Chile

Chile has a stable economy, with a strong financial sector, political and legal stability that foster foreign direct investment. The powerful mining industry, one of the most important in the world, the opportunities in sectors such as renewable energy and the ambitious infrastructure plans make Chile one of the most attractive markets of South America.

A country with great opportunities in the infrastructure, energy and mining sectors

Chile is a free-market economy with a history of stable macroeconomic and public political policies. It is the world’s greatest producer and exporter of copper and an important lithium producer. The government of President Gabriel Boric is embarked on reforms, such as introducing its new mining royalty legislation, and new stricter labour and environmental regulations that can affect the country’s investments and business climate.

Growth of 2.8% of the real GDP is forecast in 2024; this increase is related to the demand for critical minerals such as lithium and copper, along with boosting green hydrogen, which is essential in the country’s energy transition. Furthermore, inflation seems to be stabilising in the Chilean economy, which will increase household purchasing power. The current political climate of stability is favourable for foreign investment. Chile’s threats to growth are linked to a drop in world demand for lithium and copper, and to China slowing down, as it is the main destination of Chile’s exports

A current account deficit of 3.35 of the GDP is forecast for 2024 and the deficit is expected to increase by 3.4% a year between 2025 and 2028. The deficit is related to the output of the gains from the mining industry, but the country’s current account will stabilise between 2024 and 2028 due to the strong foreign direct investment, mainly in renewable energy and mining. The country has a good currency reserve and retains its ability to borrow with entities such as the IMF if necessary.

Chile is positioned as an attractive country for foreign investment as it is a liberalised economy, with a good business climate, laws that protect the investor, and macroeconomic stability thanks to traditionally controlled inflation and adequate tax management. Furthermore, it has a skilled workforce and valuable natural resources, particularly in mining. Its geography may be a drawback, due to the transport costs incurred by the length of the country. The current government has an investment plan to develop the country’s railway sector, which together with the renewable energy sector, offers good opportunities to the companies of those sectors.

Chile is attractive to investors due to its efficient bureaucratic system and its reliable legal system. After the slowdown in 2023, Chile is expected to return to economic growth in 2024. The new tax reform is likely to increase the tax burden on companies in the medium term. Furthermore, the high energy, water and labour costs are forecast to cut the profits of the mining industry in the short term, and the government is therefore encouraging investment in other sectors.

The Chilean financial sector is protected by strict regulations that protect the interests of local and foreign investors. Furthermore, Chilean companies enjoy highly competitive interest rates. One of the main obstacles for foreign investors is the country’s complex tax system, one that may be further complicated by a new reform, as the government wishes to take measures to prevent tax evasion.

Chile has many free trade agreements with over 65 different markets, along with strong relations with its traditional allies. Chile is very active in international trade, connecting regions such as Latin America, Europe and Asia. China and the United States are the two main trade partners of the country. Even though copper is the country’s main export product, the hike in energy and water prices and salaries has hit its profitability. Foreign direct investment is essential for the Chilean economy and the country therefore does not apply restrictions on investors. Chile offers one of the most stable and open investment markets of Latin America, with a transparent and welcoming climate. The greatest risk for investors is the possible change of state policy, which will reduce opportunities for companies.

There are no restrictions on foreign companies in Chile; in fact, companies that operate in the country may be 100% foreign owned without local investment requirements. Exceptions are certain key industries such as air transport, national maritime transport, the media and fishery, and certain strategic industries that are reserved to the state and which include the exploitation of maritime mining fields or those in areas of importance for national security. If the far-reaching constitutional reform goes through, it could alter the favourable investment climate. Furthermore, the environmental regulation applicable to the Chilean mining industry is likely to be stricter in the coming years, as it is being subject to scrutiny as the industry is a high polluter.

The reforms of the constitution and of the legal system in Chile are of concern to investors, which could reduce foreign investment in the country. The mining, agriculture and infrastructure sectors are subject to strict scrutiny; they are being asked to reduce their ecological impact and to respect the rights of the indigenous populations. Nonetheless, Chile continues to have a regulatory and legal system that fosters international trade, with a strong legal system and with low corruption levels in the region.

Contact office

Alberto Fernández

Business Manager

BASQUE COUNTRY DELEGATION IN CHILE

Av. Apoquindo 3669 of. 802, Las Condes -Santiago de Chile

+56 2 2 206 18 20

a-fernandez@euskadi.eus

* Office hours:

Monday to Friday: 8.00 a.m. to 5.00 p.m.


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