64 CHILE - CREDIT 



in the drawing up of the rules for the concession of loans secured on mort- 

 gage of urban real estate. The minimum limit, fixed by the organic law 

 at 500 pesos, is in practice 5,000 pesos. The borrower must pay every year 

 interest up to an amount not exceeding 8 %, a contribution to the sinking 

 fund to be agreed upon freely and, lastly, a contribution to the reserve fund 

 and working expenses, of not more than one-half per cent. 



To guarantee the holders of bonds, besides the mortgages, there 

 is the reserve fund, which forms the true capital of the Bank. This fund 

 is constituted by means of the above mentioned contributions, the interest 

 on delayed payments, the mortgage bonds drawn by lot, and interest not 

 drawn within the allotted term. 



That the bonds may be more readily accepted on the market the law- 

 permits of their being deposited as a guarantee for the exercise of any pub- 

 lic office and for judicial deposits, also in general of their being purchased 

 for investments for minors and for charitable institutions. The State 

 itself has invested in mortgage bonds of this Bank the capital forming the 

 fund for the redemption of its paper. 



The direction and management of the bank are entrusted to a man- 

 aging director, a cashier, an auditor, a secretary and a Board of Management, 

 aU appointed by the President of the Republic. The*Board of Management 

 is formed of the managing director, the auditor and four members, two ap- 

 pointed b3' the Senate, and two by the Chamber of Deputies. Of the two 

 last, one must be chosen from among the largest borrowers from the Bank. 



The Mortgage Bank has made great and rapid progress : in 1868 its 

 loans in bonds amounted to 4,000,000 pesos, and rose to more than 

 300,000,000 in 1912. 



We shall now give some particulars of the work of the Bank during 1912. 



§ 2. Speciai, transactions in 1912. 



The managing director's report first gives an account of three special 

 transactions carried out by the Bank. The first of these was the issue 

 of bonds on foreign markets to the value of 11,500,000 francs at 5 % 

 i n gold, to be repaid in instalments of i %. This was effected through 

 the French bankers, lyouis Dreyfus and Co., and Otto Benberg and Co, in 

 accordance with the contract made with them on May 19th., 1912 (i). 



The object of this transaction was to facilitate the granting of loans in 

 gold. The results were satisfactory ; the bonds continued to be quoted on 

 the Paris Exchange at an average rate of 97 %. 



The second special transaction was the conversion of bonds payable 

 in current money (2) into bonds payable in gold. By the law of February 



(i) In 191 1, in accordance with the above meut'Dned contract, the Bank liad issuea 

 mortgage bonds in gold at 5 % and i % for 40,000,000 francs and for £ 176,260. 



(2) By current money ($) is meant the paper peso ; in January, 1913, its average value was 

 frs. 1.057; in December it fell to 0,985 fr. The gold peso is equivalent to fr. 1.89. 



