December 2003Legal Bulletin

1. Editor’s Statement

At the close of this edition of our legalnewsletter, one cannot help but feelupbeat by the legal and economic eventsdiscussed here. From an economicstandpoint, after a relatively long periodof worldwide and regional stagnation, fromwhich Chile was no t comple tel yimpervious, clouds are starting to clearup. As 2003 draws to a close, everythingpoints to a prosperous year 2004.

In the legal sphere, 2003 witnessedlandmark reforms that bring our legislationmore up to date. Also, major internationaltreaties were signed in 2003, intended togive investors –Chilean and foreign alike– yet another reason to invest in ourcountry. In fac t, no t only did theCooperation Agreement between theEuropean Union and Chile come intoforce, but approval was also given to theFree Trade Agreement with the UnitedStates and the anti-double taxation treatywith Spain. All these initiat ives, bythemselves important, are just the firstfruits of numerous negotiations conductedby Chile with i ts principal trade andinvestment partners, a trend expected tocontinue in 2004 and the coming years.

For Carey Abogados, 2003 also brimmedwith success and good news. Asment ioned in one of our previousnewsletters, in 2003 we were recognizedby Chambers & Partners as the SouthAmerican law office of the year in theCorporate/M&A category –something tojustly feel proud about. Also, the list ofthe most prominent Chilean attorneysunder the age of 40, prepared by LatinLawyer, included four of our attorneys–the largest concentration of nomineesachieved by a single firm in that report.

In April 2003, Carey Abogados organizedthe Conference on Mineral Resourcesand Reserves and Venture CapitalMarkets. This conference was held at theSantiago Intercont inental Hotel, withrenowned Chilean and internat ionalparticipants, such as representatives fromthe Toronto Stock Exchange and theToronto Securities Commission, in additionto Canadian law firm McMillan Binch. Thisevent attracted most of the Chilean miningand financial community, who lauded thequality of the lecturers and the event’s

efficient organization.

Already a feature in our year-end legalnewsletters, this edition includes asummary of the most relevant transactionsin which Carey Abogados was involvedduring the past year.

2. Q4 2003 Headlines

2.1 Sovereign Risk Reaches HistoricLevels

In November 2003, Chile recorded thelowest risk index in all its history and anall-time Latin American low on scoring 84base points on US sovereign bonds. Atthe close of this edition, Standard andPoor’s increased Chile’s long-term peso-denominated sovereign debt rating from“A-“ to “A”.

2 .2 Chilean Economic Ind icators

The Central Bank issued a forecast forChile’s Gross Domestic Product of around4 .5% to 5.5% in 2004. SantanderInvestment projects it at 5.1%, whereasthe Eclac and Credit Suisse First Bostonestimated it at 4.5%. The Sant iagoChamber of Commerce has issued a GDPprojection of 4.3%. Finally, the ChileanChamber o f Construc tion and theAssoc iat ion of Banks and FinancialInstitutions have placed it in the region of4.4% to 4.7%.

Elsewhere, the price of the dollar plungedduring 2003, with a parity of Ch$593.80as of December 31st. As of the same datein 2002, the rate of exchange had beenCh$718.61 per dollar. Likewise, at its mostrecent monetary policy meeting, theCentral Bank Board lowered its interestrate from 2.25% to 1.75%.

In the inflation arena, the aggregate totalfor 2003 was 1.1%, a 68-year low. TheCentral Bank believes that inflation willbe 2% in 2004.

The balance of trade during 2003 yieldeda surpl us of US$2.9387 b il l ion .

Finally, in September-November 2003,the national unemployment rate reached8.1%, the lowest during the same periodover the past 5 years.

2.3. Chile at the Forefront of WorldRankings

In November 2003, the University of Chiledisclosed its study on “2003 BudgetTransparency Indexes”, with Chile rankingfirst in Latin America owing to significantprogress made in defense spending,available information, regulation of publicprocurement, reserved expenses andadministrative ethics, among others .

In turn, in October the World EconomicF o r um i s s u ed i t s “ 20 0 3 - 0 4Competitiveness Ranking”, prepared onthe basis of the overall perception ofcorporate execut ives with regard toeconomic growth and business efficiency.Chile placed 23rd among 102 countriesand, once again, first in Latin Americathanks to its sound macroeconomicmanagem en t and w ide ar ray o finstitutional reforms.

In the mean time, in mid-O ctobe r,Journalists Without Borders placed Chile37th among 166 countries in terms offreedom of the press.

Moreover, in early October, InternationalTransparency disclosed that Chile haddropped from 17th to 20th place among133 countr ies in the “Co rrup tionPerceptions Index”, prepared annually onthe basis of the perception held bybusinessmen, academic and risk analysts.Despite this slide, Chile is still the “leastcorrupt” country in the region.

Also, in mid-December, it was reportedthat Chile had claimed in the “TechnologyIndex” prepared by the World EconomicForum in cooperation with the World Bank.Chile rose from 35th to 32nd place among102 countries, and also headed the packin Latin America. This ranking measureshow well prepared are the economies toparticipate in and benefit from the progressin info rma t ion technol og ies andcommunications.

Finally, at the close of this edition, TheWall Street Journal and The HeritageFoundation ranked Chile in 13th place inthe “Greatest Economic Freedom Index”,from among over 147 countries. Thus,Chile climbed three places compared with2003.

December 2003Legal Bulletin

2.4. Treasury Bonds Make a Debut onthe Local Market

In mid-October 2003, the first Treasurybond since 1986 was placed in the sumof UF 1.1 million. The demand for thesebonds was UF 4.530 bil lion and theplacement rate was 5.02%. However,pension funds did not participate in thisbid, and the bonds were purchaseden t ire ly by banks and f inanc i alcorporations.

2.5. Santiago Stock Exchange ImplementsNew Stock Pricing Criterion

Effective January 2nd, 2004, a new pricingmethod was implemented for stocks andinvestment interests at the end of eachtrading session in the Santiago StockExchange. This new criterion is thestandard used by the leading internationalmarkets. The Exchange reported that thisprice will be set “based on the calculationof a weighted average price exclusivelyfor cash settlement operations conductedover the last 10 minutes of the tradingsession, totaling at least UF 20.” If nooperations meet these requirements, “theprice will be set based on the last normalcash transaction made that day amountingto at least UF 20.” Highest, lowest andmean prices w il l be dete rmined byoperations amounting to “at least UF 20,regardless of their settlement mode, i.e.due today (PH), due tomorrow (PM) ornormal cash.”

2.6. International Treaties and Agreements

In mid-November 2003, Chile advisedPeru of its intent to start negotiations witha view to signing a free trade agreement(“FTA”) between both countries. Also, inmid-December, China invited Chile tonegotiate an FTA between both countries.However, prior to negotiations, feasibilitystudies must be conducted. In turn, inmid-November, a “Political and EconomicConsultation Mechanism” was institutedbetween Chile and Japan w ith theprospect of signing an FTA between bothcountries.

In turn, on December 4th, the Presidentof Chile promulgated the Free TradeAgreement with the US, effective January1st, 2004.

In late October and mid-December, thepa rl iaments of Spain and Fin land,respectively, approved the AssociationAgreement between Ch ile and theEuropean Union signed on November18th, 2002.

In mid-October, Chile and Argentinasigned an agreement al lowing Chileaninvestors to be exempt from the 0.5%Argentine tax on equity capital. Thisagreement modified the protocol that, inAp ri l 2003, in turn amended theanti/double taxation treaty between bothcountries. Moreover, in mid-October, theagreements signed by Chile to preventdouble taxation and tax evasion withKorea and Norway were published in theOfficial Gazette. In early December, Chileand Sweden concluded negotiations thathad begun in 1995 to achieve anagreement of this kind. Likewise, onJanuary 1st, 2004, the anti-double taxationtreaty with Spain came into force. On thatsame date, a comparable agreement wassigned with New Zealand. Finally, at thec lose of this edition, a comparableagreement came into force with Peru.

With regard to the FTA with South Korea,approved by the Chilean Senate at theclose of this edition, at the close of thisedition, the Korean government promisedto have it ratified by the National Assemblyduring February 2004. Elsewhere, in earlyNovember, the Bolivian governmentplaced FTA negotiations with Chile onhold, which ought to have been signed in2003, in order to stop deepening Bolivia’strade deficit. The Bolivian governmentannounced its intention to upgrade theEconomic Complementarity Agreement(ACE-22) signed with Chile in 1993.

