2013 Investment Climate Statement - Chile

2013 Investment Climate Statement
Bureau of Economic and Business Affairs
February 2013

Openness to, and Restrictions upon, Foreign Investment

For the last three decades, Chile has made foreign direct investment (FDI) an essential part of its national development strategy. Chile's sound, market-oriented policies have created significant opportunities for foreign investors to participate in the country's steady economic growth. Chile's business climate is generally straightforward and transparent. Foreign investors receive treatment similar to Chilean nationals in nearly all sectors. There are generally no special exemptions or incentives for FDI as a matter of policy. A broad political consensus on the advantages of foreign investment means that Chile's policies towards FDI are unlikely to change.

FDI in Chile must enter through either of the following mechanisms: the Foreign Investment Statute Decree Law 600 (DL600) or Chapter XIV of the Central Bank’s Compendium of Foreign Exchange Regulations (CFER). The minimum investment under DL600 is USD 5,000,000 in currency and USD 2,500,000 in the case of fixed assets, technology, debt capitalization, and profit reinvestments. FDI valued below these levels but above USD 10,000 is made through Chapter XIV of the Central Bank's CFER.

Chile's openness and transparency to FDI are embodied in DL600. This law has been the main regulatory norm for FDI in Chile during the last 40 years. Under DL600, a foreign investor signs a contract with the Government of Chile (GOC) establishing the terms of the investment. The general regulations, terms, interest, and other modalities of foreign credit contracts as well as surcharges related to total costs to be paid by the debtor, including commissions, taxes, and expenses must also be authorized by the Central Bank of Chile. DL600 allows for capital increases in a given investment.

Chile's Foreign Investment Committee (FIC), the entity responsible for administering DL600, establishes the terms and conditions of the investment. Applications are typically approved within a matter of days and almost always within a month. The FIC's authority to reject a foreign investment is severely limited by the Chilean Constitution. The FIC's decision can be appealed if an investment is rejected.

Chapter XIV establishes regulations that govern foreign exchange operations related to credits, deposits, investments, and capital contributions originating abroad. Investments made under Chapter XIV do not involve signing a contract with the Chilean state. Instead, the Central Bank grants authorization for a given investment. FDI made under Chapter XIV must be in a foreign currency and does not convey any special rights to the investor, such as access to a guaranteed tax rate. The investor must inform the Chilean Central Bank of the investment through a commercial bank or other authorized financial institution. FDI valued at less than USD 10,000 does not require Central Bank approval.

In 2002, the Chilean Government launched an Investment Platform Initiative aimed at attracting international corporations' Latin American headquarters to Chile. As part of this initiative, an eligible company can make use of a variety of incentives, including tax exemptions for overseas shareholders based on certain criteria and a lack of restrictions on domestic borrowing by a platform company. The Initiative addresses the problem of three-way taxation by exempting platform companies from Chilean tax on overseas earnings and provides foreign investors with additional incentives to invest in Chile. This Initiative is meant to foster regional joint ventures between foreign investors and Chilean partners. To facilitate the entry of foreign capital into Chile, the Initiative also allows companies that are already established in the region to move their centers of operation to Chile without incurring the transaction costs involved in selling and re-buying assets.

Increasing public participation complicated investment projects in certain cases in 2012 and created uncertainty for investors. For example, a project by a Brazilian company to build a coal-fired power plant in northern Chile was withdrawn after failing to obtain required environmental approvals, a direct result of significant challenges from an increasingly sophisticated environmental movement.

There are no restrictions on foreign investment in telecommunications, but investors must acquire a license, and the number of licenses available is limited in some new sectors of the industry. Certain types of investment projects require additional authorization beyond that of the FIC. For example, projects in the copper mining sector require the Chilean Copper Commission's authorization; investments in the fishing sector require the approval of the Under-Secretariat of Fishing; authorization from the Bank and Financial Institutions Regulatory Agency is required to operate in the banking sector; and the Securities and Exchange Commission must authorize projects related to insurance and investment funds. Additional authorizations are required from the Pension Funds and Private Health Insurance regulatory agencies to participate in those sectors. For projects with a potential environmental impact, authorization is required from the Environmental Evaluation Service, a decentralized service related to but independent from the Ministry of Environment. Chile also maintains national security related restrictions on investments in the areas of nuclear energy, defense, maritime transportation, real estate, and mining.

Profit remitted, withdrawn or distributed to foreign investors is subject to a withholding tax. Dividends paid to foreign shareholders are subject to an additional 35 percent tax on distribution, but a credit of 17 percent is given against the additional tax where the amounts at issue were subject to Chile’s First Category tax. The company must withhold the additional tax. The same tax procedure applies to remittances of profit made to partners and to profit withdrawn by foreigners.

