Dec. 22 (Bloomberg) -- Celfin Capital SA, the Chilean brokerage that manages about $4 billion, may see its 2008 profit cut in half by covering client losses from investments in funds linked to alleged U.S. fraudster Bernard Madoff.

“It has a significant impact,” Celfin Chairman Juan Andres Camus said in a telephone interview from Santiago today. “Possibly our profits are going to be reduced by half.”

Celfin rival Larrain Vial SA also had clients invested in funds tied to Madoff, a spokesman said. The Chilean brokerages are the latest to face losses as what’s being called the largest investment fraud in history spreads to Latin America. Madoff was arrested Dec. 11 after confessing to running a “giant Ponzi scheme” that may have cost clients as much as $50 billion.

Celfin is refunding about $10 million to clients who lost money from investing with funds connected to Madoff, Camus said.

The brokerage is seeking to recover the losses through legal channels, Camus said. He declined to say how the investments were made or how many of its clients were involved.

Some Larrain Vial clients invested in a fund managed by Pioneer Alternative Investments, which had money with Madoff- controlled funds, a spokesman for the Santiago-based brokerage said by phone today. The spokesman wouldn’t give details of potential losses, citing client confidentiality. Larrain Vial Chief Executive Officer Manuel Bulnes wasn’t available to comment, his assistant said by phone.

$280 Million

Pioneer, a unit of Italian bank UniCredit SpA, invested “substantially all” of its about $280 million Primeo Select Fund with Madoff, according to a fact sheet on its Web site.

Investors ranging from Spain’s Banco Santander SA to Steven Spielberg’s Wunderkinder Foundation are facing losses from the alleged scheme. Among Latin American companies, Peru’s Credicorp Ltd. said Dec. 16 that it had $1 million invested with Madoff. Peru’s largest financial-services company also had $3.5 million at risk in transactions secured by investments with his Bernard L. Madoff Investment Securities LLC firm.

For Celfin, the losses come after the firm fired as much as a 10th of its workforce this quarter amid an economic slowdown stemming from the global credit crunch.

“We expect to have a somewhat better year next year,” Camus said.

To contact the reporter on this story: James Attwood in Santiago at jattwood3@bloomberg.net

Last Updated: December 22, 2008 16:08 EST