2.7 Chile Signs United Nations Anti-Corruption Treaty

On December 11th, 2003, Chile signedthe “United Nations Anti-Corruption Treaty”in Mexico, which requires party States toadopt preventive measures and adapttheir legal frameworks to combat thisblight.

2.8 SII Issued Rules for the Treatment ofDonations Made by Corporate Taxpayers

In mid-October 2003, the Internal RevenueService (“SII”) issued Circular No. 55,

which interpreted the tax rule for theapplication of Law No. 19,885 (the “Law”).The Law creates tax benefits for corporatetaxpayers who make donat ions toinstitutions that deliver social services topove rty -s t ricken o r hand icappedindividuals , and to polit ical entit ies .

The Law provides that donations madeby taxpayers during years in which theirnet taxable income is negative (tax loss)shall be deemed as a rejected expenseand subject to a 35% tax penalty. TheLaw does not exclude a situation in whichthe loss was incurred because acompany’s income is exempt from incometax. According to Circular No. 59 issuedby the SII on November 20th, thisprovision does not apply to donations touniversities and State-run and privatevocational institutes and to educationalprograms, for the reasons stated therein.

2.9 Tax News

On October 1st, 2003, the increase to theValue Added Tax (“IVA”) came into effect,from 18% to 19%. However, there is apossibility that it could return to 18% onJanuary 1st, 2007. Also, effective January1st, 2004, corporate income tax wasincreased from 16.5% to 17%. The luxurytax also began its phase-out -destined todisappear in 2007- and the tax base thattriggers this tax was increased fromUS$15,640 to US$18,160 per automobile.

2.10 Biotechnology Could Have TaxIncentives

On November 18, 2003, the President ofChile disclosed the National BiotechnologyPolicy, which includes nee financingalternatives to promote R&D activities,encourage the creation of biotechnologyconsor t ia, assu re the delivery o fintellectual property rights to generatebusinesses, and develop a regulatoryframework for biotechnology. To promoteventure capital projects and strategicall iances, the government opted forupdating and enhancing intellectualproperty regulations instead of applyingtax incentives, although these are notruled out . The undersecretary of theEconomy and Technology Coordinatoradvised that the Finance Ministry willcoordinate an expert commission that willassess financing alternatives. Likewise,

December 2003Legal Bulletin

he mentioned that the new regulatoryframework will be submitted to Congressin May 2004. Additionally, a BiotechnologyForum will be set up, devised to givecontinued adv ice to a BiotechnologyRegulations Commission in order toaddress this issue in the country.

2.11 Chile Considers 39 Countries as TaxHavens

In early December, the Finance Ministrypublished in the Official Gazette a list of39 countries considered “tax havens” orpreferably detrimental tax systems,” basedon a l is t regularly prepa red by theOrganization for Economic Cooperationand Development (OECD). Consequently,capital originating from the Principality ofAndorra, Anguilla, Antigua and Barbuda,Aruba, Bahamas, Bahrain, Barbados,Belize, Bermudas, British Virgin Islands,Cayman Islands, Cook Islands, Cyprus,Dominica, Gibraltar, Grenada, Guernsey,Isle of Man, Jersey, Liberia, Malta,Maurit ius , Montserrat, NetherlandsAntil les, Niue, Panama, Samoa, SanMarino, Saint Kitts, Nevis, Saint Lucia,Seychelles, Saint Vincen t and theGrenadines Principality of Liechtenstein,Principality of Monaco, Marshall Islands,Nauru, Vanuatu, Turks and Caicos andUS Virgin Islands, will not be eligible forthe special tax treatment afforded underLaw 19840 on Investment Platforms.

2.12 Pension Funds: Higher Ceiling forOve rseas Investm en ts and NewRegulations

The Central Bank raised the pensionfunds’ ove rseas investment ceil ingeffective January 1st from 25% to 30%.Also , in mi d -O ctobe r, the A FPCommissioner confirmed that he waslooking into the possibility of submittinga draft bil l to Congress during 2004 toraise this ceiling even more.

Elsewhere, in late October the newregulations governing pension funds’investments in foreign instruments werepublished in the Official Gazette. Theseregulations authorizes the funds topurchase inst ruments in the l ikes ofprotected capital structured bills, marketindexed securit ies, municipal bonds,stock-convertible bonds, commercialpaper issued by foreign companies, short-

term deposits and asset-loan operations.They also address issues relating to thecustody of investments abroad andconflicts of interest.

2.13 New Law Adapts Chilean Legislationto FTA with the US

On November 19, 2003, Law 19914 waspublished in the Official Gazette, whichlaw adapted the legislation indicatedthe re in to the FTA w ith the US.

In addition to modifying the luxury taxmentioned above, this law amended Law17336 on Intellectual Property, grantingthe producer of phonograms -to hisphonogram- and to the art ist -to hisrendering or performance- the exclusiveright to authorize or forbid making themavailable to the public. It also amendedDecree Law 825, which introduced theVAT, in relation to the gradual increase inthe customs value of certain products.

2.14. Status of Certain Legislative BillsCurrently Pending

In early October 2003, the Chamber ofDeputies passed the d raft bi ll thatamended the Bankruptcy Law andprovided for greater transparency in theprivate bankruptcy administration system. It also enhanced the efficiency andregulates the penalizing authority of theBankruptcy Commission. This bill mustunde rgo its second const itut iona lexpedition process. Justice Minister LuisBates advised that a supplementaryinitiative will be introduced to regulatedistressed companies, touching on thesubject of crimes under the BankruptcyLaw.

In other issues, at the close of this editionin January 2004, Congress approved theso-called “Short Elec tric Law”. Thislawmaking project reformed the rulesgoverning the operation and developmentof transmission systems, established thetolling system and reduced the node pricef luctuation margin. I t a lso loweredqualifications for “unregulated customers”from 2000 kW to 500 kW, introduced thesupplementary services market, improvedthe terms for building small and midsizealternative energy plants, and it introduceda d ispute-resolution mechanism. \

Finally, in mid-October, the FinanceCommittee of the Chamber of Deputiespassed the draft bill titled “Capital MarketsII”, which was discussed in our June andSeptember 2003 Legal Newsletters. Thisbill must now be discussed in theChamber.

2.15 St iffer Penalt ies for FinancingTerrorism

On November 13th, Law 19906 waspublished in the Official Gazette, whichamended Law 18314 on terrorist conduct,increasing the jai l terms for whoeverdirectly or indirectly finances or contributesto the financing of terrorism.

2.16 Status of Verdict in “Clarín Case”

The so-called “Clarín Case” followed atCIADE in Wash ington against theRepublic of Chile -extensively discussedin our September 2002 Legal Newsletter- is currently pending verdict,. A finaljudgment is expected to be passed inearly 2004. This US$517 million claim fordamages was fi led by Chilean-Spanishcitizen Víctor Pey Casados and theSalvador Allende Foundation (Spain)against the Republic of Chile for theconfiscation of the “El C larín ” dailynewspaper in 1973. Carey Abogados,counsel for the defendant, has beenmost ly in charge of coordinating theactivities of White & Case attorneys inWashington with the legal department ofthe Foreign Investment Committee andother Chilean attorneys who participatein the case.

2.17. Conama Intent on Drawing PrivateEntities into Post-Approval Oversight ofEnvironmental Projects

In early November 2003, the director ofthe National Environmental Commission(“Conama”) disclosed that it will seek toimprove post-approval overs ight o finvestment projects approved by theEnvironmental Impact Evaluation System.The aim is to have private entities directlyin cha rge o f legal compliance andcontractual commitments established foreach project at the time of approval. Oneoption considered is that these entitiesissue an environmental certification for agiven period of time. A draft bill is expected

December 2003Legal Bulletin

to be submitted to the Congress shortly,to improve, revise and supplement LawNo. 19300 (Environmental Statute),reflecting the opinions of the private sector,congressmen and civil organizations, alsoenhancing grassroots involvement.

2.18 Comptroller Approves New UrbanExpansion Plan

In mid-December 2003, the NationalComptrol ler approved the so-called“Conditioned Urban Development in Areasof Forestry and Farming Interest” project.This expands the Santiago expansionplan to the rural districts of Pirque, SanJosé de Maipo, Quilicura, Pudahuel,Maipú, Calera de Tango, La Pintana,Lampa, Colina, San Bernardo and Tiltil.Among other things, the project providestha t de ve l ope rs m ust as sum eresponsibili ty for the impacts resultingfrom their projects, and constructioncompanies for traffic impacts, so as toachieve harmonious development withthe rest of the Metropolitan Region. Also,30% of all residential properties built mustbe either low-cost or subsidized housing.This bil l need only be published in theOfficial Gazette to come into force.

