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Estado's Luksic Loan Continues to Stir Controversy

Bnamericas Published: Wednesday, December 27, 2000
Chile's Christian Democratic Party (DC) has issued a formal protest against the US$120mn loan that state-owned Banco del Estado granted Chile's Luksic group for its acquisition of local bank Banco de Chile (Banchile) earlier this month, daily El Mercurio reported. Estado allegedly aided Luksic with the loan when the group had to put up US$541mn to buy Empresas Penta's 35% controlling stake in Banchile. The DC - which is the largest party in the ruling government coalition - said in a statement that it opposed the state bank's involvement in an operation that would lead to market concentration in Chile's banking industry. Last week another coalition party, the Socialist Party, protested the loan saying it violated the bank's social mission. After the acquisition of Banchile, Luksic will control some 21% of the Chilean loan market through Banchile and Edwards (NYSE: AED). The DC said Estado's main business function is to provide financing to Chile's troubled small- and mid-sized enterprise segment and not to aid large private groups in their quest for achieving leadership positions. Estado has neither confirmed nor denied the loan since it falls under the bank secrecy law, but has stated that as an autonomous state entity it must be efficient and profitable. According to El Mercurio, the US$120mn loan represents 17% of Estado's capital and it is expected to be a very attractive deal for the bank, which has financial relationships with many of Chile's large industrial groups, thereby allowing it to finance less profitable social projects.

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