As the seventh largest economy in the Western Hemisphere, Chile has historically enjoyed levels of stability and prosperity among the highest in the region. In October 2019, widespread civil unrest broke out in Chile in response to perceived systemic economic inequality. The unrest had a significant impact on Chile’s economy and some U.S. businesses operating in Chile. Pursuant to a political accord in response to the civil unrest, Chile plans to hold a plebiscite in October 2020 on whether or not to draft a new constitution. Chile’s solid macroeconomic policy framework has provided the fiscal space to respond to the economic effects of the social unrest and the COVID-19 pandemic through an economic stimulus package of about USD16.75 billion, which is expected to increase the fiscal deficit to 8 percent in 2020. Chile boasts one of the strongest sovereign bond ratings in Latin America. The country’s economy grew 1.1 percent in 2019, and the Chilean Central Bank forecasts Chile’s economic growth in 2020 will be in the range of -1.5 to -2.5 percent due to the impact of the COVID-19 pandemic.
Chile has successfully attracted Foreign Direct Investment (FDI) despite its relatively small domestic market. The country’s market-oriented policies have created significant opportunities for foreign investors to participate in the country’s economic growth. Chile has a sound legal framework and there is general respect for private property rights. Sectors that attract significant FDI include mining, finance/insurance, chemical manufacturing, and wholesale trade. Mineral, hydrocarbon, and fossil fuel deposits within Chilean territory are restricted from foreign ownership, but companies may enter into contracts with the government to extract these resources. Corruption exists in Chile but on a much smaller scale than in most Latin American countries, ranking of 26 out of 180 countries worldwide and second Latin America in Transparency International’s 2019 Corruption Perceptions Index.
Although Chile is an attractive destination for foreign investment, challenges remain. Legislative and constitutional reforms proposed in response to the social unrest and the pandemic have generated concern about the potential impact on investments in the energy, healthcare, insurance, and pension sectors. Despite a general respect for intellectual property (IP) rights, Chile has not fully complied with its IP obligations set forth in the U.S.-Chile FTA. Environmental permitting processes, indigenous consultation requirements, and cumbersome court proceedings have made large project approvals increasingly time consuming and unpredictable, especially in cases with political sensitivities. The current administration prioritizes attracting foreign investment and continues to implement measures to streamline the process.
|TI Corruption Perceptions Index||2019||26 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report||2020||59 of 190||http://www.doingbusiness.org/
|Global Innovation Index||2019||51 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||26,146||http://apps.bea.gov/international/
|World Bank GNI per capita||2018||14,670||http://data.worldbank.org/indicator/