Unidad de Fomento
Encyclopedia
The Unidad de Fomento is a Unit of account
that is used in Chile
. The exchange rate between the UF and the Chilean peso
is now (today) constantly adjusted to inflation so that the value of the Unidad de Fomento remains constant on a daily basis during low inflation. It was created on January 20, 1968, for the use in determining principal (monetary item) and interest (constant real value non-monetary item) in international secured loans (monetary items) for development, subject to revaluation according to the variations of inflation. Afterwards it was extended to all types of bank loans (monetary items), private or special financing (monetary items) , purchases (trade debtors/trade creditors being constant real value non-monetary items) or investments on installments, contracts (constant real value non-monetary items), and some special situations. Also it is used in legal standards such as the par value of stock/capitalization (constant real value non-monetary items) of companies, fines (payables being constant real value non-monetary items) , etc. It has become the preferred and predominant measure for determining the cost of construction (variable items valued at Historical Cost being updated) , values of housing (historical variable real value non-monetary items being updated) and any secured loan (monetary item), either private or of the Chilean government. Individual payments are made in Chilean peso
s (the country's legal tender
), according to the daily value of the UF.
For historical and current values of the Chilean Unidad de Fomento (UF), see valoruf.cl or the government's Central Bank of Chile.
A similar currency unit for use generally in payment of taxes, fines, or customs duty is the Unidad Tributaria Mensual (UTM) (literally: monthly tax unit).
For historical and current values of the Chilean Unidad Tributaria Mensual (UTM), see valorutm.cl
would be quoted based on the Consumer Price Index
(abbreviated IPC in Spanish) of the past three months, which would be the official rate for the following quarter. In October 1975 with the currency changeover to pesos, the value of 1 UF was quoted in pesos and readjusted monthly. In July 1977 it was calculated daily by interpolation between the 10th of each month and the 9th of the following month, according to the monthly variation of the IPC. Since 1990 the Central Bank of Chile
Banco Central de Chile has determined its value. The values of the IPC are officially kept by the Instituto Nacional de Estadísticas de Chile (National Statistics Institute of Chile).
For historical and current values of the Chilean consumer price index (IPC), see Banco Central de Chile
Unit of account
A unit of account is a standard monetary unit of measurement of value/cost of goods, services, or assets. It is one of three well-known functions of money. It lends meaning to profits, losses, liability, or assets....
that is used in Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...
. The exchange rate between the UF and the Chilean peso
Chilean peso
The peso is the currency of Chile. The current peso has circulated since 1975, with a previous version circulating between 1817 and 1960. The symbol used locally for it is $. The ISO 4217 code for the present peso is CLP. It is subdivided into 100 centavos, although no centavo denominated coins...
is now (today) constantly adjusted to inflation so that the value of the Unidad de Fomento remains constant on a daily basis during low inflation. It was created on January 20, 1968, for the use in determining principal (monetary item) and interest (constant real value non-monetary item) in international secured loans (monetary items) for development, subject to revaluation according to the variations of inflation. Afterwards it was extended to all types of bank loans (monetary items), private or special financing (monetary items) , purchases (trade debtors/trade creditors being constant real value non-monetary items) or investments on installments, contracts (constant real value non-monetary items), and some special situations. Also it is used in legal standards such as the par value of stock/capitalization (constant real value non-monetary items) of companies, fines (payables being constant real value non-monetary items) , etc. It has become the preferred and predominant measure for determining the cost of construction (variable items valued at Historical Cost being updated) , values of housing (historical variable real value non-monetary items being updated) and any secured loan (monetary item), either private or of the Chilean government. Individual payments are made in Chilean peso
Chilean peso
The peso is the currency of Chile. The current peso has circulated since 1975, with a previous version circulating between 1817 and 1960. The symbol used locally for it is $. The ISO 4217 code for the present peso is CLP. It is subdivided into 100 centavos, although no centavo denominated coins...
s (the country's legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
), according to the daily value of the UF.
For historical and current values of the Chilean Unidad de Fomento (UF), see valoruf.cl or the government's Central Bank of Chile.
A similar currency unit for use generally in payment of taxes, fines, or customs duty is the Unidad Tributaria Mensual (UTM) (literally: monthly tax unit).
For historical and current values of the Chilean Unidad Tributaria Mensual (UTM), see valorutm.cl
Evolution of the calculation of the UF
From its creation in 1967, each calendar quarter, the UF value of 100 Chilean escudoChilean escudo
The escudo was the currency of Chile between 1960 and 1975, divided into 100 centésimos. It replaced the peso at a rate of 1 escudo = 1000 pesos and was itself replaced by a new peso, at a rate of 1 peso = 1000 escudos...
would be quoted based on the Consumer Price Index
Consumer price index
A consumer price index measures changes in the price level of consumer goods and services purchased by households. The CPI, in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of...
(abbreviated IPC in Spanish) of the past three months, which would be the official rate for the following quarter. In October 1975 with the currency changeover to pesos, the value of 1 UF was quoted in pesos and readjusted monthly. In July 1977 it was calculated daily by interpolation between the 10th of each month and the 9th of the following month, according to the monthly variation of the IPC. Since 1990 the Central Bank of Chile
Central Bank of Chile
The Central Bank of Chile is the central bank of Chile. It was originally created in 1925 and is incorporated into the current Chilean Constitution as an autonomous institution of constitutional rank.-History:...
Banco Central de Chile has determined its value. The values of the IPC are officially kept by the Instituto Nacional de Estadísticas de Chile (National Statistics Institute of Chile).
For historical and current values of the Chilean consumer price index (IPC), see Banco Central de Chile
External links
- nacionales.cl Unidad de Fomento converter
- Inflation and the mysterious UF, Corrugated City (a blog), 3 August 2007
- Shiller, Robert J. Indexed Units of Account: Theory and Assessment of Historical Experience
- Official and Historical Values for the Chilean Unidad de Fomento