Chile Country Report

Country/Territory Report - Chile
2 Feb 2021 - Economics and Country Risk
Executive summary - Chile

2 Feb 2021 - Country Risk | Profile
Our take: Executive summary - Chile

The option favouring rewriting Chile’s constitution was approved in the 25 October 2020
referendum, securing 78% of the vote. The 155 members of the Constituent Convention, the
body in charge of the redraft, are to be elected by popular vote in April 2021, effectively
launching the process, which is likely to last at least two years. A new constitution is likely to
increase state involvement in the economy, the review of property rights and the review of
balance of powers between the executive and the legislature.
President Sebastián Piñera has focused on containing the COVID-19 virus outbreak with
quarantines and sanitary measures, and faces the challenge to implement a successful
vaccination process, which started in December 2020. Chile’s plan to counteract the negative
effects of the pandemic amounts to approximately 9% of GDP, focused on employment
protection, assistance to the most vulnerable people, soft loans, and tax breaks.
Piñera has been weakened already by severe social and political discontent, manifested by
violent national protests over social grievances that began in October 2019. However, the
successful completion of the constitutional referendum, a key demand by demonstrators, will
almost certainly reduce calls from opposition parties for him to step down.
Chile's growth prospects will be undermined by the COVID-19-virus outbreak, partly because of a
drop in consumption and investment. IHS Markit forecasts GDP contraction of 5.8% in 2020, and
6.2% growth in 2021.
The risk of violent anti-government protests is likely to decline following the referendum.
However, some localised protests at specific hotspots are likely from March 2021, including
looting, arson, and vandalism, particularly in Santiago city centre and low-income areas. Public
transport infrastructure, government offices, and police assets will remain the main targets of
arson. Retail stores, mainly supermarkets, will remain the main targets of looting. Bank branches
and government offices are targets of vandalism.
Risk ratings: Executive summary - Chile
Political: Executive summary - Chile

President Sebastián Piñera, from centre-right Chile Vamos, has faced critical challenges since October 2019, when
social grievances triggered the most violent protests in 30 years. This led to a social and economic crisis
compounded by the COVID-19-virus outbreak. The victory of the option in favour of a new constitution in the 25
October referendum launches the process of rewriting the document, one of the demonstrators’ key demands.
This is likely to reduce risks of violent unrest, but increase policy uncertainty, as the new constitution will seek to
increase the role of the state in the economy.
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Political Data - Political: Executive summary - Chile
Political summary
Presidential elections Next contest: 21 November 2021; Last contest: 19 November and 17 December 2017. The next
election is scheduled for 21 November and 19 December 2021.
Legislative elections Next contest: 21 November 2021; Last contest: 19 November 2017 (National Congress and half of the
Senate). The next elections are scheduled for 21 November 2021.
Head of State Sebastian Piñera Echenique (since 11 March 2018)
Finance Ignacio Briones (since 28 October 2019)
Foreign Affairs Andres Allamand (since 28 July 2020)
Defence/Security Baldo Prokuriça (since 18 December 2020)
Economy Lucas Palacios (since 28 October 2019)
Justice/Attorney General Hernan Larrain (since 11 March 2018)
Labour Maria Jose Zaldivar (since 28 October 2019)
Interior/Home Affairs Rodrigo Delgado Mocarquer (since 4 November 2020)
Source: CIRCA People in Power © 2021 IHS Markit
Forecast summary - Economic: Executive summary - Chile

Chile’s economy advanced 5.2% quarter on quarter on a seasonally adjusted basis during third
quarter 2020 and declined 9.1% year on year—a period marked by total or partial lifting of strong
quarantine measures and mobility restrictions.
After bottoming out in May 2020, the economy continued to recover into November 2020, except
for a 0.5% contraction during October 2020. Real GDP growth declined an estimated 5.8% in
2020, but is projected to advance by 6.1% in 2021.
Copper prices stand above their 2019 year-end level. On average, the Chilean peso is forecast
to make gains overall into 2021.
To stimulate growth, the central bank maintains its policy rate at its technical minimum of 0.5%
and the use of nonconventional liquidity and credit support. Fiscal stimulus amounts to 9.8% of
GDP. Individuals can withdraw a limited amount out of their pension funds.
Data and forecasts - Economic: Executive summary - Chile