The United States-Chile Free Trade Agreement (FTA) entered into force on January l, 2004. The chapter on investment is modeled on the standards found in agreements throughout the world such as U.S. bilateral investment treaties and customary international law. The main objective of the FTA chapter is to provide stability and security to investors. It provides six basic forms of protection:

  • Non-discriminatory treatment, based on national treatment and most-favored-nation treatment, for investors from either country;
  • Freedom from performance requirements;
  • Free transfer of investment funds;
  • Expropriation only when consistent with international law;
  • A minimum standard of treatment in customary international law; and
  • The ability to hire key managerial and technical personnel without regard to nationality.




TI Corruption Index


72 / 20 (one spot behind U.S.A.)

Heritage Economic Freedom


78.3 / 7 (three spots ahead of U.S.A.)

World Bank Doing Business



MCC Gov’t Effectiveness



MCC Rule of Law



MCC Control of Corruption



MCC Fiscal Policy



MCC Trade Policy



MCC Regulatory Quality



MCC Business Start Up



MCC Land Rights Access



MCC Natural Resource Mgmt



Conversion and Transfer Policies

Chile’s regulation ensures that capital markets are well developed and open to both foreign portfolio investment and FDI. In May 2000, Chile eliminated the one-year withholding period requirement for foreign capital entering the country under Chapter XIV. This type of investment capital may now be repatriated immediately without penalty.

A second major initiative in 2000 was the discontinuation of the use of the "encaje" or lock-in, which required foreign investors to deposit 30 percent of foreign-sourced loans and portfolio investment with the Central Bank in a non-interest-bearing account for up two years. The Central Bank reserves the right to re-impose the "encaje" mechanism if needed in the future.

About a decade ago the Chilean government delivered important reforms and measures aimed at promoting savings in investment securities, including by exempting capital gains taxes on highly traded stocks of publicly traded companies, lowering taxes for foreign investors on interest payments, and advancing in the integration of Chilean capital markets to the international financing market.

A second set of reforms in 2005-06 aimed at promoting broader financing alternatives of high growth, emerging companies (small- to medium-sized enterprises, SMEs) and tax incentives for the development of a local risk capital fund management industry. In June 2007, the GOC passed Law 20.190 that introduced tax incentives to promote venture capital. The law improves the availability of financial resources for SMEs and provides tax benefits to public as well as private venture capital funds. Law 20.190 authorizes Chile’s Development Promotion Agency (CORFO, www.corfo.cl) to take an equity position of up to 40 percent in specialized venture capital funds. It also allows banks to invest up to the equivalent of one percent of their asset base in venture capital through investment fund administrators and subsidiaries.

A third capital market reform was introduced in 2010, aimed at increasing security levels of financial transactions, stronger custodial, clearing and payment, and reinforcing regulatory and supervision capabilities. These improvements involved guidance in the form of regulations and the sharing of best practices related to investment funds, derivatives and insurance companies. This set of reforms aims to improve current levels of competition in the credit market by increasing available credit instruments and to improve consumer information. The reform also increases liquidity, deepens credit markets, improves flexibility for investment funds, creates Exchange Traded Funds (ETFs), allows access to secondary markets, and fosters investment in mutual and investment funds. Another initiative already underway, the Bicentennial Capital Market Reform, aims to modernize and deepen the Chilean capital market; provide financial protection to consumers; and improve insurance and banking regulations.

Investors, importers, and others are guaranteed access to foreign exchange in the official inter-bank currency market without restriction.

The Central Bank reserves the right to deny access to the inter-bank currency market for royalty payments in excess of five percent of sales. The same restriction applies to payments for the use of patents that exceed five percent of sales. In such cases, firms would have access to the informal market. The Chilean tax service reserves the right to prevent royalties of over five percent of sales from being counted as expenses for domestic tax purposes.

Under the Investment Chapter of the U.S.–Chile FTA, each government must allow transfers of covered investment to be made freely and without delay into and out of its territory. These include transfers of profits, royalties, sales proceeds, and other remittances related to the investment. However, for certain types of short-term capital flows, the chapter allows Chile to impose transfer restrictions for 12 months as long as those restrictions do not substantially impede transfers. If restrictions are found to impede transfers substantially, damages accrue from the date of the initiation of the measure.

Expropriation and Compensation

Chilean law grants the government authority to expropriate property, including property of foreign investors, only for public or national interests, on a non-discriminatory basis and in accordance with due process of law.

The law requires the payment of compensation without delay at fair market value, in addition to any applicable interest. The government has not nationalized a private firm since 1973.

Dispute Settlement

Disputes involving U.S. investors have been typically settled in negotiations between the investor and the appropriate government entity. Disputes have been referred to the local judicial system although the time required for resolution may make this an unattractive option for foreign investors. Because of high case loads, understaffing and antiquated procedures, resolution of business disputes in the civil court system often takes four to five years. Accordingly, litigants often choose to settle out of court. A suit may also be brought in court under expedited procedures involving the abrogation of constitutional rights.