2.19 Agreement Reached in Pumalín ParkDisputes

On December 9, 2003, a final agreementwas signed by the government and USbusinessman Douglas Tompkins todeclare Tompkins’ Pumalín Park a “NaturalSanctuary”. This park, which stretchesover 300,000 hectares of land in thePalena province, in the 10th Region, wasthe focus of heated debate over the past6 years because of its location next toChile’s international border or in the vicinitythereof. The agreement provides that afoundation wil l be created, to whichsubstantially all the park will be transferred.The foundation will not be able to sell theland or change its bylaws other than withthe approval of the Ministry of Justice. Ifthe foundation is dissolved, the Presidentof Chile will decide how the land will beused. A barter system will be establishedas between the State and Mr. Tompkins,whereby he will convey to Chile 22,000hectares to clear the land titles held bylocal settlers, and the government willgive him 12,000 hectares in return.Present and future ways of communication

wil l be exc luded f rom the “NaturalSanctuary” declaration. A developmentprogram for the Palena community is alsoincluded. This agreement was signed bythe Head of the Presidential Chiefs ofStaff, Francisco Huenchumilla, DouglasTompkins, his attorney Pedro PabloGutiérrez –a partner at Carey Abogados-, and the Governor of the 10th Region,Patricio Vallespin.

2.20. New Mining Projects

Record copper and gold prices on theworld market in 2003 have promptedseveral companies to look into thepossibility of resuming or starting certainmining projects previously suspended.Thus, Canada’s Placer Dome, which hasled the approx. US$1.43 bil lion CerroCasale project, announced that it wouldmake a final decision in March. TheRefugio mine is also potentially slated forreopening, as well as the Pascua-Lamadeposit for commissioning toward 2008,with investment amounting to US$114million and US$1.2 billion respectively.

3. Articles on Issues of Legal Interest

3.1 New Law on Money and AssetLaundering

In December 2003, Law No. 19913 (the“Law) was enacted to prevent and controlmoney or asset laundering, prevent theChilean financial and economic systemfrom being used to legitimize illegal profitsand protect these systems. The Law waspassed within the context of global markett rends, unde r the light of cu rrenti n t e r n a t i o n a l t r e a t i e s a n drecommendations made to Chile byvarious specialized international entities.It is also a significant enhancement to theDrug Trafficking and Money LaunderingLaws (1995), considered insufficient andimpractical under current circumstancesand in new and increasingly complexscenarios.

The Law created a new technical entityspecial izing in f inanc ial analysis andintelligence, with strong oversight authority.It also lend more accuracy to the definitionof money or asset laundering as criminalactivities.

i) Establishment of the Financial AnalysisTaskforce (“UAF”): The UAF is aimed atpreventing and impeding money or assetlaundering activity. The UAF is a publicagency that will report to the President ofChile th rough the Finance Minis try.

Among other things, the UAF may: (a)request and examine all types o fin form at i on on susp ic i ous ac ts ,transactions and operations; (b) orderexpert audits; (c) arrange, maintain andmanage files and databases, being ableto integra te them to nat ional andinternational information networks; (d)recommend steps to be adopted by thepublic and private sectors to prevent thesecriminal activities; and (e) issue generally-applicable instructions to the entities andpersons who are required to report to theUAF.

If, after reasonable review, the UAFconsiders that there is reason to suspectthat the above offenses have beencommitted, it will order the information tobe sent immediately to the DA Office (orto the State Defense Council in thoseregions where the new system of criminalprocedure is not yet in effect) to haveadequate action taken. This includes thefiling of any necessary legal and criminalaction.

However the UAF can never assume theauthority of the DA’s Office, of the StateDefense Council or of the Courts of Law.

ii) Reporting Requirements with the UAF:The Law requires the following entities toreport to the UAF regarding suspiciousoperations they become aware during thecourse of their activ ities> banks andfinancial institutions (bank-client privilegedoes not apply); the Central Bank of Chile;the Foreign Investment Committeefac tor ing , f i nanc ia l l eas ing andsecuritization companies; general andinvestment fund management companies;currency exchange firms; credit cardissuers and operators; securities andmoney transfer and t ranspor tat ioncompanies ; stock exchanges; stockbrokers; securities agents; insurancecompanies; mutual fund managers ;futures and options market operators;general customs brokers; auction houses;assoc iation brokers and real estateservices companies; and notaries and

December 2003Legal Bulletin

reorders, among others.

These entities and persons cannot advisethe affected party or third parties regardingdemands or submissions of informationby or to the UAF, nor give them anyinformation in this regard.

Reporting obligations with the UAF shallprevail over any other legal, regulatory orother obligation regarding secrecy orconfidentiality, including the statutory bank-client privilege.

iii) More Accurate Definition of Money andAsset Laundering Activities: The Lawsignificantly improved the definition ofmoney and asset laundering activities, sotha t the UAF may subsequen tl yinvestigate and analyze not only the fundsor assets related to drug trafficking, aswas the case until now, but also thoserelated to acts of terrorism, arms dealingand acts commit ted or conspiraciescreated to this end by organized crime.

Diego Peralta / Felipe Tupperdperalta@carey.cl / ftupper@carey.clFinancial Practice Group

IP Telephony Challenges Facing Subteland Current Telecoms Regulations

It is not surprising that technology hasoutpaced the legislation that regulates it.In fact, another proof of this has come inrecen t months w ith the a rrival ofbroadband integrated voice and datatransmission systems, better known as“IP Telephony”, which has already sparkedmore than one dispute in the Chileantelecoms market.

This is not a minor issue since, i f thissystem takes root, public telephony ratescould be drastically reduced and userscould even be able to access them for amonthly flat fee, allowing them to makeand receive unlimited calls. However,more important is that the “long-distancecall” concept could possibly disappear, inpract ice al lowing that a national orinternational LD call could be comparableto local calls in terms of cost. This wouldplace the long distance carriers ’ verybusiness in jeopardy.

This is why, consistent with its policy tocreate massive access and improve the

quality of telecoms services through thep rom o t ion o f new techno log ica ld eve l op m en ts a nd fac i l i t a t i ng“ techno log ical conve rgence” , theTe lecomm uni cat i ons Depar tm en t(“Subtel”) has been avidly interested inthe development of IP Telephony in ourcountry.

However, current telecoms regulationsimpose basic restrictions that are hard toovercome. Subtel rightly believes that itwill be unable to deliver IP service in theabsence of a license allowing the serviceprovider to do so. In fact, the fact that IPservice is delivered using a ce rtaintechnology or under a certain protocoldoes not place it outside the realm of apublic telephone service or al low theprovider to release itself of the obligationto meet all regulatory requirements,inc luding possess ion of a l icenseexpressly allowing it to deliver telephonyservices. So much so, that Subtel recentlyp ressed charges against a l imitedtelecoms service licensee found deliveringIP services without the requisite license.

Various options are being discussed toovercome these hurdles. On the one hand,there is a possibility to amend the law torelease IP Telephony from the need tooperate under a preexist ing license,applying a criterion similar to that usedfor internet-access service providers(ISPs), or else to create a special licensefor IP Telephony that would have to meetcertain minimum requirements but not besubjec t to local and long-distancetelephony rules. Another option is toclassify IP Telephony as a public datat ransmission service. However, thissolution would only allow for calls to bemade, not received.

Presen t ly, a t least two telecomscompanies have applied for and beengranted public telephone service licensesto operate with the IP system. However,these licenses are not yet operational,partly because of prevailing regulatoryuncertain ty concerning this mat ter.

We hope that a solution is implementedas soon as practicable since the onesstanding most to gain from this newsystem will no doubt be the users, whowill have access to an additional, lower-cost telecoms alternative.

Alfonso Silva / Sergio Montesasilva@carey.c l / smontes@carey.clGrupo Telecomunicaciones

3.3 Amendments to Intellectual PropertyLaw

Dur ing 2003, Chile upgraded itsintellectual property legislation to withinthe min imum p rotect ion s tandardsassumed internat ionally. In fact, theInternet Treaties of the World IntellectualProperty Organization signed by Chile in1996 were published in the Off ic ialGazette, as well as Laws Nos. 19912 and19914, which adapted Chilean laws tothe 1994 World Trade OrganizationAgreemen ts and the Free TradeAgreement recently signed with the USA.

