2006年-世界发展银行全球_Access_to_Finance_by_Chilean_Corporations_34页_386kb

Summary of "Access to Finance by Chilean Corporations"

Core Content

This paper examines the extent to which Chilean firms have access to sufficient and adequate financial resources, focusing on both capital market and bank financing. It is based on the findings of the Financial Sector Assessment Program (FSAP) in Chile, conducted by a joint World Bank-IMF mission. The analysis highlights the disparity in financial access between large and small firms, and identifies key obstacles to improving access for smaller enterprises.

Main Points

1. Structure of Chilean Corporate Sector

• Chile's corporate sector is highly pyramidal, with a small number of large and mega-large firms dominating the economy.
• Mega-large firms (annual sales > US$17.17 million) account for about 1% of firms but generate 78% of total corporate sales and 96% of exports.
• Micro firms (annual sales < US$68,688) make up 82% of all formal firms, contribute only 3% to sales and less than 1% to exports, but account for 50% of employment.
• These figures exclude over 500,000 informal micro firms.

2. Financial Performance of Chilean Firms

• Chilean firms tend to be conservatively managed and have low profitability.
• The average return on equity (RoE) is 6%, while the estimated cost of capital is 10.6%.
• The leverage ratio is low (1.3x overall, 0.4x for long-term liabilities), and the interest coverage ratio is high (227x), indicating strong solvency.
• However, this low leverage may not be optimal and could be due to constraints in raising debt.

3. Access to Capital Markets and Bank Financing

• Access to foreign capital markets is limited to mega-large firms, concentrated in utilities, manufacturing, and industry.
• Domestic bond issuance is restricted due to high transaction costs and minimum rating requirements.
  • The minimum size for a domestic bond issue is estimated at US$45 million, while for international debt it is US$200 million.
  • Equity issuance costs are lower than debt, but bond issuance is still more common due to institutional investor preferences.
• Pension funds (AFP) are the largest investors in corporate debt, but their equity investments are limited due to risk aversion and past scandals (e.g., IsaCruz).
• Equity market access is limited for smaller firms due to:
  • Low profitability and high cost of capital.
  • Restrictive investment policies by AFPs, which prefer later-stage investments in larger, more stable firms.
  • Low free float of shares in listed firms, making it difficult for new firms to attract public investment.

4. Private Equity and Venture Capital in Chile

• Private equity emerged in Chile in the early 1990s but has not developed significantly due to several constraints.
• Key issues include:
  • Limited investor base: AFPs have invested only US$200 million in private equity, with a preference for later-stage investments.
  • High tax burden: Foreign private equity funds are deterred by a 35% tax on remittances and 18% VAT.
  • Lack of demand from entrepreneurs due to:
    • Poor preparation of start-up projects.
    • Low interest in entrepreneurship among new graduates.
    • Stigma of bankruptcy and limited access to bank loans for new businesses.
• Incubators are relatively new and few in number.
• Investment potential is limited due to a lack of high-growth firms and limited access to financing for new businesses.

5. Policy Recommendations

• Strengthen the legal framework for corporate governance to improve transparency and protect minority shareholders.
• Enhance disclosure requirements and ensure effective enforcement of financial regulations.
• Encourage more participation from pension funds in private equity and venture capital by reducing tax burdens and improving investment conditions.
• Develop more diverse financial instruments to support SMEs, including microfinance and alternative lending mechanisms.
• Increase financial literacy and support for entrepreneurs to improve start-up readiness and growth potential.

Key Information

• Chile's financial markets are among the most developed in Latin America.
• SMEs face significant financing constraints, limiting their growth and access to capital.
• Pension funds (AFP) are the largest corporate debt investors but have limited equity investment capacity.
• Private equity and venture capital are underdeveloped, with limited investment and few active funds.
• Foreign investment is deterred by taxation and regulatory constraints.
• Financial performance varies widely across firms, but institutional investors tend to focus on high-performing, large firms.

Conclusion

The paper concludes that only the largest firms in Chile have access to the full range of financial instruments. Smaller firms face significant constraints in accessing capital, both through debt and equity markets, due to structural, legal, and institutional factors. To improve access for SMEs, the legal and institutional environment must be reformed, and financial instruments tailored to their needs must be developed.