The FTA Investment Chapter provides a mechanism for investors to pursue a claim against a host government that is in breach of the FTA's investment obligations, an investment agreement, or an investment authorization. An exception is disputes related to investment authorizations under DL600, which are not subject to this mechanism. Only agreements signed within two years of the FTA's entry into force may make use of this mechanism. Under this section, the investor pursuing a claim may submit a claim under the International Center for Settlement of Investment Disputes (ICSID) Convention or under the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules. Any other mutually agreed upon arbitral institution may also be utilized. Rules agreed upon by the parties will govern the proceedings except to the extent that they are inconsistent with the FTA. An investor must give notice of intent to arbitrate at least 90 days before submitting a claim, and must wait at least six months from the time of the event which gave rise to the claim before initiating a proceeding. All claims must be brought within three years of the date when the claimant acquired knowledge of the breach and/or injury.

The FTA chapter on investments encourages consultations or negotiations before recourse to dispute settlement mechanisms. If the parties fail to resolve the matter, a claim for arbitration can be submitted by the investor. Provisions in Section C of the FTA ensure that the proceedings are transparent by requiring that all documents submitted to or issued by the tribunal be available to the public, and by stipulating that proceedings be public. The tribunal must also accept amicus curiae submissions. The FTA chapter on investments establishes clear and specific terms for making proceedings more efficient and avoiding frivolous claims. Domestic law is to be applied to all contracts. However, arbitral tribunals decide disputes in accordance with FTA obligations and applicable international law.

The judicial system in Chile is generally transparent and independent. The likelihood of government intervention in court cases is low. If a state-dependent firm is involved in the dispute, the GOC may become directly involved through the State Defense Council. In cases where courts determine a firm is bankrupt, a receiver is named to distribute the debtor's remaining assets to the creditors.

Performance Requirements/Incentives

Chile's Foreign Investment Committee does not apply performance requirements in its review of projects. The investment chapter in the U.S.–Chile FTA establishes rules prohibiting performance requirements that apply to all investments, whether by a third party or domestic investors.

The FTA investment chapter also regulates the use of mandatory performance requirements as a condition for receiving incentives and spells out the exceptions. These include government procurement, qualifications for export and foreign aid programs, and non-discriminatory health, safety, and environmental requirements.

Chile does not subsidize foreign investment nor does it offer any special tax exemptions. There are, however, some regional incentives linked to isolated geographical zones and to the information technology sector. These benefits relate to co-financing of feasibility studies as well as to incentives for the purchase of land in industrial zones, the hiring of local labor, and the facilitation of project financing. Other important incentives include accelerated depreciation accounting for tax purposes, special tax treatment for retained earnings, and legal guarantees for remitting profits and capital.

Chile has other special incentive programs aimed mostly at promoting investment and employment in remote or disadvantaged regions, the development of new businesses, support for micro-, small-, and medium-sized enterprises, and promotion of technological innovation.

Since 2001, CORFO has implemented the "Chile Invests" plan with the goal of fostering FDI outside the Santiago Metropolitan Region in certain sectors. A key objective of the plan is to encourage investment in areas of non-traditional technology such as biotechnology, research and development of new materials, electronics and engineering processes, and new production techniques to increase the value added to natural resource exports. The plan also promotes investment in the energy sector mainly for non-conventional renewable energy projects. CORFO provides co-financing programs to pre-investment feasibility studies for projects using renewable non-conventional energy resources.

The Arica Law of 2001 grants tax credits to companies in the provinces of Arica and Parinacota. Investment projects amounting to over 2,000 UTM (about USD 145,000) in Arica are eligible for a tax credit of 30 percent of the value of the fixed physical assets (40 percent for tourism projects). Investment projects totaling more than 1,000 UTM (about USD 76,000) in Parinacota are eligible for a tax credit of 40 percent of the value of the fixed physical assets. These incentives are available until December 31, 2030. [NOTE: The Unidad Tributaria Mensual (UTM) is an inflation-indexed measure of value, adjusted on a monthly basis. On January 18, 2013, 1 UTM was equivalent to about USD 85.

A third investment promotion plan for the province of Tierra del Fuego in Region XII (Magallanes) is available for mining, manufacturing, transport, fishing and tourism companies that produce goods or services made up of at least 25 percent of local labor and inputs.

Other investment incentives have been introduced through the “Chile Competes Plan.” The Plan includes an exemption from the income tax normally paid by institutional investors, such as mutual funds and pension funds, on earnings from the transfer of corporate stock that is publicly traded, or bonds or other publicly offered securities representing debt issued by the Central Bank of Chile, the Chilean Government, or by companies incorporated in Chile.

In January 2011, the Ministry of Economy, using CORFO, established a three-year, USD 40 million program, known as “StartUp Chile,” whereby selected entrepreneurs receives a USD 40,000 grant and a Chilean work visa to develop a “start up” business in Chile. Upon admittance into the program, an entrepreneur is given six months to develop a project and then promote it through a series of pitches and seminars at local universities, corporate meetings and other community outreach.