The main modifications introduced are asfollows:

i) Border Measures:

Customs autho rit ies are allowed toadministratively forbid any merchandisebearing a forged registered trademark orwhich violates copyrights from enteringthe country. In this case, they are requiredto inform this fact to the competent courtsand advise the holder of the potentiallyviolated rights.

The holders of industrial property rightsregistered in Chile, as well as copyrightholders and the l ike, are authorized toask the competent civil court to instructthe customs authorities to suspend thedispatch of merchandise if found to violatetheir rights, or if there are reasonablegrounds to believe that a violation isunderway.

Several rules were devised to make thisright enforceable, including: copyright andcomparable holders need not prove theirregis t rat ion , ra the r onl y p roducereasonable evidence of their ownership;there is no requirement to post a bondunless the court so requires; the courtmay accept petitions ex-officio and nofailure o serve process on the importeror consignee of the merchandise may beused as grounds to suspend the resolutionand the suspension wil l be advised tomade extensive to all Chilean customschiefs -hence, during its effective term

December 2003Legal Bulletin

this merchandise may not be sold ordisposed of, assigned, used or consumed.

ii) More Robust Protection Standards:

Increased protection standards includethe following:

a) The protection term for copyright andsimilar holders is expanded to 70 years,allowing for 20 more years of exclusivemarketing of the protected products.b) Software protection was expresslyreinforced, regardless of the mode orexpression of the program, such as sourceor object code, including prefatorydocumentation, its technical descriptionand user manuals. Data and othercompilations and texti le drawings ormodels were also expressly included.c) New definitions were introduced, suchas reproduction, public communicationand transformation.d) Authorship presumptions were alsomade extensive to those personsappearing as authors upon disclosure ofa work that indicates their names,pseudonyms, signatures or signs thatusually identify them. This is consistentwith our copyright system, which doesnot require any prior registration to acquirethis right.e) Protection of the rights of artists,performers, phonogram producers andradio broadcasting entities was reinforced,and the cases in which the use of others’works without any permission from orpayment to the author were restricted.f) The right to distribution to the publicand the exhaustion of this right wereexpressly regulated.g) Whoever provides the means tofacilitate intellectual property violations isnow subject to sanctions, including thosecommitted through digital means and/orthe internet.

These legal reforms are expected to allowfor better protection of intellectual assetsin our country.

Guil le rmo Ca rey / Ca rola Cane logcarey@carey.cl / ccanelo@carey.clIntel lectual Property Pract ice Group

3.4 “Administrative Silence” under LawNo. 19880

On May 29, 2003, Law No. 19880 waspublished in the Official Gazette, creatingthe Terms for Administrative Procedurethat govern the Acts of the Civil Service(the “Service”) (the “Law”). This Lawregulates, for the first time ever in theChilean legal framework, an alternativeadministrative procedure with regard toadministrative acts that must be expeditedunder special laws, such as the grantingof licenses pr bids, etc.

The Law is be tte r known as the“Administrative Silence Law”, alluding toits regulation of the Service’s failure tostate an opinion when submitted inquiries,petitions, claims, complaints, remediesand other filings.

Legal theory d ist inguishes betweenpositive and negative silence. The formerentails acceptance of the request if theinterested party does not receive a replyfrom the authorities on time. The laterentails rejection of the petition if theauthorities do not decide thereon withinthe established timeframe, when it affectsthe property of the State.

Positive silence expedites administrativeprocedures and the investments requiringsuch procedures. However, Chile requiresa prior administrative approval known as“toma de razón” (“Toma de Razón”), whichgrants force and basis to the presumptionthat all Service acts are lawful, and which-as we will see- could pose an obstacleto the eff iciency of this new concept.

The Law expressly provides the effectsof positive silence. The interested partymay file a complaint with the authoritythat was required to decide on his petition,in order that it meet the deadline for suchprocedure. The authority will issue areceipt (“Certificate”), and, as of the dateof the Certificate, a 5-day term shall startrunning for the noncompliant authority tobreak its silence, whereupon the petitionwill be deemed accepted. The interestedparty may subsequently request that thiscircumstance be certified.

During the Law’s congressional debate,it was believed that positive silence wouldprove an efficient tool to speed up the

paperwork entailed by investment projects.However, the Law makes no reference tothe need of submitting the Certificate tothe Toma de Razón.

In the case of electric concessions, thishas brought about uncertainty. In fact, theauthorities have 90 days during which todecide upon an elect ric concessionapplication. Once this term is over, theapplicant may demand that the authority’sdecision be issued pursuant to the positivesilence rule. The Certificate will constitutethe administrative act per se, and itscontents must make accurate referenceto the terms of the application. However,the electric concession is in itself an actthat requires Toma de Razón. Is i treasonable that in this case the Certificateshould be subject to this step? In ouropinion, the Certificate should be an actexempt of Toma de Razón, as it merelyconstitutes the authority’s certification inthe sense of granting the application thevalue of a completed filing.

It could be argued that this position wouldsidetrack one of the Service’s legalitychecks. However, we are of the opinionthat it is the administrative procedure itself-with the rights and guarantees affordedto the subordinate parties, the deadlinesprovided for the Service and other pro-active regulatory tools - which actuallyaffords efficiency and validity to the actsof the Service. It is this factor, not theToma de Razón, which creates theunderlying basis and depth for the actsto be presumed lawfu l, s ince theadministrative acts were conducted inaccordance with the same. The Toma deRazón would only confirm that saidprocedu re has been com pl eted .

Rafael Verga ra / Camila Boe tt igerrvergara@carey.cl / cboettiger@carey.clNatura l Resources Practice Group

3.5 Tax News

The end of 2003 and the beginning of2004 have, in the taxation sphere, beenhallmarked by developments relating tointernational anti-double taxation treaties,the issuance of an official list of tax havens(“blacklist”) applicable in Chile, andreforms to the t rea tmen t a fforded

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donations and grants.

1. In the treaty arena, effective January1, 2004, the bilateral treaties intended toprevent double taxation between Chileand Brazil, Norway, South Korea, Peru,Ecuador, Spain and Poland came intoforce. These agreements join thosealready signed with Argentina, Canadaand Mexico. The treaties signed withDenmark, Croatia, United Kingdom andNew Zealand are expected to come intoforce next year.

Except for the treaty between Chile andArgentina, which uses a system ofexemptions whereby income that is taxedin one country are tax-exempt in the other,all the treaties signed by Chile arepatterned on the model agreementprepared by the O rganizat ion fo rEconomic Cooperation and Development(OECD), with certain peculiarities to adaptthem to the Chilean tax system. It is worthnoting that, pursuant to the most-favorednation clause, some of the rates providedin the new agreements favorably alterthose included in previous treat ies.

2. Also in the sphere of Chilean taxationinternationally, a decree published by theFinance Ministry in late December 2003issued a “blacklist” of jurisdictions which,for Chilean tax purposes, are consideredtax havens or regimes that engage indetrimental tax practices. This list, alreadymentioned in this Legal Newsletter, isimportant for three main reasons:

2.1 Persons or entities domiciled in theblacklisted jurisdiction are ineligible forthe special treatment afforded foreigncompanies wishing to use Chile as aplatform for investment in other countries.These rules contained in Law No. 19840of 2002, known as the “InvestmentPlatform”, expressly exc lude foreigncompanies domiciled in those jurisdictions.They also exclude the investments madefrom Chile toward those jurisdictions.

2.2 Transact ions between a localtaxpayers and companies or personsdomiciled in blacklisted jurisdictions willbe understood as made between relatedparties for transfer pricing regulationspurposes.

2.3 Credit operations between a local

debtor and cred itors domic i led inblacklisted jurisdictions will be understoodas made between related parties for thincapitalizat ion regulat ions purposes.

Finally, Law No . 19885 in troducedamendments to the tax treatment ofdonations, creating a new statute fordonations made to charitable institutionsand another for those destined to financepolitical activities. It also sought to matchand arrange a series of various statutesin effect for specific-purpose donations(cultural, educational, sports-related, etc.)by setting common limits and ceil ings,which overlap with the specific rules ofeach specific treatment. However, inpractical terms, the new changes causedmore confusion and drew a great amountof criticism as they reduced some of thebenefits tha t these trea tments hadintended to introduce.R icardo Escobar / Héctor Lehuedérescobar@carey.cl / hlehuede@carey.clTaxation Practice Group

3.6 Modifications to Consumer ProtectionLaw

The Senate is currently looking into a draftbill, already approved by the Chamber ofDeputies, which modifies the present LawNo. 19496 on Consumer Protection (the“Bil l”). One of its most novel andcontroversial proposals is the introductionof class actions. Class actions allow forthe fi ling of collective lawsuits when asingle injury or damage similarly affecteda broad group or class of persons. Theintent is to have the final judgmentrendered on such act ion be madeextensive to all class members, withoutrequiring each individual class memberto fi le separate action. This facili tatesobtainment of damages by persons wholack the incentives or means to individuallytake on the costs of a lawsuit.

