By Simon Gardner

SANTIAGO, Aug 11 (Reuters) – A Chilean government plan to regulate taxation of derivatives to encourage currency hedging by smaller companies should boost currency liquidity, help clear uncertainty, lure investment and boost the Chilean peso.

The government is set to present a bill on derivative tax regulations to Congress within days, aiming to clear up legal uncertainties regarding hedging versus speculation and boost use of instruments to cover risk, Finance Minister Felipe Larrain said on Tuesday.

Analysts are hungry for details of the bills, which Larrain outlined at a seminar, but said they should be positive for Chile’s foreign exchange market, which is far less liquid than those of regional powerhouses Mexico and Brazil.