Right to Private Ownership and Establishment

Except for the limitations in the fisheries and media sectors noted above, Chile does not, in general, restrict the right to private ownership or establishment. Section 24 of Article 19 of the Constitution establishes the “absolute, exclusive, inalienable and permanent domain” of the Chilean state over all mineral, hydrocarbon, and fossil fuel deposits within Chilean territory. Under Chilean law, the Government may grant concession rights to individuals and companies for exploration and development of these natural resources for a finite period. There are also national security-related measures regarding the purchase of real estate by foreigners in certain geographic areas, such as near land borders with Chile’s neighbors.

Protection of Property Rights

Because of concerns about its commitment to the protection of intellectual property rights (IPR), Chile has been on the Special 301 Priority Watch List (PWL) since January 8, 2007. The Chilean government has undertaken a number of legislative reforms to strengthen its IPR regime and bring it in line with international commitments, including the U.S.-Chile Free Trade Agreement (FTA). However, there are still substantive deficiencies in Chile's IPR laws and enforcement of existing IPR protections. Of particular concern are inadequate patent and test data protection in the pharmaceutical sector; copyright piracy of movies, music, and software; and Chile’s failure to protect encrypted program-carrying satellite signals.

The 2012 Special 301 Report notes steps Chile has taken to address outstanding IPR issues under the United States-Chile Free Trade Agreement, including accession to the Convention Relating to the Distribution of Programme Carrying Signals Transmitted by Satellite and the Trademark Law Treaty. Chile has also taken, the report notes, steps toward acceding to and ratifying the International Convention for the Protection of New Varieties of Plants (UPOV). The report urges Chile to: implement an effective system for addressing patent issues expeditiously in connection with applications to market pharmaceutical products; implement protections against the circumvention of technological protection measures and protections for encrypted program-carrying satellite signals; ensure that effective administrative and judicial procedures and deterrent remedies are made available to IPR holders; provide adequate protections concerning undisclosed test or other data generated to obtain marketing approval for pharmaceutical products; and amend its internet service provider liability regime to permit effective action against piracy over the internet.

The U.S.-Chile FTA seeks to strengthen protection for valid patents and their accompanying clinical test data. For example, the FTA provides for the extension of the protection period for patents when there are unjustified delays in the patenting process. The FTA also requires parties to protect confidential information provided to authorities in order to obtain marketing or health permits for pharmaceutical products and agricultural chemicals. In addition, the FTA establishes the obligation to undertake reasonable efforts to extend patent rights to qualifying plants.

In 2012, the United States and Chile held several meetings to exchange information and review implementation of the IPR provisions of the FTA. In addition to urging Chile to address IPR issues in the pharmaceutical industry, the United States has asked Chile to implement protections against the circumvention of technological protection measures, to implement protections for encrypted program-carrying satellite signals, and to ensure that effective administrative and judicial procedures and deterrent remedies are made available to rights holders.

Chile has been a member of the World Intellectual Property Organization (WIPO) since 1975 and joined the Treaties on Copyright and Performances and Phonograms in April 2001. Chile approved legislation to comply with TRIPS obligations related to industrial property in December 2004. The law provides, among other protections, for expedited court proceedings and the authority to seize illegal copies of patented products. In 2008, Chile ratified the Patent Cooperation Treaty (PCT), which came into force in June 2009.

The U.S. and Chile have committed to making a system available for the resolution of disputes regarding internet domain names. This follows international standards with respect to problems such as the cyber piracy of brands and trademarks for country domain names. Furthermore, both countries committed to creating a database containing information on individuals who have registered higher-level domain names. This database will protect the personal data of those who have registered.

Transparency of the Regulatory System

Chilean regulatory systems tend to be transparent, and government regulators generally have little discretion in carrying out their duties. While rulemaking processes do not generally include formal provisions for public hearing or comment, opening a business is normally easier in Chile than in many other developing countries. The World Bank’s “Doing Business 2013” report ranks Chile 32nd of 185 economies (previously 27th of 183 in 2011) for ease of starting a business. The U.S.–Chile FTA establishes some additional obligations for transparency in regulatory processes.

Efficient Capital Markets and Portfolio Investment

Chile's capital markets are well-developed and open to foreign portfolio investors. Credit is allocated on market terms and is available to foreigners although the Central Bank does reserve the right to restrict foreign investors' access to internal credit if a credit shortage exists. To date, this authority has not been exercised.

Publicly traded Chilean companies attract substantial international investment. In late 2000, the Chilean Congress approved legislation on public stock tenders that provides greater legal protection of minority shareholder rights.

In November 2001, the core measures in the far-reaching “Capital Market Reform I” came into force. This first reform: provided more flexibility for the insurance and mutual-fund industries; abolished income tax on capital gains from the sale of frequently traded shares; promoted voluntary (pre-tax) contributions by employees to pension plans (mirroring the U.S. 401K option); created five funds with different risk-return profiles instead of a single option administered by the private pension fund administrators (AFPs); and created asset-management entities to manage several types of funds, such as mutual funds, investment funds and mortgage companies.