The bill provides that the filing of actionunder the Consumer Protection Law maybe conducted not only individually butalso “in the benefit of collective or diffuseinterests of the consumers”. These actionsare intended to punish noncompliantproviders, annul abusive clauses, obtainperformance of breached obligations,terminate acts that affect consumer rightsand ob ta i n damage paym en ts .

To this end, “collective interest” actionsare understood as those f iled in thedefense of rights shared by a specific orspecifiable group of group of consumerswho dealt with the same provider. In turn,“diffuse interest” actions are those filedin the defense of an indeterminate groupof consumers whose rights are affected.

These class actions are commenced witha comp laint f iled by the Na tionalConsumer Serv ice , a consumerassociation, a group of 50 or more affectedconsumers, or any State entity with theauthority to intervene in consumer affairs.

Filing of this action activates a “declarationprocedure” aimed at ascertaining theexistence of the breach and the liabilityof the applicable provider. If the action isadmitted, a “collective indemnification”procedure is then commenced, aimedprecisely at determining the amount ofdamages payable.

The intended scope of the verdict issuedin the declaration procedure is perhapsthe main new point in this Bill. In fact, thedecision would have erga omnes effects,i.e. affecting not only the parties to thedispute but also all consumers eligible forinclusion in the respective class, whetherthey take part on the action or not .Accordingly, the Bill provides that thedecision ascertaining the liability of thedefendant(s) wil l be advised by noticesto anyone interested in asserting theirrights, the benefited consumers beingable to act either collec tively in theindemnification procedure, or else fi leindividual act ion in accordance withgeneral rules.

Nevertheless, this legislative initiative hasdrawn criticism from various angles .

Firstly, one of the most debated classaction issues –regulated in detail throughUS case law – is the identification orcrea ti on o f the “c lass” , i .e . therequirements to join the applicable group.The Bill makes no reference to this issue,merely establishing the “collective interest”and “diffuse interest” concepts as the onlyapplicable parameters, both of which aredangerously broad. In other words, theapplicability of these class actions or lackthereof is left almost entirely to the court’sdiscretion, something reprehensible from

December 2003Legal Bulletin

the s tandpoin t o f legal cer ta inty.

Moreover, opinions have also been criticalof the fact that class actions tend to createa “litigation industry” whereby attorneysearn large sums on collecting a significantportion of the award, ultimately becomingthe single largest beneficiaries of thesystem. Experiences in other countriesconfirm this, especially in the US. It isalso held that consumers will stand tolose from increased prices of productslikely to fal l within the scope of theseactions and the higher concomitant costof liability insurance.

Strictly legal analysis confirms the needto improve on several aspects of the Bill.Issues such as the admissibility of actionsand class determination, the brief andexcessively summary nature of theprocedure, the possibility to file separateaction after the class action has beenresolved upon, among others, are clearlyamenable to greater legislative effort inorder to afford these regulations anadequate degree of legal certainty ifultimately approved for inclusion into oursystem.

Pablo Iacobell i / Guil lermo Acuñapiacobelli@carey.cl / gacuña@carey.clCorporate Practice Group

4. Outstanding Transactions Closed byCarey Abogados in 2003

During 2003, Carey Abogados was onceagain involved in some of the mostimportant transactions closed in Chile,including, among others, the fol lowing:

4.1 Financing through the debt securitiesissuances

· Ch ilean Soverei gn Debt Issue

In January 2003, the Republic of Chileissued US$1,000 mill ion in sovereignbonds. Carey Abogados acted as counselfor banks Deutsche Bank, JPMorganChase Bank and others, who were theunderwriters, through a team led bypartner Diego Peralta and associatesFelipe Rencoret and Juan Esteban Laval.

· International Debt Securities Issue byCorporación Nacional del Cobre de Chile("Codelco").

In October 2003, mining corporationCodelco issued 10-year internationalbonds in the sum of US$500 million. Thisoperation is set within the framework ofCodelco ’s debt workout and capitalexpend itu re financ ing p lans. Thisunderwriting set a new record in terms ofdemand and spread. Carey Abogados ascounsel for the issuer through a team ledby partner Juan Guillermo Levine andassociates María Fernanda Carvajal andNatalia González.

· Debt Securities Issue at SociedadConcesionaria Autopista Central S.A.( “Centra l”), unde rwritten by MBIAInsurance Corporation

In December 2003, Centra l issuedUF13,000,500 in bonds for the localChilean market and a Rule 144-A US$250mill ion issue for the US market. Bothissues were insured by MBIA InsuranceCorporation, one of the leading USi nsu rance com pan ies . C it ig roupunderwrote both issues, and with itsstructuring approach pioneered the “Dutchauction” system for infrastructure bondson the local securities market andsimultaneous auctioning (with only twominutes’ difference) for infrastruc turebonds in Chile and the US. The doubleUF and USD issue by Central was thefirst of its class for Chilean public worksconcessionaires and the largestinfrastructure bond issue to date. Thistransaction entai led furnishing a widerange of security instruments. Central isthe concessionaire for the “North-SouthSystem” works, the largest urban highwayconcession in Chile. Once built, it will usethe free-flow mode for toll collections andis sure to be one of the most modernhighways in the world. Carey Abogadosacted as counsel for Central through ateam led by partner Jaime Martínez Tejedaand associates Pilar Duarte and NicolásCabello.

· Debt Secur it ies Issue by BancoSantander unde r an MTN Program

In January 2003, Banco Santander issuedUS$300 mill ion in medium-term debtsecurities. Carey Abogados acted ascounsel for the issuer through a team ledby partner Diego Peralta and associatesFelipe Rencoret and Juan Esteban Laval.

· Trade - in o f B anco San tande rSubordinated Bonds

In January 2003, Banco Santanderlaunched a US$300 million offering forthe trade-in of existing subordinated bondsfor new longer-maturing subordinatedbonds. The intent of this operation wasto continue using the existing issue asquasi-capital (tier 1). Carey Abogadosacted as counsel for Banco Santanderthrough a team led by partner DiegoPeralta and associates Felipe Rencoretand Juan Esteban Laval.

· Debt Securities Issue by Metro S.A.

In September 2003 , undergroundtransportation concern Metro S.A. issued,registered and underwrote fixed-sumbonds totaling UF4,000,000, guaranteedby the Republic of Chile. In this operation,Banco de Ch ile acted as ar ranger,underwriter and agent for the bondholders.Carey Abogados acted as counsel for theissuer through a team led by partner DiegoPeralta and associates José MiguelCarvajal and José Manuel Díaz de Valdés.

· Debt Securities Issue by Distribución yServicio D&S S.A.

In November 2003, supermarket holdingconcern Distribución & Servicios S.A.(“D&S”) simultaneously issued, registeredand underwrote fixed-sum and line bondstotaling UF3,000,000. In this transaction,Larraín Vial acted as underwriter andBanco de Chile as agent for thebondholders. Carey Abogados acted ascounsel for the issuer through a team ledby partner Diego Peralta and associatesJosé Miguel Carvajal and Felipe Moro.

· Debt Securities Issue by Empresas JuanYarur S.A.C.

In March 2003, Empresas Juan YarurS.A.C. simultaneously issued, registeredand underwrote fixed-sum and line bondstotal ing UF1,500,000. IM Trust was theunderwriter, whereas Banco de Chile wasthe agent for the bondholders. CareyAbogados acted as counsel for the sellers,through a team led by partner DiegoPeralta and associates José MiguelCarvajal and Felipe Moro.

· Commercial Paper Issue by D&S

Diciembre 2003Legal Bulletin

In November 2003, D&S registered a lineof commerc ial pape r and issued,registered and underwrote commercialpaper under that l ine in the sum ofUF1,250,000. In this transaction, LarraínVial acted as underwriter. Carey Abogadosacted as counsel for the issuer through ateam led by partner Diego Peralta andassociates José Miguel Carvajal andFelipe Moro.

