Chilean Peso (CLP)

What Is the Chilean Peso (CLP)?

The Chilean peso is the official currency of Chile and is issued by the Banco Central de Chile, the country's central bank. It is represented by the code CLP on the foreign currency markets.

The peso is symbolized by $, usually preceded by the symbol CLP to distinguish it from the U.S. dollar and other dollar-denominated currencies that use the same symbol.

The Chilean peso subdivides into 100 centavos.

As of March 27, 2022, $1 U.S. was worth 777.18 CLP.

Understanding the Chilean Peso

The Chilean people have several colloquial names for the Chilean peso (CLP). These names include quina for the 500 peso note, first introduced in 1977, and gamba for the 100 peso note.

The Chilean peso is a restricted currency, meaning that it can only be exchanged and used within Chile. This restriction affects international travelers but does not bar its trading on the forex markets.

There also is one exception to the restriction: Chile has a currency swap agreement with China due to the importance of the trade relationship between the two countries. Such swaps are done to keep loan rates between trading nations stable.

CLP in the Forex Markets

The peso suffered a historic low period in March 2020 when the COVID-19 pandemic spooked traders in the currencies of emerging nations. The CLP fell to about 839 pesos per U.S. dollar, a drop of more than 20% on a year-over-year basis and its worst level historically, The central bank intervened with purchases of the peso to stabilize its price.

The peso recovered steadily in early 2022, moving from about 851.50 at the beginning of the year to 777.18 on March 27, 2022.

In the forex markets, the CLP commonly trades with major world currencies including the USD, Canadian dollar (CAD), Australian dollar (AUD), the euro (EUR), British pound (GBP), and Japanese yen (JPY). It also trades regularly against the Brazilian real (BRL).

History of the Chilean Peso

The Chilean peso was introduced in 1817 and was then tied to the Spanish real. It remains Chile's currency to this day, with the exception of the period between 1960 and 1975 when it was replaced by the escudo, which was valued at 1,000 pesos.

The peso is not pegged to any other currency.

The peso’s valuation has changed several times since its introduction. Until 1979, the central bank held the currency within a crawling band of exchange rate values. Between 1979 and 1982, the central bank pegged the peso to the U.S. dollar. Overvaluation of the peso caused by a combination of the dollar peg and high interest rates caused the country to run up its debt, leading to an economic crisis in 1982. Associated inflation made centavo coins obsolete in 1984.

The Central Bank returned to a system of crawling currency bands to value the currency between 1984 and 1999. The currency’s value has floated freely since then, though the Chilean government allows occasional intervention in markets to control extreme volatility.

The currency’s value has remained relatively stable since, aside from actions imposed by the central bank in response to specific events. These included the Sept. 11, 2001, terrorist attacks in New York and a period of volatility following Brazil’s chaotic 2002 election cycle.

The central bank also took action to rein in the currency’s strength against the USD during 2008 and 2011. The currency fell precipitously in 2015 on market fears of a drop in copper prices but the central bank declined to intervene at that time. The bank did choose to intervene in 2020 when its currency dropped sharply in response to the COVID-19 pandemic.

The Chilean Economy

Chile enjoyed one of Latin America's fastest-growing economies for decades. However, its growth has slowed in recent years, revealing deep-rooted problems of income inequity and a fragile middle-class.

The problems were greatly exacerbated by the COVID-19 pandemic, The nation's economy contracted by 6% in 2020, although it began improving with the loosening of COVID-related restrictions. The nation's leaders responded vigorously to the pandemic with social spending to relieve the financial strain on families. And that, of course, boosted the nation's debt, at least temporarily.

Chile was expected to recover economically from the pandemic, with an estimated 12% growth in GDP in 2021, followed by a slower but still healthy 2% growth in 2023.

History of the Chilean Peso

Historically, the term peso first referred to a Spanish coin named the eight-real coin, which was circulated in Chile beginning in 1817. By 1851, the peso was equal to five French francs but was made up of a smaller amount of gold.

The first paper banknotes appeared in the early 1840s, printed by some private banks, which continued until 1898. The first government-issued convertible paper currency came out in 1881. The Banco Central de Chile became the country’s sole issuer of currency in 1925.

Chile decided to replace its peso with a new currency, the escudo, in 1960, at a value of one escudo per 1,000 old pesos. Fifteen years later, in 1975, the central bank re-established the Chilean peso and began replacing the escudo at an exchange rate of $1 peso for 1,000 escudos.

Currency Swap with China

Chile has strong diplomatic and economic ties with China. In 2018, it signed onto China's Belt and Road initiative, a massive program to improve infrastructure in nations that have or could have useful trade ties with China.

China has become Chile's top trading partner.

The relationship is not without controversy. Chile's choice of a Japanese company rather than a Chinese company for a trans-Pacific fiber optic cable project was seen as a response to growing concern over China's political influence in Chile.

In any case, the currency swap agreement between Chile and China has helped shield Chile's economy from interest rate shocks that would damage its trade. The amount of currency available through the swap was increased in 2020 to further shield Chile from the economic effects of the pandemic.

The Bottom Line

Chile's status as a Latin American beacon of economic stability and growth has somewhat dimmed in the recent past. A series of demonstrations in 2019 and 2020 focused attention on the nation's continuing problems of poverty and inequality.

The COVID-19 pandemic added to its problems, making the nation's growing middle class vulnerable to its economic disruptions. Aggressive fiscal and monetary policy actions seemed to have worked, bringing the country back to pre-pandemic levels of growth and prosperity.