Capital market reform leveled the playing field for foreign investors in the local market and those who invest in Chilean bonds abroad. This has slowly increased demand for local debt instruments among new foreign investors.

In June 2007, “Capital Market Reform II” entered into force to promote the development of the venture capital industry, strengthen the stock and exchange markets, deepen other Chilean financial markets, broaden the existing scheme of voluntary contributions for pensions, improve standards for corporate governance in accordance with OECD standards, and increase supervision over the market. In September 2009, the GOC introduced “Capital Market Reform III” aimed at providing better levels and quality of credit to SMEs and internationalizing the Chilean capital market. Passed in 2010, this third reform increased liquidity and depth of the capital market, enlarged the financial markets, promoted competition within the credit market, and facilitated integration of Chilean capital markets by promoting participation of non-residents. One particular reform, Law 20,448, provided grounds for the growth of Exchange Traded Funds (EFTs) in Chile by amending the mutual fund statute in order to allow the payment of shares by contributing a basket of securities that mirrors the investment portfolio of the fund.

In 2010, President Sebastian Pinera’s government introduced a new package of capital reforms called the “Bicentennial Capital Market Reform.” This new reform consists of over 20 separate bills aiming to: deepen integration with international capital markets; introduce regulatory measures to promote innovation and undertakings; improve competition, oversight and transparency; increase liquidity and access to financial markets; and improve standards for corporate governance and customer protection.

Under the U.S.-Chile FTA, U.S. insurance firms have full rights to establish subsidiaries or joint ventures for all insurance sectors, with limited exceptions. A program is underway to phase in insurance branching rights and to modify Chile’s legislation to open cross-border supply of key insurance sectors such as marine, aviation, and transport (MAT) insurance, and insurance brokerage of reinsurance. U.S. banks and securities firms are allowed to establish branches and subsidiaries and may invest in local firms without restriction, except under very limited circumstances. U.S. financial institutions are also able to offer financial services to citizens participating in Chile's privatized voluntary saving plans, and they have gained increased market access to Chile's mandatory social security system. U.S.-based firms are allowed to offer services in Chile in areas such as financial information, data processing, and financial advisory services, with limited exceptions. Under the measures outlined in “Capital Market Reform III,” Chilean mutual funds are permitted to use foreign-based portfolio managers.

In May 2011, the stock markets of Chile, Peru and Colombia merged to become the second largest trading market in Latin America after Brazil. This market alliance, known as the Integrated Latin American Market (MILA) hopes to better expose investors to assets linked to the region’s natural resources. Chile’s IPSA Index is a total return index and is composed of 40 highly traded stocks. The IPSA has been calculated since 1977 and is revised on a quarterly basis.

The main institutional investors and suppliers of capital to local companies are the pension fund administrators (AFP) as well as insurance companies, mutual funds and banks. More than half of the instruments issued in the fixed-income market are held by institutional investors.

Pension funds are the largest institutional investors followed by insurance companies. As of September 2012, Chile's seven AFPs managed a total investment portfolio of USD 151.6 billion, representing about 76 percent of Chile's GDP. The pension funds administered by the AFPs belong to 9.2 million contributors. As of September 2012, the total resources under AFP administration were distributed in five different types of funds of varying degrees of risk. As of July 2012, accumulated savings in the voluntary contributions system (APV) of the AFP system totaled USD 4.3 billion that belong to 735,170 contributors.

The GOC has been raising the percentage of pension funds that can be invested overseas. In 2008, a reform package of the pension system was approved by Congress increasing the threshold for pension fund administrators to invest abroad (from 30 to 60 percent of their funds). The reform package also set the foundation on which to build a “solidarity pillar” to increase coverage among lower-income contributors and self-employed workers and expand social security assistance coverage. Total spending in 2012 on “solidarity pension payments” reached USD 286.2 million.

As of September 2012, insurance companies managed more than USD 6 billion in assets. Insurance companies invest a major share of their portfolio in fixed-income securities.

The Chilean banking system is sound, competitive, and meets Basel standards. There are currently 25 banks operating in Chile, and 12 are foreign-owned representational branches. Only one bank is completely owned by Chilean economic interests (BCI). The rest have some level of incorporation with foreign institutions. Foreign banks can compete on the same terms as their domestic rivals. There are also five local savings and loan corporations, and one state-owned bank, Banco Estado, which is the nation’s third largest. Private banks manage most corporate business.

The Chilean banking industry is subject to strict limits on lending to a single debtor or group of related companies. This is capped at five percent of the capital and reserves of a bank for collateral-free loans and at 25 percent for collateralized loans (fixed assets).

