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Sovereign Man Notes from the Field Date: June 1, 2011 Reporting From: Santiago, Chile

In Business, Business/Political Trends Worldwide, Government, Money and Finances, Opportunity, personal and business, Political, Travel on June 1, 2011 at 2:19 pm

Sovereign Man
Notes from the Field

Date: June 1, 2011
Reporting From: Santiago, Chile

We have had a lot of conversations about Chile as ‘the new America.’ In short, this is a country that is full of opportunities, open to foreigners, and where the government just leaves you alone without trying to molest you at the airport or encourage you to rat out your friends and neighbors.

Chile really makes a lot of sense for would-be expatriates who are seeing their home country go down in flames… and looking around for alternatives.

Often times, folks who consider such bold options have a strong interest in precious metals; it seems that there is a high correlation in people who seek freedom to also understand the nature of sound money.

We’ve received a lot of questions lately about gold and silver in Chile, specifically, and I wanted to spend some time today discussing such an appropriate topic with you: sound money in one of the soundest countries on the planet.

For this, I’d like to turn it over to my friend and colleague Dr. John Cobin, a long-time Chilean expat. John is a university professor here in Chile and has become quite a famous intellectual (yes, Chileans still celebrate intellect and talent instead of just reality TV pop stars). His nickname in the press is “hiper-liberal” which means the “Super Libertarian”.

From John:

“Many expatriates have an interest in precious metals, gold in particular. Gold offers much appeal to those who fear government meddling with fiat currencies or to those who want long term liquidity. Chile has a fairly well-developed gold market, although silver, platinum and palladium markets are very immature.

“Most people don’t realize that Chile has its own gold coin issues; the most prominent is the 100 peso coin, cointaining 0.5886 ounces of gold. The somewhat less common 50 peso coin contains .2943 ounces of gold. Both coins can be found in downtown Santiago among several numismatic coin stores in Providencia.

“There is a fair amount of buying and selling of gold in Chile. First, there are several “compraventa” shops in every significant Chilean city. “Compraventa” literally means ‘buy/sell’, though in this market they prefer to buy. The shops focus on gold, including jewelry of at least 18 karat.

“The downside is that the prices they pay are abysmally low, often 20% under spot. Thus, while I can see why these firms are so profitable and ubiquitous, I can hardly recommend doing business with them.

“Chilean coins can also be bought in Chile through major banks or the Central Bank, with the great disadvantage of having to pay value added tax. This option, too, is not recommended.

“The best choice for buying and selling are found in downtown Santiago where one will find money exchange houses, known as “casas de cambio.” Some display placards with “moneda de oro” (gold coin) at the bottom. The way they sell is informal, which means that they are not required to charge the value added tax.

“I have seen premiums on gold coins in these shops from as little as 1% over spot; there is no set figure, and premiums can vary widely by shop, so it’s best to check around among several of them and negotiate individual deals.

“There are also some private bullion coin dealers which deal in foreign issuances like the Canadian Maple leaf coin for around 3% to 6% over spot. These dealers do not necessarily have a place of business with fixed office hours– they’re private traders who will often meet at your home or office.

“As for storage, the best of option in Chile is at the banks. This can be difficult for foreigners as it is typically required to have some sort of residency visa to have a safety deposit box or checking account. Fortunately we have come up with a simple, fast track residency process for foreigners, and I know Simon plans on rolling this out to premium subscribers soon.

“For now, I know of no private secure storage facilities in Chile other than the secure vaults around the country’s many casinos. This presents a solid business opportunity as private vaults could be leased at a more competitive price than bank safety deposit boxes, and demand would be very strong.

“Anyone who travels to Chile can bring in up to US$10,000 worth of gold coins, per person per trip, without reporting them. That method is the easiest means of getting gold into Chile, albeit not in large quantities.

“It is possible to bring in larger quantities of gold, tax-free, but there is a slightly more complicated process. One must first convert all gold holdings to coins issued by a country with which Chile has a free trade agreement, such as Canada (the Maple Leaf coin).

“After that, a lawyer must obtain a ruling letter that the coins were made in that country (Canada, in this example) and are thus not subject to import duties. When the coins are brought in to the country, you only need to show the customs agents the ruling letter.

“I discuss all of these in much more detail in my book, Life in Chile: A Former American’s Guide for Newcomers.”

Simon again. Holding, transporting and storing gold coins is often an important part of an expatriate’s offshore strategy. With a bit of planning, Chile can be a suitable venue for this.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com

This article appears courtesy of SovereignMan.com: Notes From The
Field
, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

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