FDI in figures

Foreign direct investment in Chile was 7.95 billion USD in 2006 which makes Chile the 2nd country for foreign investment in South America, behind Brazil. The origin of this continuous growth of FDI can be credited to the Chilean policy of welcoming FDI founded on transparency and non discrimination against foreign investors, and to its macro-economic stability and growth prospects, as well as the country's low level of risk and its high level infrastructures.

Why you should choose to invest in Chile

Strong points

Macro-economic stability and the perspective of growth as well as the low level of risk, are among Chile's most positive points.  The country is the top Latin-American importer per capita, enjoys an excellent solvency and the economic protagonists have the highest purchasing power in South America (8570 USD per capita GDPin 2006, more than 12,000 USD including PPP).  Chile has a simple neutral and competitive fiscality.  The legal context favours incoming capital.  Chile is characterised by a a very flexible labour market: legislation relative to labour in Chile is favourable towards business thanks mainly to flexibility in working hours and the ability to license employees.  Chile is clearly below the regional mean in the time taken to start up a new business.

 

In addition, the restricted size of the Chilean market constitutes less and less of a handicap because its economic weight relative to the region is increasing and because Chile is clearly open to the outside.  In fact foreign companies who are established in Chilecan benefit from a privileged access to the regional markets via a number of exisiting free trade agreements.

Weak points

There are three problems to consider: - lack of innovation.  While research and development costs, in proportion to the GDP, are comparable to those of certain countries in the OCDE, they are still too small at 0.7% of the GDP in 2002 and financed principally by the state in a closed institutionalised manner.   The authorities intend to encourage R&D activities with the help of a new mining tax.

 

- The weakness of the climate of investment in network industries.  Perhaps the regulations could be tightened up.  In the electricity sector for example, a new law will ensure supply in the context of repeated ruptures in the delivery of natural gas coming from Argentina.  Public-private partnerships help to progressively reduce Chile's <<deficit infrastructure >> in areas like roads and ports.

- The skill of the workforce: Chile's population's level of activity is very weak especially among women and young people.  In the long term there is progress to be made in the accumulation of <<human capital>> especially in today's economy, founded on knowledge.  However, Chile is really behind in this field with regard to other countries of the OCDE.   The realisation of this objective will not only reinforce Chile's long term potential growth but will also help to reduce inequality of revenue.  Even if social indicators are improved over the years with a reduction in poverty Chilean society will remain unequal.

Government measures to motivate or restrict FDI

The Chilean policy for reception of investments has always been based on simplicity, transparency and non discrimination towards foreign investors. The process of direct investment DL 600, offers security of investment. The government continues to have bills passed for developments such as the simplification of administrative procedures (in particular concerning the environment) or the increased appeal for credit (up to 75% instead of 50% of the project). In addition on a fiscal level, foreign investors benefit from a moderate income tax on companies (17% in 2004) and their capital can be repatriated without being taxed at the level of the invested funds.  The country also offers a large range of investment solutions and set up the <<Chile Plataforma>> program in 2003 in order to encourage investment in Chile and to make this a regional investment platform.  These directions have notably allowed the emergence of a new type of company - the company of action - which allows a foreigner (physically or morally) to create a business in Chile without having recourse to a local partner.

Procedures relative to foreign investment

Freedom of establishment

YES

Acquisition of holdings

A majority holding interest in the capital of a local company is legal, as long as Chilean procedures and agreement formalities are respected.

Obligation to declare

Depending on the qualification of the company in Chile, the foreign investment will under control of:
- The Law-Decree procedure (DLF) n°600 called "Status of the Foreign Investor" fixed by DLF 523 of the Ministry of Economy, Development and Reconstruction for productive investments
- The procedure in the 14th Chapter of the Central Bank International Exchange Regulation, controlling financial investments only
- The procedure of the chapter 19th of the Central Bank exchange regulation allowing a foreign investment, if creditor to a public or private Chilean enterprise, to finance a future investment.

Competent organization for the declaration

Chile Foreign Investment Committee

Requests for specific authorizations

Foreign investors must obtain specific authorisation to invest in certain strategic sectors such as exploration and exploitation of hydrocarbons or the production of nuclear energy.

Finding assistance for further information

Investment aid agency

Chile Foreign Investment Committee

Other useful resources

Information pages of the Government