In 2009, Chile enacted several reforms as part of the process to join the Organization for Economic Cooperation and Development (OECD). One of these reforms was a law that Chile enacted in 2009 allowing for the exchange of tax information between tax authorities, including information based on bank account activity (information previously restricted under Chilean law). As of September 2012, there was a low level of systemic risk within the system due to a sound regulatory framework. As a result, the rate of non-performing loans remained low, at 2.75 percent, and the aggregate loans-to-deposits ratio was stable at 119 percent.

Summary of Chilean Banking System (November 2012):

Total Loans – USD 220.1 billion
Deposits – USD 182.7 billion
Total Assets – USD 294.4 billion

Source: Chile's Superintendence of Banks and Financial Institutions

General Information on the Financial Market (November 2012)

  • Banks and Financial Institutions: 25 participants. Total Loans: USD 220.1 billion
  • Pension Funds: 6 administrators. Funds under management: USD 151.6 billion
  • Insurance Companies: 59 (26 general insurers, 33 life insurers).

According to the World Economic Forum's Global Competitiveness Report for 2012-2013, Chile is the most competitive country of South America and the third most competitive of the Americas after the U.S. and Canada. Chile is ranked 33rd in the world.

Competition from State-Owned Enterprises (SOEs)

Chile has relatively few state-owned enterprises (SOEs), most having been privatized during the military government's economic reforms between 1974 and 1989. Notable SOE’s are the national copper company, CODELCO; the national petroleum company, ENAP; the National Postal System (Correos de Chile); and the state-owned bank, Banco Estado.

In general, private enterprise is allowed to compete with public enterprise under the same terms and conditions (e.g., there are many private copper mines and private banks). However, there are specific areas where this does not hold and SOEs enjoy special advantages. For example, ENAP is the only refining company in Chile.

Most SOEs in Chile are structured so that the company management reports to a board of directors, which includes the relevant government minister (e.g., the Minister of Mining sits on ENAP's board of directors). Most board members are independent representatives from the private sector and academia, or from that industry's main labor union or trade association. Board members are usually designated by the President of Chile.

Chile passed a law in October 2009 which modifies CODELCO's corporate governing structure. The law removes the Ministers of Finance and Mining and a representative of the military from the board of directors. It also expands the board to nine members, three of whom are designated by the President of Chile, two of whom are nominated by CODELCO's labor unions and approved by the President of Chile, and four of whom are elected by the Consejo de Alta Dirección Pública (Chile's independent committee that makes high-level civil service appointments) and subsequently approved by the President of Chile.

Chile has two sovereign wealth funds constituted principally from state copper revenues. The Economic and Social Stabilization Fund (FEES) was established in 2007 and was valued at USD 14.9 billion in November 2012. The Reserve Pension Fund was established in 2006 and was valued at USD 5.8 billion in November 2012. The stated purpose of this fund is to assist the Government with payments to those eligible to receive pensions but who remain indigent (Chile uses a privatized pension system). A third sovereign wealth fund, called the Bicentennial Fund, encourages Chileans to study abroad through the use of government funded scholarships.

The sovereign wealth funds are administered by the Chilean Central Bank, at the direction of the Ministry of Finance. The Ministry of Finance receives advice on policy related to the funds from an external Finance Committee made up of independent advisors. The Ministry of Finance publishes monthly, quarterly, and yearly reports on the funds.

Corporate Social Responsibility (CSR)

There is general awareness of corporate social responsibility among both producers and consumers in Chile. As part of the OECD accession process, Chile passed a law in September 2009 setting out new rules to help bolster corporate social responsibility.

Political Violence

The incidence of terrorist activity and civil disturbance is generally low in Chile, and the violence that has occurred has had little impact on the Chilean economy. Crime rates are moderate throughout the country, and the vast majority of crimes are nonviolent. During the last 10 years there have been relatively few incidents of politically motivated attacks on investment projects or installations. In 2012, there were occasional incidents of vandalism of storefronts and public transport during student protests over education reform, some of which included violent incidents. Incidents of anti-American sentiment and civil disorder are rare, and there have been no attacks known to be attributable to international terrorist organizations. However, since 2007 Chile has experienced a number of small-scale bombings targeting mostly banks, but also a police station, a political memorial and the U.K. Embassy, the offices of a major newspaper and magazine publisher, and a prominent Catholic cathedral. Anarchist groups have claimed credit for some of the bombings. There have also been violent incidents on farms and forestry plantations in south-central Chile, resulting in three deaths in 2012. Many of these incidents are related to the land claims and other grievances of indigenous people (the Mapuche Native American group) in regions VIII (Bio-Bio) and IX (Araucania).


Corruption in Chile is generally limited. Since 2003, Chile has had laws in place that establish a more efficient and professional civil service through performance-based incentives and a reduction in political appointee positions in public service positions. In 2005, the GOC passed a law to regulate political party and candidate financing to further deter corrupt government practices.

Chile has signed and ratified the Organization of American States (OAS) Convention against Corruption. Chile is also a signatory to the OECD Convention on Combating Bribery, fulfilling the necessary accession processes, including implementation of its Anti-Bribery Convention obligations.