· Securitization Debt Securities Issue byABN AM RO Secur it izado ra S.A.

In May 2003, ABN AMRO SecuritizadoraS.A. simultaneously issued, registeredand underwrote securitizat ion debtsecurities in the sum of UF1,000,000,backed by cash flows originating fromtuition and registration fees paid by law,des ign, advertis ing and jou rnalismstudents at Universidad Diego Portales.This operation pioneered the issue ofsecuritization debt securities backed bytuition fee cash flows in Chile. In thistransaction, Universidad Diego Portalesacted as originator, Ernst & Young asarranger, BBVA Corredores de Bolsa asunderwriters, and the Interna tionalFinance Corporation (“IFC”) as guarantor.Carey Abogados acted as counsel for theoriginator through a team led by partnerDiego Peralta and associates José MiguelCarvajal and Felipe Moro.

4.2 Banking Finance

· Security Operations in Favor of ForeignBanks

During the firs t half of 2003, severaltransactions were conducted to completea leveraged buyout between Frenchcompany Leg rand S.A. –and itssubsidiaries worldwide- and severalforeign banks. In Chile, Inversiones G.L.Limitada furnished a pledge and joint-and-several guaranty to secure, togetherwith other subsidiaries of Legrand S.A.,obligations in the sums of 1,756,244,500Euros, 1,335 ,000 ,000 Eu ros and2,222,000,000 Euros. Carey Abogadosacted as counsel for The Royal Bank ofScotland Plc through a team led by partnerJuan Guillermo Levine and associatesMaría Fernanda Carvajal and NataliaGonzález.

· US$300 Mil lion Syndicated Loan toCodelco

In July 2003, a syndicate of banks andfinancial corporations led by BNP Paribasgranted a US$300 million loan to Codelcothrough a cred it agreement . CareyAbogados acted as counsel for Codelcothrough a team led by partner JuanGuillermo Levine and associate MaríaFernanda Carvajal.

· Local Syndicated Loan and BondPlacement Agreements of SociedadAustral de Electricidad S.A. (“Saesa”)

In January 2003, a local bank syndicatecomprising Banco Bice, Banco de Chile,BCI, Corpbanca and Banco Estadogranted Saesa a long term credit facility(7 years) in the sum of UF 1,406,103.33and a working capital facili ty totaling UF1,065,435.053. On even date, the banksyndicate granted Empresa Eléctrica dela Frontera S.A. (“Frontel”), an affiliate ofSaesa, a long term credit facility (7 years)in the sum of UF 980,168.374 and awork ing capital fac i li ty tota ling UF532,717.5267. Also, in January 2003,Saesa placed its Series C and Series Dbond issues in the sum of UF 2,600,000and UF 2,300,000, respectively. Thisprocess was part of the corporateres tructur ing of the Saesa Groupconducted during 2002, the key goal ofwhich was to refinance a foreign creditextended to certain companies within thegroup to purchase these concerns fromCopec in 2001. Carey Abogados actedas counsel for Saesa and Frontel througha team led by partner Claudio Lizana andassociates Consuelo Raby, Lorena Pavic,Mar iana G ómez and Karen Piddo.

· Refinancing of Sociedad ConcesionariaA u top is ta de l Aconcagua S. A.(“Concesionaria”)

In March 2003, a syndicate of 3 localbanks (Banco de Chile, BBVA Banco BHIFand Banco Security) granted a loan toConcesionaria and purchased severalcredits granted to the same in foreigncurrency by the development bank of theFederal Government of the UnitedMexican States , Banco Nacional deComercio Exterior, S.N.C., Grand CaymanBranch, furnishing a broad range ofsecurity instruments, including a special

pledge on a public works concession. Theamount of th is operation was UF7,800,000. Carey Abogados acted ascounsel for Concesionaria and BancoNacional de Comercio Exterior, S.N.C.through a team led by partner JaimeMartínez Tejeda and associates CristiánCorrea and Pilar Duarte.

· Restructuring of VTR Global Com S.A.Syndicated Loan

In May 2003, VTR Global Com S.A.(“VTR”), a leader in the CATV andBroadband Internet businesses and thesecond largest fixed-telephony operatorin Chile, a subsidiary of US companyUnitedGlobalCom, Inc., restructured aUS$ 123 million syndicated loan withforeign banks BankBoston N.A., CitibankN.A., ING Bank N.V., JP Morgan Chase,Credit Lyonnais, Export DevelopmentCanada, Canadian Imperial Bank ofCommerce and The Toronto DominionBank. This t ransaction also called forcapital contributions into VTR in the regionof US$ 230 million. Carey Abogados,together with US law firm Holme, Roberts& Owen, acted as counsel for VTR andits parent through a team led by partnerPablo Iacobelli and associates GuillermoAcuña and Pa tr ic ia Sil berm an .

· US$50 Million Loan to Nestlé Chile S.A.

In December 2003, foreign bank ABNAMRO Bank N.V. granted a US$ 50 millionloan to Nestlé Chile S.A. under a creditagreement. Carey Abogados acted ascounsel for the lender through a team ledby partner Juan Guillermo Levine andassociates María Fernanda Carvajal andNatalia González.

· Purchase of Coca Cola Polar ArgentinaS.A. Secured Credit

During the first quarter of 2003, CareyAbogados acted as counsel for NMRothschild & Sons Limited in the purchaseof credits extended to Coca Cola PolarArgentina S.A. by its shareholders as aresult of a capital reduct ion at tha tcompany. This operation was valued atUS$ 33 mill ion and involved ent itiesresiding in Argentina, Chile, England andUruguay. Carey Abogados acted ascounsel for NM Rothschild & Sons Limitedthrough a team led by partner Salvador

December 2003Legal Bulletin

Valdés and associate Cristián Eyzaguirre.

· Revolving Credit Facility to Lan ChileS.A.

In June 2003, the IFC granted airl inecarrier Lan Chile S.A. a revolving creditfacility in the aggregate sum of US$ 30million under a “Revolving Credit FacilityAgreement”. Carey Abogados acted ascounsel for the IFC through a team ledby partner Juan Guillermo Levine andassociates María Fernanda Carvajal andNatalia González.

· Financing for HV Line at Ralco Plant

In March 2003 , Dresdne r BankLateinamerika Hamburg and Corpbancagranted a US$ 25 million syndicated loanto Huepil de Electricidad S.A. to fund theconstruction and commissioning of thehigh-voltage line of the Ralco Plant. Thisloan was secured by US Abengoa S.A.(Spain), Abengoa Chile S.A. and MedioAmbiente Ltda. Carey Abogados actedas counsel for the financiers through ateam led by partner Diego Peralta andassociates Felipe Rencoret, Juan EstebanLaval and Macarena Vargas.

· Financing for Masisa Overseas Securedby Masisa Chile and Masisa Argentina

In Ja nua ry 2 003 , S co t i aban kSudamericano extended US$ 25 millionin financing to Masisa Overseas, securedby Masisa Chile and Masisa Argentina.Carey Abogados acted as counsel for thefinancier through a team led by partnerDiego Peralta and associate FelipeRencoret.

4.3 Company Mergers and Restructures

· Restructuring of Operations at R.R.Donnel ley & Sons Co rpora t i on

In December 2003, the parent companyof the controlling shareholder at EditorialLord Cochrane S.A. (“Cochrane”), R.R.Donnelley & Sons Corporation (“RRD”),restructured its operations in Argentina,Brazil and Chile. Chilean-based printingoperations were segregated from thoseconducted in Argentina and Brazil throughInversiones Cochrane Chile Limitada,auctioning the membership interests in

the latter to a US subsidiary of RRD.Outstanding indebtedness to local banksand financial institutions were paid. Finally,Cochrane’s printing assets in Chile andits operational working capital were soldat their market value to a wholly-ownedChilean subsidiary of RRD. The amountinvolved in this transaction was US$ 60million. Carey Abogados acted as counselfor RRD through a team led by partnersJorge Carey T. and José Antonio Silvaand associates Carlos Schultz and FelipeMoro.

· Merger of Banco Sudameris, ChileBranch (“Sudameris”) with Banco delDesarrollo

Between July and September 2003,Sudameris merged with Banco delDesarrollo. This operation was conductedunder Article 138 of the General BankingLaw and consisted in subscribing for andpaying a capital injection at Banco delDesarrollo through the contribution ofsubstantially all the assets and liabilitiesof Sudameris and subsequent sale to theshares received in exchange to foreigncompanies Credit Agricole, InversionesNorte Sur S.A. and San Paolo IMI S.p.A.This transaction totaled US$ 30 million.Carey Abogados acted as counsel forSudameris through a team led by partnerDiego Peralta and assoc iates FelipeRencoret , Juan Esteban Laval andMacarena Vargas.

