The Unidad de Fomento (UF) is a
unit of account
In economics, unit of account is one of the money functions. A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of rela ...
used in
Chile
Chile, officially the Republic of Chile, is a country in the western part of South America. It is the southernmost country in the world, and the closest to Antarctica, occupying a long and narrow strip of land between the Andes to the east a ...
. It is a non-circulating currency;
the exchange rate between the UF and the
Chilean peso is constantly adjusted for inflation so that the value of the Unidad de Fomento remains almost constant on a daily basis during low inflation. It was created on 20 January 1967, for the use in determining the principal and interest in international secured loans for development, subject to revaluation according to the variations of inflation. Afterwards it was extended to all types of bank loans, private or special financing, purchases and investments on instalments, contracts, and some special situations. It is also used in legal standards such as the par value of stock and capitalization of companies, and fines.
It has become the preferred and predominant measure to determine the cost of real estate, values of housing and any secured loan, either private or of the Chilean government. Individual payments are made in
Chilean pesos (the country's
legal tender
Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in ...
), according to the daily value of the UF. A similar currency unit for use generally in payment of taxes, fines, or customs duty is the (UTM) (literally: monthly tax unit).
Calculation over time
From its creation in 1967, each calendar quarter, the UF value of 100
Chilean peso would be quoted based on the
Consumer Price Index (CPI) 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 CPI. Since 1990 the
Central Bank of Chile has determined its value. The values of the CPI are officially kept by the Instituto Nacional de Estadísticas de Chile (National Statistics Institute of Chile). Historical values of the UF as of 31 December each year (unlike below, in Chile numbers are written with a decimal comma and a dot to separate thousands):
See also
*
Constant Item Purchasing Power Accounting
Constant purchasing power accounting (CPPA) is an accounting model that is an alternative to model historical cost accounting under high inflation and hyper-inflationary environments. It has been approved for use by the International Accounting St ...
*
Unidade Real de Valor
The Daily Unidade Real de Valor, or URV (Portuguese, ''Real Value Unit''), was a non-monetary reference currency (i.e., non-fiat) created in March 1994, as part of the Plano Real in Brazil. It was the most theoretically sophisticated piece of the ...
*
Indexed unit of account
External links
Official historical and updated (UF) values Corrugated City (a blog), 3 August 2007
Shiller, Robert J. Indexed Units of Account: Theory and Assessment of Historical Experience
References
{{DEFAULTSORT:Unidad De Fomento
Finance in Chile
Currency
Business in Chile
1967 establishments in Chile
Currencies introduced in 1967