If you walk into a bank in Santiago to ask about a mortgage, the loan officer won’t talk to you in Chilean Pesos. Not at first. They’ll talk to you in Unidad de Fomento, or UF. It’s a concept that leaves most foreigners scratching their heads. Honestly, it’s a bit weird. Imagine a currency that isn't actually money you can hold in your hand, but it’s the only thing that determines how much your rent, your insurance, or your student loans cost. That is the Chilean unit of account in a nutshell.
It isn't a cryptocurrency. It isn’t a physical coin. It’s an index. Specifically, it’s a non-circulating currency unit used in Chile to adjust for inflation. Since its birth in 1967, it has become the backbone of the Chilean financial system.
The Chilean unit of account was created during the Eduardo Frei Montalva administration. Back then, Chile was struggling with the kind of inflation that eats economies alive. Banks didn't want to lend money because, by the time they got paid back, the money was worthless. The UF solved this by decoupling the "value" of a contract from the volatile national currency.
How the UF actually functions day-to-day
The UF changes every single day. Most people think inflation is something you measure once a month when the government releases a report, but for Chileans, inflation is a daily reality reflected in the UF value. The Central Bank of Chile calculates it based on the Consumer Price Index (CPI) from the previous month.
Think about it this way. If you sign a lease for 20 UF a month, you aren't paying a fixed amount of pesos. On Monday, those 20 UF might be 740,000 pesos. By the next month, it might be 745,000 pesos. The landlord doesn't have to raise your rent; the "unit" stays the same, but the pesos you need to cover it increase. It’s automatic.
This system creates a strange psychological split. You earn your salary in pesos, but your biggest expenses—your mortgage, your health insurance (Isapre), and your kids' private school tuition—are priced in the Chilean unit of account. When inflation spikes, your salary stays flat while your bills climb every morning. It’s a recipe for stress, yet it’s the reason Chile has a functional long-term credit market while some of its neighbors struggle to offer a 5-year loan.
The Great De-dollarization
Most Latin American countries "dollarize" their mindsets. If you want to buy a house in Argentina or Peru, you often talk in U.S. Dollars. Chile is different. Because of the UF, Chileans don't care about the Greenback nearly as much as they care about the daily UF rate.
The Chilean unit of account essentially "internalized" the stability that people usually seek in the dollar. This gave the Central Bank more power. It allowed the country to develop a massive capital market. Pension funds (AFPs) invest heavily in UF-denominated bonds. This creates a circle of local investment that doesn't depend on what's happening in Washington or New York.
However, there is a catch. Using an indexed unit of account makes inflation "sticky." If every contract in the country—from office rentals to cell phone plans—automatically adjusts upward when prices rise, it becomes very hard to bring inflation back down once it starts. It’s a feedback loop. Economists call this "inertial inflation."
Is it fair for the average person?
There is a growing debate in Chile about whether the UF has outlived its usefulness. During the social unrest in 2019 and the subsequent inflationary periods in 2022 and 2023, many people started calling for the "Eliminación de la UF."
Their argument is simple: the UF protects the banks, but it leaves the workers exposed.
When the CPI goes up, the bank’s profit margin is protected because the mortgage payment increases. But the worker’s salary doesn't automatically adjust. Most labor contracts in Chile are negotiated in pesos, not UF. This creates a massive gap. You're basically living in two different economies at once.
Still, most experts, including former Central Bank presidents like Vittorio Corbo, argue that removing the Chilean unit of account would be a disaster. Without it, long-term interest rates would skyrocket. Banks would add a "risk premium" to every loan to cover potential inflation, making houses even more expensive than they are now with the UF.
Surprising places you’ll find the UF
It isn't just for big bank deals. You’ll find the Chilean unit of account in places you wouldn't expect.
👉 See also: 50 trieu vnd to usd: Why This Magic Number Matters Right Now
- Fines and Penalties: If you get a ticket for a building code violation, it's often priced in UF or UTM (a similar monthly unit).
- Start-up Valuations: Local investors often talk about "tickets" or investment rounds in terms of UF.
- Corporate Salaries: While rare for most, high-level executives sometimes negotiate "UF-protected" salaries.
- Insurance Premiums: Your car insurance or life insurance quote will almost certainly be in UF.
The math behind the daily change
It isn't a random number. The value of the UF is adjusted between the 10th of one month and the 9th of the next. It follows a geometric progression so that, by the end of the period, the total increase matches the previous month's CPI.
If the CPI was 1% last month, the UF will grow by approximately $1/30$th of that 1% every single day. This prevents "price shocks." You don't wake up on the 1st of the month to find your mortgage suddenly jumped $50. It’s a slow, steady creep.
Actionable steps for dealing with the Chilean Unit of Account
If you are moving to Chile, starting a business there, or just trying to understand the financial landscape, you need a strategy for the UF.
1. Negotiate your salary with inflation in mind.
Since your major costs (rent and health) will likely be in UF, ask for a "reajuste" clause in your labor contract. Most formal jobs in Chile offer a semi-annual or annual salary adjustment based on the CPI. If yours doesn't, you are effectively taking a pay cut every month.
2. Use UF-based savings accounts.
If you are saving for a down payment on a house, do not save in a standard peso savings account. The inflation will eat your deposits. Chilean banks offer "Ahorro a Plazo" accounts denominated in UF. This ensures your savings keep their purchasing power relative to the housing market.
3. Watch the 10th of the month.
The National Statistics Institute (INE) releases the CPI around the 8th of every month. By the 10th, the new daily schedule for the UF is set. This is the moment you can calculate exactly what your costs will be for the next 30 days.
4. Compare "Costo Total del Crédito."
When taking a loan, don't just look at the UF interest rate. Look at the total peso equivalent. Because the UF rises, a 4% interest rate in UF is much, much more expensive than a 4% interest rate in a stable currency.
The Chilean unit of account is a tool of stability that comes with a high price tag for the consumer's peace of mind. It has allowed Chile to build skyscrapers and a modern infrastructure by giving lenders certainty. But for the person paying the bill, it remains a daily reminder that the value of money is a very slippery thing.
To track the current value and see how it will change over the next few weeks, you should check the official Banco Central de Chile website. They publish the definitive table that every bank and business in the country uses. Understanding this unit is the first step to truly understanding how wealth moves in the southern cone.
✨ Don't miss: Is the bank open tomorrow? How to find out before you waste a trip
Next steps for navigating Chilean finance:
Check your current contracts for the term "reajustable." If you see that, or the letters "UF," your payment is not fixed. Calculate your "inflation exposure" by adding up all your UF-denominated monthly obligations and comparing them to your peso-denominated income. This ratio is the most important number in your personal budget in Chile.