Foreign money floods Chile's bond market as "Sell America" vibe returns

What's pulling money into Chile

Global investors have been trimming US exposure and looking farther afield, and Chile keeps showing up in the screeners. Non-resident holdings of local-currency government bonds rose by $700 million in August to $21.04 billion, a new high that puts foreign ownership 42% above where it started the year, according to the latest central bank data. Banco de Credito e Inversiones' market-making chief, Alexis Vega, said, "We've seen a decline in the share of US bonds in investment portfolios and some of those flows have come to Chile." "I think the 'Sell US' trend will continue and Latin America, given commodity prices and potential fiscal adjustments, is looking more disciplined than the US."

The "Sell America" theme has resurfaced during President Donald Trump's second term as investors balk at policy volatility, spanning historic tariff hikes and the outbreak of new wars, as well as frayed alliances. Last month, Treasury Secretary Scott Bessent's decision to push down yields by buying longer-dated Treasuries added momentum to that narrative. "They are carrying out a buyback program that lacks credibility," Vega said. "The current debt structure is unsustainable."

Why Chile's fiscal stance stands out

Chile's case rests on steady budgeting and stronger market plumbing, with metal prices doing some of the heavy lifting. In July, the budget showed a 95 billion peso surplus, reversing a 957 billion peso deficit a year earlier, as revenue from the private mining industry jumped 79% and spending slipped 0.7% for the month. Through the year so far, fiscal expenditure is up only 0.7%. Finance Minister Jorge Quiroz also stated that the government intends to cap spending, with growth in a 0%-1% range next year.

That looks different from peers. Brazil faces mounting interest costs and persistent deficits, and Colombia this month gave the green light to a 16% rise in government spending for next year, rattling investors already focused on its growing debt load. "Elevated metal prices should boost mining-related revenues, as the administration has signaled limited spending growth in the coming years, building credibility to the structural fiscal consolidation path after several years of above-target deficits," said Andrés Pérez, Banco Itau's chief Latin America economist.

Smart investors use changing global flows as a reminder to safeguard and grow savings. Join Briefs Finance CEO Jaspreet Singh on September 29th for a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, where he shows how we're spotting investment opportunities as the dollar falls. Save your spot.

Market fixes lowering frictions

Chile has removed many of the bottlenecks that used to keep foreigners at arm's length. "The major frictions that made it difficult for non-residents to participate in Chile's bond market have been removed," said Central Bank Deputy Governor Alberto Naudon. "Fine-tuning is needed to foster its development and determine where we can achieve standards similar to those used abroad, making it easier for non-residents to enter the market."

Several recent initiatives aim to extend that progress. Earlier this month, officials said they plan to let domestic pension funds participate in repo and reverse repo deals for the first time, a step expected to boost trading and tighten bid-ask spreads. Separately, officials have released a market-maker program for public consultation to further boost liquidity. The pension-fund plan arrived within a package of 30 measures to deepen capital markets, including proposals to reduce paperwork and tax hurdles for foreign investors. Vega said there are "positive impacts we expect to see from a new repo market, which would lower financing costs for investments, and a potential market-maker program that would provide greater liquidity to Treasury debt instruments."

The flow picture and what to watch next

Foreign demand across Latin America underscores Chile's lead. During the year's first eight months, foreigners' stakes in Colombia's local sovereign bonds climbed 4.2%; in Brazil, non-resident positions increased 2% through July; and Mexico saw about a 3% rise over a similar stretch. In Chile, foreign investors owned 15.6% of local sovereign debt in March, the highest level since early 2020, and almost twice the 8% seen at the end of 2024. For context, the share last peaked at around 20% in the fourth quarter of 2019.

For your wallet, the through-line is simple: investors are rewarding steadier budgets and smoother markets. If Chile sticks with limited spending growth and follows through on the market-access tweaks now on the table, it likely stays high on the shortlist when people look for a home for longer-term, lower-drama cash.

Staying balanced and informed helps protect your nest egg through any financial season. Our CEO Jaspreet Singh is hosting a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, on September 29th. Sign up free to join him live.