating.

Royalty:

Payment by an individual or company to the owner or creator of an original work for the right to exploit it commercially.

Royalty:

Payment by an individual or company to the owner or creator of an original work for the right to exploit it commercially.

Safeguard:

An emergency measure intended to limit the level of imports according to certain World Trade Organization provisions.

Sovereign Bond:

Bonds issued by a central government.

Sovereign Bond:

Bonds issued by central governments.

Spread:

Spread is the difference between two interest rates. There is for example a bank spread, which is the difference between the interest rate on loans and on deposits, and there is a sovereign spread, an indication of country risk, which is the difference between the interest rate on a US Treasury issue and a similar issue of another government.

Stagflation:

A macroeconomic phenomenon that combines stagnant economic growth and high inflation.

Structural Surplus:

The structural surplus is the difference between government or fiscal revenue during cyclical peaks (higher than normal economic growth or copper prices) and long-term average, or sustainable fiscal revenue. The government saves the structural surplus in sovereign wealth funds in offshore accounts denominated in foreign currencies to curb the strength of the peso and to save funds to spend during economic down cycles.

Swap:

A swap is an agreement to exchange future cash flows. For example, one company may agree to swap the difference between a fixed interest rate and a floating (Libor) interest rate so that its future cash flows be coherent with its future debt obligations. This is also referred to as a financial swap. Because the companies swap only the interest rate based on a notional principal, it does not involve any payment of principal, only of the difference, if any, in the interest rates on the agreed payment dates.

Tariff:

Duty or tax that is paid on the import of merchandise.

TIR:

Interest rate at which the price of a bond equals the sum of the value of coupon bonds. It is a security profitability measure. It is consistent when related to the duration.

Trade Barrier:

Impediment or restriction of any kind to the entry of imported goods.

UF:

Unidad de Fomento (UF). A Chilean currency unit indexed according to inflation. This index is calculated on a monthly basis effective on the 10th day of the current month until the 9th day of the following month, with the value of the UF adjusted daily.

Underlying Assets:

Assets upon which derivatives are based (options, futures, etc.)

Underwriter:

Entity in charge of the primary sale of securities.

Unencumbrance:

Gradual reduction of the tariffs applied on imported goods.

Value Added:

This is the additional value goods and services acquire when transformed during the productive process. Value added, or gross domestic product, is the value created during the productive process. It is a duplicate-free measure and is obtained by deducting the value of the goods and services used as intermediary supplies from gross production. It may also be determined by the sum of payments to production factors, that is, payroll, consumption of fixed capital, operating surplus and production taxes net of the respective subsidies.

Value Added:

This is the additional value goods and services acquire when transformed during the productive process. Value added, or gross domestic product, is the value crated during the productive process. it is duplicate-free measure and is obtained by deducting the value of the goods and services used as intermediary supplies from gross production. It may also be determined by the sum of payments to production factors, that is, payroll, consumption of fixed capital, operating surplus and production taxes net of the respective subsidies.