Doing Business in Chile: an Introduction

General overview

Chile is widely regarded as one of the top-performing economies in Latin America and as one the best emerging economies globally. For many years, it has been a preferred destination for foreign investors in South America, owing to its stable economy, openness to trade, competitive and transparent business environment, and promising business opportunities.

For these reasons, Chile has been recognised in various rankings and studies, such as the business environment ranking developed by the Economic Intelligence Unit, which ranks Chile 30th worldwide and as the most prominent country in Latin America.

Stable economy

Chile has solid institutions and macro- and micro-economic policies that have been consistent over the years. For example, the Central Bank is a technical entity with constitutional autonomy, whose corporate governance ensures the adequate fulfilment of its primary objective, which is to safeguard the stability of the currency. In addition, governments of different political orientations have been consistent in applying principles of fiscal responsibility, enabling Chile to stand out for reducing its inflation levels. In August 2022, inflation peaked at 14.2% after an explosive increase in public spending to address the COVID-19 pandemic and its social effects, before dropping to 3.9% by the end of 2023. The estimate is that inflation will be even lower during 2024.

It should be noted in this regard that Chile experienced one of its most significant crises towards the end of 2019 and, in response, the centre-right government of Sebastián Piñera, together with most of the political parties in Congress, advocated for constitutional renewal as a potential resolution. After two consecutive processes and two new constitutional drafts were rejected in national plebiscites, it seems that Chile will keep its Constitution enacted in 1980 but amended more than 60 times as a sign of constitutional evolution.

Openness to trade

Chile's proactive approach to bilateral, regional and multilateral trade agreements over the past 30 years accounts for the nation's robust performance in foreign trade of goods and services, earning it high regard as an international partner. Consequently, Chile has entered into trade agreements with more than 65 countries, significantly broadening its domestic market of 18 million residents to encompass over 4.3 billion potential consumers worldwide. This translates to approximately 88% of global GDP and 66% of the world's population.

Chile’s main industries

Chile stands out as one of the most industrialised nations in Latin America, with its key sectors including mining (Chile is a leading global copper producer and major lithium supplier), energy, infrastructure and the food industry (including agriculture and manufacturing).

Despite these challenges, Chile remains the most reliable business partner in the region. It faces significant underlying obstacles like stagnant productivity, but its potential in renewable energy generation is noteworthy, especially considering the current high reliance on fossil fuels in the energy mix.

Trends

Further free trade agreements

As already mentioned, Chile stands out for its openness to international trade, and governments have promoted the signing of new treaties that encourage commercial exchange for more than 30 years.

The current government, despite initially appearing less enthusiastic about it, obtained approval for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

It also signed the Advanced Agreement between Chile and the European Union and the free trade agreement between the Pacific Alliance and Singapore, and is negotiating agreements with India, Indonesia, the United Arab Emirates and South Korea, among others.

Notwithstanding this openness to trade, it should be noted that the National Commission for Investigation of Price Distortions in Imported Goods (the Commission), which is the entity responsible for conducting trade defence investigations and imposing trade remedies in Chile, is currently conducting an investigation into imports from China of steel forged grinding balls less than 4 inches in diameter, and steel bars for the production of conventional grinding balls less than 4 inches in diameter. In both cases, the Commission recently recommended the application of provisional anti-dumping duties for a period of six months starting from March 2024.

Fostering investment

Foreign direct investment in Chile has been increasing significantly, accounting for more than USD21 billion during 2023, which was the largest amount since 2015 and is proof of the confidence that foreign investors have in Chile. However, the figures for productive investment have fallen, causing concern among the authorities. That is why, among other measures, the government of Chile has initiated a bill aimed at facilitating the implementation of investment projects by simplifying the required sectoral permits, reducing processing times, and providing certainty to developers by improving regulatory quality. Proposals include replacing authorisations with sworn statements from the project owner, establishing a digital one-stop shop, and better regulating administrative silence.

National Lithium Strategy

Chile's substantial lithium reserves give the country considerable influence on the global lithium market. As one of the leading lithium producers worldwide, Chile stands to gain significant advantages as both an exporter and a supplier.

Lithium plays a crucial role in various industries worldwide, including batteries, electronics and numerous other products. The demand for these goods continues to grow with ongoing technological advancements driving innovation and progress. Given the high consumption levels, efficient production processes are crucial to ensure reliable supply chains.

At present, Chile's lithium market accounts for approximately 40% of the global lithium output, establishing it as one of the primary producers worldwide. Moreover, Chile holds a significant portion of the resource and related technologies in the industry, despite the fact that lithium has a different legal regime to other minerals, such as copper or gold, under which private companies can obtain mining claims for its exploitation and claim a property right over such mining claim.

These circumstances led the Chilean government to enact a National Lithium Strategy in 2023: a set of measures to incorporate capital, technology, sustainability and value addition in the productive sector, in harmony with local communities. Under the National Strategy,state-owned copper producer Codelco just reached an agreement with SQM, one of the largest lithium producers in the world. The public-private partnership will take responsibility for the production of refined lithium in the Salar de Atacama from 2025 to 2060, and aims to achieve a total additional production of 300,000 Lithium Carbonate Equivalent (LCE) in 2025–2030, while the production of 280,000–300,000 tons of LCE annually has been defined for 2031–2060.

Labour reforms

As promised during the presidential campaign, the current government has promoted an agenda of labour reforms that may place burdens on the employer but should improve the quality of life of employees and generate better relations within the company.

In January 2024, Law No 21.645 for the Protection of Maternity, Paternity and Family Life entered into force. The main changes introduced are the right to preferential use of legal holidays during children's vacation period, the right to temporarily modify shifts or workload during children's vacation period and the employer's obligation to provide remote work for employees caring for children under 14 years of age or caring for a person that has a disability or is in a situation of severe or moderate dependence, regardless of the age of the person being cared for.

Law No 21,565 entered into force in April 2024 and reduces the workday from 45 to 40 hours a week. It also introduces flexibility measures such as compensating overtime with holidays and implementing “4x3” shift schedules.

Finally, Law No 21,643 entered into force in August 2024 and aims to prevent violence in the workplace by introducing new requirements for companies' internal regulations, requiring new investigation procedures within a company and making a company responsible for the violence of customers or suppliers towards its employees.