Chile is regarded as one of the most attractive investment destinations in Latin America, being rich in natural resources with a stable macroeconomic system, good potential for growth, a secure legal system and a low level of risk for business.
Background: Chile ranks 59th out of 190 countries in the World Bank 2020 Doing Business report. One of Chile's strengths is its economic policies, which are based on the principles of capital transparency and non-discrimination against foreign investors. At a fiscal level, the country has made recent strides to ease the process of starting a business. There are low corporate tax rates and foreign investors have access to the formal foreign exchange market, including capital and profit remittances. Another attractive factor is the new legal company type ‘Simplified Limited Company' ('empresa individual de responsabilidad limitada', EIRL), which allows a foreign citizen to start a business in Chile without the need for a local partner.
Chile has been at the forefront of start-up support, including strong Government support for technology-based investments in diverse fields such as health, education and software.
Background: Chile is ranked as the 2nd best ecosystem for start-ups in Latin America, and 34th globally. The country launched its public accelerator programme Start-Up Chile in 2010, drawing innovators from around the world and energizing its tech sector. Start-Up Chile was the first governmental accelerator of its kind. By 2020 it had supported over 1,600 start-ups, with more than 4,500 entrepreneurs from 85 countries. Overall, nearly 55% of the start-ups accelerated by the programme remain active.
In addition to two distinct programmes available through Start-Up Chile (S Factory and Seed), new businesses can also receive mentoring, co-working office space and access to investors. After going through the Start-Up Chile programmes, businesses can apply at CORFO (Chilean Economic Development Agency) for investment funds.
A highly educated population consequently leads to a higher skilled workforce, suitable for industries such as high tech.
Background: According to data from the World Bank and UNESCO, in 2018, nearly 91% of students who complete secondary education then enroll in tertiary education. This positively influences the skill level of the Chilean workforce, contributing to high quality labour across different sectors, and thus higher income. Nevertheless, student protests have intensified in response to growing costs and unequal access to higher education. Public expenditure on higher education is low, making government institutions heavily dependent on private investment and raising the costs of annual tuition fees for students.
Chile has one of the most stable economies in Latin America, with sustained economic growth and social progress, as well as governmental changes designed to attract foreign direct investment (FDI).
Background: Chile’s economy has a mixture of both state-owned and private companies. The Global Competitiveness Report 2018 classified Chile as a high-income economy, being the most competitive economy in South America and the 33rd most competitive in the world. According to the World Bank, Chile has been one of Latin America’s fastest-growing economies in recent decades, with expectations to reach almost 6% increase by the end of 2021. This growth has allowed poverty to be significantly reduced, however, 30% of the population remains economically vulnerable and income inequality rates are high.
R&D programmes in Chile have been unstable and volatility of the tax incentives system causes uncertainty for companies, making it challenging to anticipate potential government support and reducing companies’ willingness to invest in R&D.
Background: According to the OECD, from 2007 to 2018 the amount of Business Enterprise Expenditure on R&D (BERD) was increasing in Chile. However, there have been frequent changes in support priorities over recent years. Regular modifications have led to changes in the availability, scope and generosity of R&D tax incentives.
As of 2020, the three main sources of research, development and innovation programmes and incentives in Chile are:
The R&D Tax Incentive, which aims to improve the competitive capacity of Chilean companies by establishing a tax incentive for investment in R&D;
CORFO programmes, which offer different public initiatives of cash grants and credits to finance innovation, training and employment;
Foundation for Agricultural Innovation (FIA) programmes, which provide support for the implementation of innovation initiatives in the forestry and agricultural sectors.
The industry in the country looks for innovative technologies to modernize productivity and extraction in its mines, a trend accelerated by the COVID-19 pandemic.
Background: Chile is one of the world leaders in mining, being responsible for around 25% of the world’s copper production. While most Latin American countries have mineral resources and mining activity, Chile, Peru, Brazil and Mexico account for 85% of total mineral and metal exports from the region. The most mined metals in Latin America are copper, iron ore, gold and silver. A roadmap developed by the Chilean Mining Council, the Chile Foundation and Alta Ley Corporation, outlines a 15-year plan for mining companies to use new technologies to address operational challenges, including improving sustainability and human resource management.
In addition to the mining sector, other growth sectors include tourism, retail and telecommunications. Tourism has significantly increased its importance in the country and it represents a concrete business opportunity for companies, mainly due to Chile’s diverse natural landscape and many protected areas. Whilst the COVID-19 pandemic hit Chile’s tourism and service sectors, recovery is expected in the coming years.
Background: The tertiary sector contributes to nearly 60% of GDP and employs over 69% of the population in Chile. Specifically tourism is estimated to contribute about 10% to both GDP and total employment. According to Statista, in 2019, Chile received more than 3.6 million international tourists from the Americas, and 3.2 million from South America alone. Further, over 500,000 Europeans travelled to Chile in 2019.
After years without any change implementations, recent interactions between Chile and the EU aim to modernise the Commercial Pillar of the Association Agreement, which will include increased opportunities for SMEs. There are also advantages from a single EU-wide comprehensive investment chapter to facilitate foreign direct investment flows. Gains from easing market access and regulatory barriers to public procurement in both Chile and the EU appear less prominent.
Background: In November 2017, Chile and the EU formally launched negotiations to modernise the Association Agreement. To date, 10 Rounds have taken place. The last round was held in April 2021. The parties agreed to finalise the modernisation process during the first half of 2021.
Is Chile an attractive country for investment? Does the government provide a good support for start-ups? Take this quiz and learn about innovating in Chile!