Chile: Key indicators and forecasts
Historical
data edge 2019 2020 2021 2022 2023 2024 2025
Real GDP (percent change) 2019 1.0 -5.8 6.1 3.1 3.2 3.2 3.5
Nominal GDP (billion USD) 2019 282.4 248.5 276.1 294.3 322.0 346.7 370.8
Nominal per-capita GDP (USD) 2018 14,902 12,999 14,372 15,286 16,729 18,022 19,272
Consumer price index (percent change) 2019 2.6 3.0 3.2 3.0 2.8 2.9 2.9
Exchange rate (year end, per USD) 2020 744.62 711.24 748.29 725.18 712.05 708.80 713.35
Last update 15 January 2021

Source: IHS Markit © 2021 IHS Markit
© IHS Markit 2021 Page 2 of 47

Strengths and weaknesses - Business environment: Executive summary - Chile
Strengths Weaknesses
Vast mining potential combined with The process to draft a new Constitution, starting in 2021, will reduce legal certainty and increase risks of change to the
government strategy to address business-friendly regulatory framework.
challenges concerning the sector.
Business-friendly legal framework, Students, unions, and anti-government groups are prepared to vandalise commercial property and loot commercial
facilitating the entry of foreign direct establishments as a means of opposing or demanding concessions from the government. Mounting levels of
investment. environmental activism can frustrate the development of extractive industry projects.
High levels of human capital Active trade union movement can cause operational delays and increase wage-related costs.
compared with the rest of the region.
Impartial and professional judiciary Vulnerability to natural disasters.
improves trust in trade and investment
disputes.
Legal - Business environment: Executive summary - Chile

Legislation covering foreign investment is transparent and clearly defined in Chile. Foreign investors enjoy the
same rights as nationals and are able to operate in almost all areas. Courts are independent and legal institutions
firmly consolidated. However, court proceedings can be subject to long delays and high costs remain a barrier to
pursuing legal action. An elected constituent convention will draft a new constitution in 2021, likely creating
uncertainty about potential changes to Chile's pro-business legal framework and strong legal protection for
property rights.
Tax - Business environment: Executive summary - Chile

Chile's tax system underwent a major change under the government of Michelle Bachelet (2014-18) through the
creation of a dual-tax system and a gradual increase in corporate tax from 20% to 27% in 2018. President Sebastián
Piñera initially sought to return to one single 'integrated' system, which allows shareholders to use 100% of
corporate income tax in their personal income tax. However, violent protests that started in October 2019
demanding a stronger social agenda forced the government to backtrack on this. The government is offering tax
breaks to small and medium-sized enterprises to deal with COVID-19. Economic contraction post-pandemic is
likely to lead to further tax increases for the wealthiest.
Operational - Business environment: Executive summary - Chile

Chile’s operational environment is marked by positive attitudes towards foreign direct investment, highly
developed infrastructure, low levels of corruption compared to the rest of the region, and a relatively liberal
labour market. Its operational outlook is underpinned by consolidated institutions and solid macroeconomic
stability. However, the process to re-write the constitution in 2021 is likely to lead to some changes in the
economic model, increasing the role of the state in the economy. Increased environmental scrutiny is likely to
lead to projects being challenged in courts, causing delays and raising cancellation risks, including in mining and
energy.
War risks - Security: Executive summary - Chile

In October 2018, the International Court of Justice (ICJ) ruled that Chile did not have the obligation to negotiate
with Bolivia sovereign access to the sea, lost during the War of the Pacific (1879–83), but Bolivia is unlikely to drop
this demand. There is another dispute with Bolivia at the ICJ, presented by Chile in 2016 over the use of the Silala
waters. However, war between both countries is very unlikely.

Terrorism risks - Security: Executive summary - Chile
Chile has faced unprecedented levels of property damage since October 2019, but the commercial and
government buildings have been targeted (arson and vandalism) by protesters rather than terrorist groups.
Anarchist groups, however, are likely to have participated in many of the violent attacks against property, though
the use of improvised explosive devices has not been widespread. Mapuche indigenous extremists in the southern
Araucanía region often carry out arson attacks on rural estates, cargo trucks, warehouses, and assets of forestry
firms, in demand of land ownership and rights.
Social stability and unrest risks - Security: Executive summary - Chile