In 2007, a new law came into force that provides protection for public employees who denounce irregularities or violations in accountability standards and at the same time, Chile ratified the United Nations Convention against Corruption. In 2009, Chile passed a transparency law obligating government offices to public information about expenditures, employee salaries, and other fiscal data. It also mandates that citizens be provided up-to-date information on how to access government services and request information. The law created an autonomous Transparency Council which is charged with implementing the requirements of the law. The Pinera administration has launched a campaign to educate citizens about their right to access public information and created Chile Atiende, an online and in-person platform to streamline access to common government services.

Chile is an active member of the Open Government Partnership (OGP).

Bilateral Investment Agreements

In 1991, Chile became a signatory of the Washington Convention of 1965, which created the International Center for Settlement of Investment Disputes (ICSID). Since then, Chile has negotiated numerous Bilateral Investment Treaties (BITs) through which Chile provides additional protection to foreign investment flows. According to information provided by the Government of Chile to ICSID, as of the end of 2012, Chile had signed 53 BITs, of which 39 are in force. There are agreements in force with Argentina, Australia, Austria, Belgium, Bolivia, China, Costa Rica, Croatia, Cuba, Czech Republic, Denmark, Dominican Republic, Ecuador, El Salvador, Finland, France, Germany, Greece, Guatemala, Honduras, Italy, Malaysia, Nicaragua, Norway, Panama, Paraguay, Peru, Philippines, Poland, Portugal, Romania, Spain, Sweden, Switzerland, Ukraine, the United Kingdom, Uruguay, and Venezuela. Those BITs signed but not in force include Brazil, Colombia, Egypt, Hungary, Iceland, Indonesia, Lebanon, Netherlands, New Zealand, South Africa, Tunisia, Turkey and Vietnam.

Chile has a number of double taxation treaties in force: Australia, Belgium, Brazil, Canada, Colombia, Croatia, Denmark, Ecuador, France, Ireland, Malaysia, Mexico, New Zealand, Norway, Paraguay, Peru, Poland, Portugal, Russia, South Korea, Spain, Sweden, Switzerland and the United Kingdom.

Chile and the United States have signed the U.S.-Chile Treaty to Avoid Double Taxation, which addresses certain tax-related obligations for U.S. companies operating in Chile. In May 2012 President Obama submitted the treaty to the U.S. Senate for ratification. As of January 2013, the Government of Chile has not submitted the treaty to the Chilean Congress for ratification.

OPIC and Other Investment Insurance Programs

A Bilateral Investment Agreement with the Overseas Private Investment Corporation (OPIC) took effect in 1984. Chile is a party to the convention of the World Bank's Multilateral Investment Guarantee Agency (MIGA).


Chile has enjoyed generally calm labor relations over the last decade, but strikes do occur. Strikes and public protests have been concentrated in the mining, health, education, transportation, and civil service sectors.

Union membership is voluntary, and approximately 11 percent of the non-public workforce and 13.8 percent of the total workforce is unionized. Multiple unions exist in many companies, and management can negotiate collective agreements with any of the unions or with ad hoc groups of workers. Unions can form confederations or nationwide labor centrals and can affiliate with international labor federations. Contracts are normally negotiated at the company level. Multi-company bargaining is permitted on a voluntary basis. Minimum wage, working hours, overtime, paid annual vacations, and holidays are all established by law. Women are entitled to state-funded maternity leave for a period of six weeks before and six months after childbirth. Layoffs are not permitted between conception and one year after the female employee has returned from maternity leave.

Top executive salaries are on a par with European countries, although well below those in the U.S. Chile allows companies to deduct set training costs (up to one percent of annual payroll) from corporate tax payments. A company can also use 10 percent of the rebate to finance an analysis of its training needs, and 15 percent to run a training department.

On January 1, 2005, the maximum number of labor hours per week was reduced from 48 to 45 without any loss of salary to the employees. This is now the standard work week in Chile.

Subject to certain exceptions, Chilean nationals must comprise no less than 85 percent of the workforce of companies employing more than 25 persons.

A 2007 subcontracting law defines outsourcing as two different activities: subcontracting and the supply of outside labor. Subcontracting is when a company permanently outsources a specific process to another firm which takes full responsibility for it, carrying it out with its own employees. However, the law does not permit companies to outsource its main economic activity. Regarding outside workers, the law limits this to "temporary" labor, defined as those employed for periods of up to 90 (or in some cases 180) days during an "emergency." Additionally, only firms that register as suppliers of temporary labor and set up guarantees against their obligations to their own workers are allowed to fulfill this function. The law also sets limits on the number of staff that can be used on short-term jobs.

