Chilean lawmakers have introduced seven indications to the government's fourth capital market reform, known as MK4, which also addresses home financing. The proposals were submitted before the Friday 15:00 deadline and will be debated starting Tuesday in the Finance Committee of the Chamber of Deputies. Led by Deputy Diego Schalper, the Startup and Digital Economy Caucus seeks to adjust the junior stock exchange, create tax benefits for startup investors, and establish a fund of funds with Corfo participation.
Adjustments to the Junior Stock Exchange
The original MK4 proposal created a junior stock exchange segment to help early-stage innovative companies and greenfield mining exploration projects raise capital. Ecosystem actors told the Ministry of Finance that successful startups do not list in early stages, prompting Schalper to say the instrument was poorly designed if it targeted startups. The resulting adjustments would further flexibilize access to the junior exchange and extend capital gains tax benefits to private financing mechanisms such as venture capital and private equity funds.
Tax Relief for Technology Companies
A separate indication would eliminate the indirect sale tax for the technology industry. The levy currently applies when two entities domiciled abroad transfer an asset whose underlying is located in Chile. Schalper said the rule does not fit the digital economy, where assets have no physical location, and some companies moved development out of Chile to avoid the tax.
Disagreement Over a Corfo Fund of Funds
The only measure that creates friction with the executive branch would enable Corfo to invest directly in venture capital and private equity, and to establish a fund of funds for startup-focused venture funds. Because the government disagreed, the caucus presented the indication with deputies from the Party of the People and the Christian Democratic Party. Schalper said the Ministry of Economy was studying its own fund of funds project, but any such initiative requires Ministry of Finance support.
Regulatory Backing
Catherine Tornel, president of the Financial Market Commission, addressed MK4 at the Chile Day London event, saying the reforms share the goal of creating better incentives, deeper markets, and a financial system that serves more people at lower cost. Her comments followed the regulator's broader development mandate established in 2017 and operational milestones including a market development policy in 2024 and a modernization document in August. This regulatory backing reinforces the reform's importance as parliamentary debate begins.
A Cautionary Precedent
A recent Corfo venture capital committee decision offers a cautionary note for the fund of funds discussion. The committee unanimously terminated a program to finance indigenous enterprise development funds after it never operated because of design flaws, despite credit lines between US$4 million and US$12 million. The episode shows that in venture capital, vehicle design matters as much as the amount of money allocated, and a poorly calibrated fund of funds could fail in the same way.
With the deadline closed, the Finance Committee will prepare a comparative text that includes all indications from lawmakers and the executive. Schalper remains optimistic, saying the government will value the cross-party support and that he will insist on the fund of funds proposal because it is extremely important. Starting Tuesday, the parliamentary process will determine whether these intentions become legal text, while stakeholders monitor indirect tax exposure, investment vehicle structures, and exit strategies.
Source: df.cl