· Merger of Forestal Terranova S.A. withTerranova S.A.

In October 2003, in order to generatesavings in overhead and production costsand restructure its assets, the respectiveshareholders of Forestal Terranova S.A.(“Forestal Terranova”) and its subsidiaryTerranova S.A. (“Terranova”) agreed toproceed with the absorption merger ofForesta l Terranova into Te rranova.Consequently, Andino S.A. and SociedadForestal Millenium S.A. will be dissolvedupon concentration of 100% of theirshares under the control of Terranova.Since there are institutional AFP investorswho are sha reholders o f Fo resta lTerranova , spec ia l authorizat ion isrequired of the AFP Commission in orderthat these investors be able to trade intheir shares for Ter ranova shares.Terranova wil l be l isted and trade its

shares on the stock exchange. Terranovashares are expected to maintain the samerating as Forestal Terranova. The closingfor this operation is tentatively scheduledfor late January or early February 2004.Carey Abogados acted as counsel forForestal Terranova and Terranova througha team led by partners Jorge Carey T.and José Antonio Silva and associatesFrancisco Ugarte and Cristián Eyzaguirre.

4.4 Company Acquisitions and Sales

· Sa le of Minera Teck Chile S.A.

In December 2003, Gestiones y NegociosLimitada and Inversiones Tajamar S.A.purchased Minera Teck Chile S.A. fromTeck Explorations Ltd. and Teck ComincoLtd. in the sum of US$ 250 million. Thisoperation included the assignment of acredit against Minera Teck Chile S.A. toSponte S.A. Carey Abogados acted ascounsel for the sellers through a team ledby partner Rafael Vergara and associatesJuan Francisco Mackenna and DanielaVeth.

· Sale of Shares and Debt Securities Issueat NII Holdings, Inc.

Starting in July 2003, Carey Abogadosl o c a l l y c o u n s e l l e d N e x t e lCommunications, Inc. and NII Holdings,Inc. in the preparat ion of variousprospectuses and offering memorandafiled with the US Securities ExchangeCommission in connection with theissuance and/or sale of shares and theissuance and underwriting of convertibledebt securities of NII Holdings, Inc.. Theamount of the latter transaction is approx.US$ 200 million. Carey Abogados actedas counsel for Nextel Communications,Inc. through a team led by partner AlfonsoSilva and associates Matías Sanhuezaand Sergio Montes.

· Takeover of Banco Conosur by BCI

In November 2003, Banco de Crédito eInversiones (“BCI”) entered into a stockpurchase p romise agreemen t withEmpresa Conosur S.A. and Dersa S.A.,the holding concern of the Del Río group,to acquire 100% of Banco Conosur, itssubsidiary Genera Corredora de SegurosLimitada and its affil iate Servicios de

December 2003Legal Bulletin

Cobranza Exte rna L imitada. Thetransaction is currently pending theapproval of the Banks and FinancialInstitutions Commiss ion, but the finalpurchase/sale agreement is expected tobe signed in January 2004. The amountof this operation was approx. US$ 100million. Carey Abogados acted as counselfor BCI through a team led by partnerJaime Martínez Tejeda and associatesFrancisco Ugarte and Cristián Eyzaguirre.

· Divestment of 49.82% of Esval S.A.

In October 2003, Anglian Water GroupPlc –through its Chilean subsidiary AguasPuerto S.A.- sold its entire equity holdingsat Esval S.A., the third largest water utilityin Chile, totaling 49.82% of the latter ’sshare capital, which was purchased byChilean group Consorcio Financiero S.A.and investmen t fund Moneda S.A.Administradora de Fondos de Inversión.This operation was valued at approx. US$91.8 million. Carey Abogados acted ascounsel for the seller through a team ledby partner Claudio Lizana and associatesConsuelo Raby and Mariana Gómez.

· Sale of “Coya-Pangal” HydroelectricAssets of Codelco to Pacific Hydro ChileS.A. (“Pacific Hydro”)

In December 2003, Codelco awarded theCoya and Pangal Hydroelectric Plants toPacific Hydro (including their water rightsand other assets destined for theiroperation) in the sum of US$ 75,630,000,and certain water rights and privilegeslocated at various catchment points alongthe Cachapoal river and its tributaries, inthe sum of US$ 10 million. This operationis part of Codelco’s effort to divest itselfof certain assets that are not part of itsprincipal mining business. The estimateddate of closing would be in April 2004.Carey Abogados acted as counsel forCodelco through a team led by partnerClaudio Lizana and associates ConsueloRaby, Mauricio Álvarez and MarianaGómez.· Sale of Stock at Infraestructura 2000(“ In f raestructu ra” ) and Soc iedadConcesionaria Autopista del Sol S.A.(“Autopista”)

In June 2003, Empresa Nacional deEl ec tr ic i dad S .A. s ol d to O HL

Concesiones, S.L. (“OHL”), a subsidiaryo f O b ras cón Hua r te -La ín , S .A.(“Obrascón”) –one of Spain’s largestconstruc tion firms- 3,741 shares ofAutopista and 330,939,522 shares ofInfraestructura. Thus, OHL became themajority shareholder at Infraestructuraand the indirect controll ing shareholderof Autopista. Simultaneously, OHL andObrascón became the new sponsors (thelatter as parent sponsor) of Autopista inits UF 5,565,000 bond issue insured byFinancial Security Assurance Inc.. Thissale included the execution of the relevantshare purchase agreement and theamendment to the Sponsor Support andSecurity Agreement and the securitiesoriginally furnished for Autopista’s securedbond issue. This operation was valued atapprox. US$ 56 mil l ion, and wasinstrumental for OHL to become theind irec t contro ll ing sha reholder ofSociedad Concesionaria Autopista LosLibertadores S.A. (concessionaire of the“Santiago-Colina-Los Andes Highway”public works). Carey Abogados acted ascounsel for Financial Security AssuranceInc., the insurer, through a team led bypartner Jaime Mart ínez Te jeda andassociates Cris tián Correa and PilarDuarte.

· Sale of Stock at HSBC InversionesFinancieras S.A.

In January 2003, the HSBC Group sold,assigned and transferred its entire equityinterest at HSBC Inversiones FinancierasS.A. to Forestal Quilpolemu S.A.. Theprice of this transfer was approx. US$ 30million. Carey Abogados acted as counselfor the sellers, through a team led bypartner Jaime Mart ínez Te jeda andassoc ia te José Miguel Carvaja l.

· Sale of 8.5% Cerámicas IndustrialesS.A.

In October 2003, the companies LATCAPII, SPV I, L.P. and LATCAP PIV, SPV I,L.P. so ld 8.5% of share capita l atCerámicas Industriales S.A., a leadingmanufacturer of bathroom products witha production and distribution network inthe US and Latin America. The amountof this operat ion was approx. US$20,732,000. Carey Abogados acted ascounsel for the sellers through a team ledby partners Diego Peralta and Salvador

Valdés and associate Cristián Eyzaguirre.

· Acquisition of Minera Valle Central S.A.

In May 2003, the companies Viviendas2000 Limitada, Inversiones Orestes S.A.,Málaga Inversiones S.A., Inmobiliaria eInversiones Pastel S.A., Sociedad deIngeniería Vito Limitada, Inversiones yEstudios Torremolinos Limitada andInve rsiones Cortelazor S.A. sold toAmerigo Resources Ltd. I Chile Limitadaand Amerigo Internacional Holdings Corp.their equity holdings at Minera ValleCentral S.A., a company engaged in theprocessing of mine tailings from Codelco’sEl Teniente deposit for the production ofcopper concentrate. This transactiontotaled US$ 20 million and included duediligence, negotiation and preparation ofdocuments for the acquisition. CareyAbogados acted as counsel for the buyersthrough a team led by partner RafaelVergara and associates Jaime Ubilla andPatricio Pohl.

· Bid to Invite a Partner into FundiciónTalleres S.A.

In December 2003, Compañía ElectroMetalúrgica S.A. tendered a bid of US$9,250,000 to purchase and acquire 60%of the shares issued and scheduled forissuance at Fundición Talleres S.A., asubsidiary of Codelco, which engagesprincipally in industrial and t radingactivities in the metallurgy and metal toolsbusiness. This operation is part o fCodelco’s effort to divest itself of certainassets that are not part of its main miningbusiness. Carey Abogados acted ascounsel for Codelco through a team ledby partner Claudio Lizana and associatesLo rena Pav ic and K aren Piddo .

