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Interest Rate Risks124Report 2011The company’s policy partially covers risks from interest ratefluctuations and has contracted the corresponding financialinstruments to comply with it. The proportions of variable-ratedebt exposed to fluctuations in the estimated rate behave ina manner sufficiently similar to business assets and reflectsEBITDA generated during each financial year.As of December 31, 2011, the Group had credits in foreign currencyto the value of USD $600 million, accruing interest basedon the variable Libo rate and impacting on financial expensesin the income statements. In order to mitigate the effectsof these variations, the management takes out financial contractsfor rate derivatives (Cross Currency Swap), hence fixinga significant proportion of the interest paid.When there is a rise in the Libo base rate according to marketforecasts, the Group’s annual financing costs increase,although they are still within the limits established by themanagement and the financial safeguards guaranteed to itscreditors.Credit riskCredit risk derived from the balances of accounts held withbanks, financial instruments, negotiable stocks, and derivativesis managed by the Finance Division in line with investmentcapital policies. These policies ensure the diversification ofrisk by means of pre-established limits for the duration of theplacement, percentage by institution, and the risk of instrumentsin which cash surpluses are invested. The investmentinstruments approved for use are those issued by the CentralBank of Chile or banking subsidiaries with high risk ratings.Investments may be denominated in the national currency orthe main foreign currencies.Risk exposure associated with the recovery of accounts receivableoriginating from business operations is derived from theterms of payment that must be offered as a result of the natureof the telecommunications industry to direct customers,intermediaries, and other national and international operatorswith whom reciprocal connection agreements are held.Risk management for accounts receivable is designed to minimizeexposure, insofar as possible given market conditions.Risk management processes are differentiated according todebtors’ profiles in line with segmented portfolio controls:these include consumers, enterprises, corporations, telecommunicationscompanies, correspondence, distributors, largeretailers, and other channels for the distribution of goods andservices.For each segment, there are prospective and predictive modelsthat make it possible to devise policies depending onthe origin of the debt. These range from the prepaid servicesused for the highest risk customer/product combinations, allthe way to the establishment of credit limits, with and withoutcollateral guarantees, credit insurance, and other alternatives,evaluated on a case-by-case basis.Liquidity RiskIn terms of providing the required liquidity to meet financial obligationsin a timely manner, Entel pays future expiries in advance,seeking options on the market that can provide funds in a timelymanner. As such, during 2011, the amortization installment of thesyndicated loan due in June 2012 was paid in advance, thus avoidingthe potential risks of the debt market around the due date.#