The most violent protests in the last 30 years began in October 2019 over high living costs and social grievances,
such as low pensions and a poor healthcare system. At least 118 Santiago Metro stations were damaged, hundreds
of supermarkets looted, and an estimated USD4.5-billion worth of damage done to infrastructure, affecting all
main cities. The successful completion of a referendum on a new constitution, a key demand by demonstrators, in
October 2020 reduces the risk of massive violent unrest, with localised protests at specific hotspots, particularly in
Santiago city centre, more likely. The economic effects of the COVID-19-virus pandemic, mainly rising
unemployment and poverty, are potential triggers of further protests.
Risks to individuals - Security: Executive summary - Chile

The main security concern for foreigners is petty crime, particularly pick pocketing and mugging in city centres and
poorer neighbourhoods. Crime hotspots for visitors include tourist areas in the capital, Santiago (such as
Bellavista and the city centre), Valparaíso (Cerro Alegre, Cerro Concepción, and areas near the port), Viña del Mar,
and Antofagasta. The Santiago and Araucanía regions are the most common locations for small improvised
explosive device attacks by anarchists and arson attacks by Mapuche groups, which typically focus on property in
the Araucanía and neighbouring regions.
Risks to cargo/transport - Security: Executive summary - Chile

Cargo risks are concentrated in ports and some border crossings, where unions and customs workers often resort
to industrial action. The northern border with Bolivia is a hotspot for cargo theft. Disruption to ground cargo from
protests and roadblocks is also common on the main routes into Santiago and the Route 5 through the southern
Araucanía and nearby regions. In Araucanía and Bio-bío and to a lesser extent Los Ríos and Los Lagos regions,
cargo trucks are target of arson attacks by Mapuche extremists, particularly those belonging to or serving forestry
and agricultural firms.
Risks to property - Security: Executive summary - Chile

Retail and public transport assets, as well as banks, pharmacies, government offices, vehicles, and police stations
in Santiago and main cities have been target of arson, looting, and vandalism during violent anti-government
protests that began in October 2019. There is also a risk of minor property damage by anarchist groups, generally
using small improvised explosive devices. In Araucanía and neighbouring regions, Mapuche extremists typically
mount arson attacks against vehicles, storehouses, and industrial equipment from the forestry and agricultural
sectors, particularly in towns such as Ercilla, Victoria, Collipulli and Cañete.

Political - Chile
2 Feb 2021 - Country Risk | Profile
Overview: Political - Chile

President Sebastián Piñera, from centre-right Chile Vamos, has faced critical challenges since October 2019, when
social grievances triggered the most violent protests in 30 years. This led to a social and economic crisis
compounded by the COVID-19-virus outbreak. The victory of the option in favour of a new constitution in the 25
October referendum launches the process of rewriting the document, one of the demonstrators’ key demands.
This is likely to reduce risks of violent unrest, but increase policy uncertainty, as the new constitution will seek to
increase the role of the state in the economy.
Analysis - Government stability: Political - Chile

Launch of process to redraft the constitution will reduce calls for president to step
down, but social and economic crisis likely to undermine ruling coalition’s prospects
for 2021 election
The option favouring rewriting Chile’s constitution won the 25 October 2020 referendum, with 78% of the vote.
The 155 members of the Constituent Convention, the body in charge of the redraft, will be elected by popular
vote in April 2021, effectively launching the process that is likely to last at least two years. A new constitution
became a key demand of demonstrators during the social unrest that began in October 2019, triggered by a
subway-fare increase, but quickly escalated to include wider social grievances, such as inequality, high living costs,
poor basic services, and the overall economic model. They deem the current constitution (1980) “illegitimate” as it
was drafted under the dictatorship of Augusto Pinochet and consolidates a neoliberal economic model that
exacerbates inequalities. The protests, the most violent in the last 30 years, put severe strain on President
Sebastián Piñera, who was forced to amend his proposed pro-business agenda into a social one, with a focus on
pensions and healthcare improvements, job protection, and salary increases to quell demonstrators. The
landslide win for the “yes” option is also likely to empower the centre-left and left-wing opposition to demand
deeper changes to the government’s agenda, particularly on pensions, by allowing additional fund withdrawals
and further reducing the role of private pension funds (Asociación de Fondos de Pensiones: AFP) in the system.
However, the successful completion of the referendum will reduce calls by pressure groups, such as unions,
students, and civil society, for more protests and for the president’s resignation, which had been supported by the
left-wing opposition Communist Party (Partido Comunista: PC) and the coalition Broad Front (Frente Amplio: FA).
The Piñera government will come out weakened by the social and economic crisis, compounded by the effects of
the coronavirus disease (COVID-19) pandemic, which is increasing unemployment and leading towards economic
recession (IHS Markit forecasts Chile’s GDP to contract by 6.8% in 2020). This is likely to further undermine people's
living standards and raise poverty, becoming triggers for fresh protests, further weakening the president.
This is likely to affect the prospects for the ruling coalition Chile Vamos for several elections due in 2021:
municipal, local, regional governors, and members of the Constituent Convention in April and legislative and
presidential in November (with a potential run-off in December).
The ruling centre-right coalition is likely to be further undermined by the increasing popularity of a more radical
opposition – the FA and the PC – with some of their ideas gaining traction in the Chilean society, mainly over a
significant reduction of the private sector on issues such as pensions, healthcare, and education, and an increase in
the state role in the management of natural resources, particularly water and lithium.