Foreign Trade Zones/Free Ports

Chile has two tax-free zones: one in the northern port of Iquique (Region I) and the other in the southern city of Punta Arenas (Region XII). Merchants and manufacturers in these zones are exempt from corporate tax, VAT, and customs duties. Businesses can re-export goods without paying taxes but must pay VAT (19 percent) and import duties when goods leave the zone to be used/sold in other regions of Chile. The same exemptions also apply to manufacturers in the Chacalluta and Las Americas Industrial Park in Arica (in the XV Arica and Parinacota Region created in October 2007). Mining, fishing and financial services are not eligible for free zone concessions. Management companies and firms established in the free zone are exempt from payment of tariffs, VAT, other charges on imports, first category income tax under the Income Tax Law, and payment of VAT on goods and services for all their operations in the free zone.

Foreign Direct Investment Statistics

Today more than 3,000 companies from 60 countries have operations in Chile. Over the last decade, FDI has represented an annual average of around 6.5 percent of Chile’s GDP. The United Nations Conference on Trade and Development (UNCTAD) World Investment Report for 2011 placed Chile sixth in the world and first in Latin America in its FDI Attraction Index, which measures countries’ success in attracting FDI over a rolling three-year period.

Between 1974 and 2011, the mining sector attracted 34.1 percent of implemented FDI under DL600, followed by services (22.4 percent); electricity, gas and water (18.4 percent); manufacturing (10.9 percent); transportation and communications (11.1 percent); and construction (1.7 percent).

Although figures for the total 2012 authorized and implemented FDI are not available yet, through October of 2012 authorized FDI stood at USD 16.1 billion, up 21.6 percent on authorized FDI for all of 2011 (USD 13.7 billion). During this timeframe, the mining sector accounted for 56.7 percent of authorized FDI (USD 9.4 billion), followed by the service sector (18.5 percent); transport and communications (10.0 percent); electricity, gas and water (9.6 percent); and manufacturing (4.8 percent).

According to the Central Bank, implemented (as compared to authorized) FDI in Chile reached a record of USD 12.3 billion in the first three months of 2012, representing an 80.2 percent increase over inflows from the same period in 2011. The mining sector was at the forefront of the historic wave of capital, accounting for 60.3 percent of implemented FDI at USD 1.1 billion, followed by the gas, electricity and water sector, at 14.2 percent of total implemented FDI (USD 250.8 million). The manufacturing sector accounted for 12.7 percent (USD 224.9 million) and transportation and communication represented 7.4 percent (USD 130.6 million) of all implemented FDI.

According to the Central Bank, in 2011 implemented FDI was a record USD 17.5 billion, representing a 16.1 percent increase over 2010 FDI (USD 15.1 billion). Actual implemented or realized FDI in 2011 through the D.L. 600 totaled USD 4.1 billion, while FDI realized from the U.S. from January through September 2012 amounted to USD 3.9 million.

In 2011, Canada was the largest investor in Chile with 59 percent of total implemented FDI in the country, with projects totaling USD 8.2 billion. Canada was followed by Japan (12 percent), Spain (7 percent), the United States (6 percent) and Australia (4 percent).

The U.S. was the single largest direct investor in Chile from 1984-2011, accounting for 26.4 percent of implemented FDI from 1974 – 2010, totaling over USD 20 billion. U.S. FDI to Chile in 2011 was USD 34.2 billion, down 5.5 percent from 2010. The service sector represented about 33 percent of U.S. FDI in Chile in 2011, followed by the mining sector (27.6 percent); electricity, gas and water (14 percent); manufacturing (12.5 percent); and transportation and communications (10.5 percent). Canada, Japan, Spain, and Mexico –have also been significant investors in Chile in recent years.

According to Central Bank statistics, between 1990 and June 2011 Chilean investment abroad totaled USD 62.7 billion distributed over 70 countries. During that period, ten countries accounted for 92 percent of Chilean FDI abroad: Argentina (32 percent of total out-bound FDI), Brazil (18 percent), Peru (17 percent), Colombia (13 percent), and the United States (7 percent, totaling USD 3.7 billion). Mexico, Panama, Australia, Uruguay and Belgium round out the top ten destination countries for Chilean FDI during the period.

In 2011, over 1,000 Chilean companies combined to invest USD 5.8 billion abroad. In 2011, Peru was the largest recipient of Chilean FDI abroad at USD 1.2 billion, followed by Uruguay and Colombia at USD 950 million and USD 937 million, respectively.

FDI (DL600) by Sector (USD million, nominal)































Food, beverages and Tobacco






Wood and paper












Other manufacturing






Electricity, gas, water












Wholesale, retail trade






Transport, storage












Financial services (1)












Engineering – business Services






Sewage, sanitation and similar services






Other Services (2)












Source: Foreign Investment Committee. (* provisional figures as of December 31, 2012)

(1) Includes banking, investment companies, investment and risk capital funds and other financial services; (2) Includes restaurants and hotels, real estate activities, social and related community services, recreation

United States FDI to Chile Under DL600: 1974-2011
(USD thousand, nominal)


U.S.A. Total Value















































Source: Foreign Investment Committee; (*provisional figures as of December 31, 2011)