· Purchase of Enocap Chile S.A.

In May 2003, Groupe Pechiney acquired100% of equity capital at Enocap ChileS.A., which in turn acquired all the assetsand l iabil i t ie s o f Elabo rado ra eImportadora de Cápsulas Enocap ChileLimitada, a company that engages in thedes ign , m anufacture , p roduction ,marketing and distribution of bottle capsand crowns in Chile. The amount of thisoperation was approx. US$ 4 million andentailed a due diligence, incorporation ofa Chilean subsidiary of Groupe Pechiney,

December 2003Legal Bulletin

and others. Carey Abogados acted ascounsel for Groupe Pechiney through ateam led by partner Salvador Valdés andassociates Carlos Schultz and FelipeMoro.

· Acquisition of Norsk Hydro Chile S.A.(“NH Chile”)

In April 2003, Soquimich Comercial S.A.purchased all of the equity capital at NHChile from the norwegian company HorskHydro ASA (“Hydro”) in the sum of approx.US$ 3,200,000. NH Chile is a subsidiaryof the latter that commercializes fertilizersand agricultural products in Chile. Thisoperation also included the sale of a NHChile credit portfolio to Norsk HydroHolland B.V., Chilean Branch (“HydroHolland” ) in the sum of approx. $3,700,000. Carey Abogados acted ascounsel for Hydro and Hydro Hollandthrough a team led by partner PabloIacobelli and associates Guillermo Acuñaand Rosario Celedón.

· Purchase of General Seals Group Assets

In May 2003, John Crane S.A. purchasedGenera l Seals S.A. and a ff i l ia tedcompanies in the sum of US$ 3 million tothe General Seals Group holding. CareyAbogados acted as counsel for the buyerthrough a team led by partner PabloIacobelli and associates Juan FranciscoMackenna, Jaime Ubilla and RosarioCeledón.

· Club Hípico de Peñuelas S.A. TakeoverBid

In June-July 2003, AM Gestión Limitada(“AM Gest ión” ) purchased sha resamounting to app rox. 27.124% ofauthorized paid-up equity capital at ClubHíp i co de P eñue l as S .A. ( the“Corporation”), which, coupled with theequity interest already held by AM Gestión,amounted to more than 2/3 of the votingstock of the Corporation. Consequently,as provided in article 69 of Law 18,046and articles 199 et seq. of Law 18,045,AM Gestión tendered a takeover bid(“OPA”) for 100% of the shares of theCorporation. The purchase price for27.19% of its shares totaled US$270,197.465. Carey Abogados acted ascounsel for AM Gestión through a teamled by partner Salvador Valdés and

associates Francisco Ugarte and FelipeMoro.

4 .5 Assoc ia t ions, All i ances andShareholders Agreements

· Starbucks Enters Chile

In March 2003, US concern StarbucksCoffee International, a subsidiary ofStarbucks Coffee Company, entered intoa joint venture agreement with Chileancompany Grain Red S.A. to establish theStarbucks chain of coffee shops in Chile,this being Starbucks’ first South Americanoperation, call ing for the opening ofseveral shops throughout Chile. CareyAbogados rep resen ted the Chileaninvestors through a work team led bypartner Claudio Lizana and associatesJavier Allard and Patricia Silberman.

· MetLife Chile - Almacenes París Alliance

In early 2003, Carey Abogados acted ascounsel for MetLife Chile in creating amortgage loan management companyand, in July 2003, acted as counsel forsaid company, named MetLife ChileAdministradora de Mutuos HipotecariosS.A., in the negotiation and execution ofa major strategic alliance with AlmacenesParís, destined to place a novel producton the market addressed at the customersof Almacenes París, “Gran HipotecarioParís”. Carey Abogados acted as counselfor MetLife Chile through a team led bypartners Pablo Iacobell i and RicardoEscobar and associates Javier Allard andMaría Agnes Salah.

· New Shareholders’ Agreement at HNSS.A.

In October 2003, Carey Abogados actedas counsel for General Electric CapitalCorporation (“GE”) in the execution of anew Shareholders’ Agreement at HNSS.A. , between Heller de Chile S.A.,controlled by GE, and Ever II HNS S.A.,a member of the HNS group. CareyAbogados acted as counsel for GEthrough a team led by partner AlfonsoSilva and associates Matías Sanhueza,Salvador Valdés and Nicolai Bakovic.

4.6 Projects on Natural Resources

· Commiss ion ing Advice RegardingHid roel éc tr ica La H igue ra S.A .

Throughout 2003, legal advice hascontinued for Pacific Hydro to implementthe hydropower project of HidroeléctricaLa Higuera S.A., to be developed in VIRegion in the estimated sum of US$ 300million. Advice offered in this project hasincluding corpo rate, mining, water,environmental, real estate, contractualand em ploymen t aspects . CareyAbogados is counsel for Pacific Hydrothrough a team led by partners RafaelVergara and Oscar Aitken and associatesJuan Francisco Mackenna, PaulinaMiranda, Daniela Veth, Alberto Cardemiland Jaime Ubilla.

· Purchase of 60,000 hectares by TheNature Conservancy and the WorldWildlife Fund

In Novem ber 2003 , The Na tu reConservancy and the World Wildlife Fundpurchased membership interests andproperties totaling 60,000 hectares ofmild-weather coastal woodland in Valdivia,in order to develop a conservation projectin the area. Carey Abogados acted ascounsel for The Nature Conservancythrough a team led by partner RafaelVergara and associate Jaime Ubilla.

· Sale of Lands by Inversiones FrutícolasEl Yeso Limitada

In September 2003, Inversiones FrutícolasEl Yeso Limitada so ld fa rmland toInmobiliaria Los Alerces Limitada, asubsidiary of the Río Blanco group, in thesum of US$ 1.8 million. Carey Abogadosacted as counsel for the seller through ateam led by partner Rafael Vergara andassociate Alberto Cardemil.

4 .7 Ce r tai n Re levan t L i t iga t ion· Sup reme Cou rt Autho rizesDigital ization and Interconnectivity ofTrunking Licenses with other TelecomsLicensees.

In October 2003, the Santiago Court ofAppeals upheld the trial-level verdic tissued by the Transpo rta tion andTelecommunications Ministry authorizingthe modification of the trunking licensesheld by Centennial Cayman Corp. Chile

December 2003Legal Bulletin

Ltda. and Multikom S.A., subsidiaries ofNextel Interna tional, al lowing theirdigitalization and interconnectivity withsame- type telecoms ut i l i tie s. Thedismissed claims were aimed at blockingthe entry of digital trunking into Chile, filedby operators BellSouth ComunicacionesS.A. , Smar tcom S.A. , En tel S.A,Compañía de Telecomunicaciones deChile S.A., Telefónica Móvil de Chile S.A.and Entel PCS Telecomunicaciones S.A.These are landmark dec isions in theChilean telecoms industry since theyauthorize interconnectivity with othertelecoms licensees (fixed and mobiletelephony, among others). These verdictsalso in terpre ted the m eaning of“interconnectivity”, allowing it to take placeamong the various telecoms services iftechnically feasible, finally permitting that“technological convergence” become areality in Chile. The Supreme Court upheldthe decision of the Appeals Court againstthe claims raised by the appellants, exceptfor Bellsouth Telecomunicaciones S.A..The case is hence formally over. CareyAbogados acted as counsel for NextelInternational through a team led by partnerAlfonso Silva and associates EstebanOvalle, Eduardo Martin and DeborahKenrick. Attorneys Luis Ortiz and LuisGutiérrez participated in the legal strategyand defense.

· Lawsuit for Alleged Violation of Utili tyModel Registration

In March 2003, Desarrollos TecnológicosS.A. f iled for US$ 10 mil lion in civildamages against Sociedad Constructoray Metalúrgica Manuel Medel y CompañíaLimitada (“Conymet”), claiming an allegedviolation of its mining hopper utility modelregist ration. This is the first suit fordamages ever filed in Chile in connectionwith utility model registrations, the violationof which is usually within the competencyof the criminal courts. The suit wasdropped at no cost for our client. CareyAbogados was counsel for Conymetthrough a team led by partners RafaelVergara and Guil le rmo Ca rey andassociates Fernando García, AlfredoWaugh and Juan Francisco Asenjo.