Data - Government stability: Political - Chile
Political summary
Presidential elections Next contest: 21 November 2021; Last contest: 19 November and 17 December 2017. The next
election is scheduled for 21 November and 19 December 2021.
Legislative elections Next contest: 21 November 2021; Last contest: 19 November 2017 (National Congress and half of the
Senate). The next elections are scheduled for 21 November 2021.
Head of State Sebastian Piñera Echenique (since 11 March 2018)
Finance Ignacio Briones (since 28 October 2019)
Foreign Affairs Andres Allamand (since 28 July 2020)
Defence/Security Baldo Prokuriça (since 18 December 2020)
Economy Lucas Palacios (since 28 October 2019)
Justice/Attorney General Hernan Larrain (since 11 March 2018)
Labour Maria Jose Zaldivar (since 28 October 2019)
Interior/Home Affairs Rodrigo Delgado Mocarquer (since 4 November 2020)
Source: CIRCA People in Power © 2021 IHS Markit
Analysis - Policy direction and predictability: Political - Chile

Solid support for new constitution likely to empower opposition to push for deeper
changes to government’s socially oriented agenda
The solid win of the option in favour of rewriting Chile’s constitution (78%) on the 25 October referendum is likely
to empower the opposition centre-left and left-wing parties to push for deeper changes to the government’s
agenda. This is likely to affect discussions on pension reform, a key demand of demonstrators during the late 2019
unrest, by pushing for additional fund withdrawals and further reducing the role of private pension fund
(Asociación de Fondos de Pensiones: AFP) in the system, to which President Sebastián Piñera strongly opposes.
Piñera's original pro-business agenda, focused on reducing bureaucracy and taxes to attract investment, shifted
towards a socially oriented agenda as massive protests against the economic model since October 2019 show that
social grievances are shared by most of the population. Coupled with the coronavirus disease 2019 (COVID-19)-
virus outbreak, this has led to the government prioritising social, healthcare, and job protection issues.
The process to draft a new constitution was not part of Piñera's programme, but he agreed to it in cross-party
efforts to curb the social crisis. The redrafting is likely to seek a more active role for the state in the economy and
in guaranteeing healthcare, education, and environmental protection. Other issues likely to be reviewed include
property rights, particularly regarding water (currently private and permanent); ownership of national resources,
particularly lithium, which is considered a “strategic mineral”; presidential powers, which significantly exceed
those of Congress; lowering quorums to pass structural reform; and the role of the constitutional court (Tribunal
Constitutional: TC), which can currently overrule policies approved by Congress. The members of the Constituent
Convention in charge of the redraft are scheduled to be elected by popular vote in April 2021. Another referendum
at the end of the process would ratify the new constitution that then needs to be approved by Congress. The
process will take at least two years.
The constitutional process will increase investor uncertainty as it threatens to change the regulatory framework
that has characterised Chile’s business-friendly environment. However, the election of the members of the
Constituent Convention will be done by districts, which suggests that the body will have a similar composition as
Congress, allowing a balanced representation of political forces. Representatives from the ruling centre-right
coalition Chile Vamos and moderate elements of the centre-left, such as the Christian Democrats (Democracia
Cristiana: DC) and Convergencia Progresista, are likely to water down any significant changes on a new

constitution or any attempts to diminish respect for institutions, the rule of law, or international treaties.
Analysis - Opposition prospects and programme: Political - Chile

