Huaso Bonds

Definition

The term huaso bond refers to an indenture issued in Chile, in Chilean peso, by a foreign bank or corporation.  Huaso bonds are issued when a corporation wishes to raise capital from investors located in Chile.

Explanation

Foreign corporations that wish to raise funds in Chile have the option of issuing what are known as huaso bonds.  These bonds are sold by non-domestic entities, including corporations, financial institutions and governments, and are issued in the Chilean peso.  This is typically done when the interest rates in Chile are low relative to the foreign corporation's domestic rates, which lowers their interest expense.

Since the bond is issued in Chile's domestic currency, investors located in Chile are also insulated from currency exchange rate risk.  Foreign companies will usually issue these securities if they have plans to establish operations in Chile.  These bonds are also attractive to investors wishing to geographically diversify their portfolios.

A huaso is a skilled horseman in Chile, similar to the American cowboy and gaucho of Argentina.  They are a significant part of the country's culture, and oftentimes play an important role in parades and other festive events.

Related Terms

investment-grade bonds, dim sum bond, baklava bond, Arirang bond, panda bond