Interview with Diego Masola, Executive Vice President and Country Head, Scotiabank Chile, as published in Diario Financiero
Interview as published in Diario Financiero with Diego Masola, Executive Vice President and Country Head, Scotiabank Chile.
“We assume that any tax reform will be moderate and will take investment into account.”
Masola confirms the Canadian-owned bank’s commitment to the country, which he views with optimism.
On pensions, he says that any changes must consider, for example, access to mortgage credit.
The 2023 version of Chile Day, the annual meeting that brings together the public and private sectors to showcase the country’s advantages as an investor and opportunities for investment, begins this Tuesday.
And there is something new. For the first time, Toronto is included as a venue, after being held in New York and London in previous years. The activities start today in the Big Apple and continue on Wednesday and Thursday in the Canadian financial capital. Something else that is new is that Scotiabank will be the main sponsor of the event, which is organized in conjunction with InvestChile.
Diego Masola, Executive Vice-President and Country Head, Scotiabank Chile, was invited to the event last year and says he was surprised by the level of organization and cooperation between the public and private sectors, something he says he does not see in other countries in the region. And he knows what he’s talking about: this is the seventh nation where the Argentinian has resided as an executive. “As a Canadian Bank in Chile, this reinforces our long-term commitment and confidence in the country. I say this because we signed on for three years, not for one year. It already has a long-term profile and we have been in Chile for 32 years,” he pointed out. “What do you expect from the event?” “Canada is the leading foreign investor in Chile with US$13 billion, and Teck and Scotiabank are two of the largest. This obviously generates very high expectations because Canada has very good examples of issues that Chile is trying to work on, such as pensions and mining. There is a strong correlation between the economies of both countries, especially in commodities such as oil, gas and mining.”
“How much impact can tax reform have on investments in Chile?”
“Tax reform, if this is what Chile decides to do, the sooner it’s approved or rejected, the better because what we are looking for is certainty, for the investor, whether local or foreign, to know what rules to play by in the long term. So, tax reform, pension reform and obviously Constitutional reform are there, we need them to be approved or rejected and we need to know what the long-term rules are.”
“Do you think Chile is in a position to continue increasing taxes?”
“Tax reform, as far as I can see, is moving towards the centre. It’s very important this moderation that we are noticing and the government’s openness towards dialogue; they are much more collaborative.
I think that countries have a duty to remain balanced, trying to maintain a balance where neither side, either too much taxation or too little taxation, will do. The government is taking a slightly more moderate view with respect to the first bill.”
“Does that give assurance that it will be a different reform from the original one?”
“The best thing that Chile has is this capacity to change things, to continue evolving within a democratic dialogue. And I emphasize this because not all Latin American countries have it. But in the past 30 years Chile has been an example for Latin America in this capacity to dialogue and dissent.
From the banking point of view, we are here to support, and we are thinking in the long term, so we assume that any type of tax reform will be moderate and will take into account the long-term capacity of the investments.”
“How positive can it be for expectations that an across-the-board agreement can be reached?”
“If it is approved, it must be positive, precisely because it reduces uncertainty. This fiscal pact will probably come with a slightly higher tax burden, but it will also come with greater efficiency in spending. The two things will probably be balanced.
Just as with the mining royalty reform, Scotiabank is optimistic, more than anything else with Chileans' ability to self-regulate for the long term. And, so far, they are an example for Latin America, and I expect we will remain so.”
“What things would you keep and what would you take out of the tax reform?”
“I’m not going to get into the details. Obviously, banks have a commitment with the country, with our customers. The less tax burden they have, the more the consumption, and if there is more consumption, there is more credit and, therefore, the economy grows faster.
Today's orthodox monetarist policy of high interest rates coincides with an abrupt increase in the tax burden, especially on salaried employees or the upper middle class – who consumes the most – it will have an effect on this capacity to grow.”
“How have you seen the role of the business community? The Confederation for Production and Commerce (CPC) closed the door to any tax increase and there was criticism that they talked to the government before the parliamentarians.”
“The more dialogue there is, the better. It all depends on how those talks are conducted. As far as I can see, they are happening at a high level in a transparent manner and they add value.
A tax reform was proposed here without much dialogue and we know what happened. Now, all this dialogue is taking place and we hope that the result will be different and that this will lead to a successful outcome in the negotiations in Congress, which is where they should be discussed.”
30-year loans
“And with pensions, how do you envision an agreement?”
“Pensions are obviously 100% tied to the capital market and the financing and funding structure of banks in Chile is 100% dependent on this form of capital market financing.
For the past 30 years Chile has had a combined system between the banking industry and capital markets and the pension markets, and right now a decision has been made to change the law.
What we definitely have to understand is that the depth of the capital markets here in Chile has a direct benefit, for example, in having 30-year mortgages. And I give this example because I have worked in countries where we do not have that.
Today, the benefit of home ownership at a reasonably low rate, which enables the advancement of Chileans, was achieved thanks to the entry of capital, the banking industry and pension funds, pension fund managers.
So, if we want to continue having 30-year mortgages, if we want to have an active, deep and liquid market, we must ensure that the bill addresses these issues.
Now, considering what is happening, for example, with tax reform and with Constitutional reform, I assume that the potential pension reform will also be moderate and will listen to all parties.”