The opposition coalition centre-left former New Majority (Nueva Mayoría: NM) started to disintegrate after losing
the December 2017 election to President Sebastián Piñera. The NM, which enjoyed a majority in both chambers of
Congress during the government of president Michelle Bachelet (2014–18), now has 57 of the 155 seats in the
lower chamber (versus 72 of the ruling Chile Vamos), and 21 of 43 seats in the Senate (only two more than the 19
of Chile Vamos). Divisions within the former NM have become clear as sections of the centrist Christian Democratic
Party (Partido Demócrata Cristiano: PDC) supported the government in advancing tax and pension reform against
the will of large parts of the broad opposition. Violent and massive protests that erupted in October 2019 have
further alienated the Communist Party (Partido Comunista: PC), which refused to negotiate with the government
and to strongly condemn the violent protests, and has, in turn, been getting closer to the left-wing bloc Broad
Front (Frente Amplio: FA). Both forces unsuccessfully promoted Piñera's impeachment. The PDC, the Party for
Democracy (Partido por la Democracia: PPD), the Radical Party (Partido Radical: PR), and the Socialist Party
(Partido Socialista: PS) have been more willing to negotiate with the government in order to find a political
solution to the crisis and have agreed on some economic measures to mitigate the effects of the coronavirus
disease 2019 (COVID-19)-virus pandemic. They have also reached an agreement with the government over a
process to rewrite the constitution and will continue to push for deeper changes in the government's agenda,
particularly on pensions and healthcare, while increasing the pressure on the government to prioritise social
issues. However, there is no figure in the opposition yet capitalising on the government's weakness to position
itself as a clear leader. Some opposition mayors, who have been very vocal against the government’s
management of the crisis, such as the mayor of Recoleta Daniel Jadue (PC), are likely to seek political gains ahead
of the municipal and local elections in April 2021.
Opposition profile
Main opposition forces New Majority (Nueva Mayoría)
Broad Front (Frente Amplio: FA)
Opposition strength Falling: the NM lost seats in both houses of parliament in the 2017 election.
Prospects in forthcoming election Falling: the NM candidate lost the 2017 presidential election.
Extent of policy differentiation Moderate: greater focus on increasing the role of the state in the economy and promoting social policies.
Data - Opposition prospects and programme: Political - Chile

Parliament Summary
Party abbr. Party name Seats
Chamber of Deputies
(Lower chamber)
CV Chile Vamos (led by the National Renewal Party – RN and Independent Democratic Union – UDI) 73
FM Force of the Majority (led by the Socialist Party of Chile – PS, the Party for Democracy – PPD, and the Radical Social 43
Democratic Party – PRSD)
BF Broad Front (led by the Democratic Revolution – RD) 20
DC Democratic Convergence (led by the Christian Democratic Party – PDC) 13
Others Others 6
Senate (Upper
chamber)
CV Chile Vamos (led by the National Renewal Party – RN and Independent Democratic Union – UDI) 19

Parliament Summary
Party abbr. Party name Seats
FM Force of the Majority (led by the Socialist Party of Chile – PS, the Party for Democracy – PPD, and the Radical Social 15
Democratic Party – PRSD)
DC Democratic Convergence (led by the Christian Democratic Party – PDC) 6
Others Others 3
Data reflects seat distribution following last election Source: CIRCA People in Power © 2021 IHS Markit
Major parties - Parties and key figures - Political system and players - Political
background: Political - Chile
Independent Democratic Union (Unión Demócrata Independiente: UDI)
Political stance: The UDI is Chile’s most conservative mainstream party. It stands for neo-liberal
economics and traditional family values. It is part of the ruling centre-right coalition Chile Vamos
(Chile Let’s Go), in government since March 2018.
Support base: Conservative upper and middle classes, although its work in poor
neighbourhoods of Santiago and other depressed parts of the country has earned it a popular
appeal that crosses the traditional divide between left and right. It enjoys the tacit support of the
leadership of the Catholic Church.
Recent history: It has backed the RN-linked governments of Sebastián Piñera (2010–14 and
2018–22), and it has four cabinet ministers. In the 2017 parliamentary election it lost its position
of the largest party in the Chamber of Deputies, having 30 of 155 deputies, but remains the
largest party in the Senate, with nine of 43 seats.
Potential future leaders: Joaquín Lavín, mayor of Las Condes, an upper-middle class
municipality.
National Renewal (Renovación Nacional: RN)
Political stance: The party advocates classic right-wing neo-liberal economic policies but is
more progressive than its coalition partner, the UDI, on social issues. The RN’s platform is built
on the idea that neo-liberal policies should be developed in tandem with more socially liberal
policies.
Support base: Upper-middle classes, business sector.
Recent history: In 2017, RN became the party with the largest representation in the Chamber of
Deputies, obtaining 36 seats. RN also increased its seats in the Senate from six to eight. RN’s
best-known figure is President Sebastian Piñera, a successful businessperson who also served
as president in 2010–14.
Potential future leaders: Cecilia Perez, Francisco Chahuán, Andrés Allamand, Cristián
Monckeberg.
Christian Democratic Party (Partido Demócrata Cristiano de Chile: PDC)
Political stance: It is the most centrist -and conservative party within the former New Majority
(Nueva Mayoria: NM) coalition. The main issues of contention with the rest of the coalition were
social and ethical issues, such as abortion and gay marriage, as the PDC has a more
conservative view on these topics, given its Christian (Catholic) background. Some more

moderate sectors of the party were critical of the previous government of Michelle Bachelet (NM),
opposing some aspects of its proposals on issues such as labour and education reform.
Support base: Mostly Catholic or more conservative voters who do not feel represented by the
right-wing neo-liberal economic system.
Recent history: After dominating politics in the 1960s and the 1990s after the return of
democracy, the PDC began to lose its way, ceding ground to the more leftist Socialist Party. In the
November 2017 parliamentary election the party lost parliamentary representation from 22 to 14
seats in the Chamber of Deputies, making it lose negotiating power, as it ceased to be the party
with the largest group of parliamentarians of the NM.
Potential future leaders: Jorge Pizarro, Ximena Rincon, Carolina Goic.
Socialist Party (Partido Socialista: PS)
Political stance: The PS has become more pragmatic since the early 2000s, maintaining free
market policies, despite its origins as a party representing workers, left-wing political thinkers,
and activists looking for social change and fairer distribution of wealth in the 1930s.
Support base: Working classes. It is one of the most traditional of left-wing parties and has a
solid base of mature loyal voters but has not permeated to younger generations who have found
a place in the Broad Front.
Recent history: The socialists were an important partner in the coalition government in the early
1990s that replaced the military government of Augusto Pinochet, although overwhelmed by the
more moderate Christian Democrats. The PS was in power with President Bachelet from 2014 to
March 2018. Her second term (the previous one being in 2006–10) was marked by a slight turn
to the left, as she managed to pass a tax reform that increased corporate tax, a labour reform
that strengthened unions, and passed an education reform to provide free higher education. The
PS controls 19 of 155 seats in the Chamber of Deputies and 7 in the Senate.
Broad Front (Frente Amplio: FA) coalition
Political stance: The FA is a left-wing coalition founded in early 2017. They advocate for
participative democracy and overcoming neoliberalism in Chile. The FA stands to the left of the
New Majority coalition and did not always support the policies of the previous Bachelet
administration.
Support base: Progressive, anti-neoliberal youth. It is composed by several parties and
movements including its most prominent member, the Democratic Revolution (Revolución
Democrática: RD) party, founded by leaders of the 2011 student movement.
Recent history: In the 2017 parliamentary elections, the FA became the third political force in
the country when it gained 20 of the 155 seats in the Chamber of Deputies and elected one
senator. Its presidential candidate, journalist Beatriz Sánchez, came third in the first round held
on 19 November 2017, with 20% of the vote; only 2% behind Senator Alejandro Guillier from the
NM.
Potential future leaders: Beatriz Sánchez, Giorgio Jackson, Gabriel Boric.
Data - Parties and key figures - Political system and players - Political background:
Political - Chile
Leadership

Title Name Appointed
President Sebastian PIÑERA 11 Mar 2018
Echenique
Minister of Finance Ignacio BRIONES 28 Oct 2019
Minister of Foreign Affairs Andres ALLAMAND 28 Jul 2020
Minister of National Defence Baldo PROKURIÇA 18 Dec 2020
Minister of the Economy, Development and Tourism Lucas PALACIOS 28 Oct 2019
Minister of Justice Hernan LARRAIN 11 Mar 2018
Minister of Labour and Social Security Maria Jose ZALDIVAR 28 Oct 2019
Minister of the Interior and Public Security Rodrigo DELGADO 4 Nov 2020
Mocarquer
Minister of Transport and Communications Gloria HUTT 11 Mar 2018
Minister of Energy Juan Carlos JOBET 13 Jun 2019
Minister of Health Oscar Enrique PARIS 13 Jun 2020
Minister of Mining Baldo PROKURICA 11 Mar 2018
Minister of Education (Mineduc) Raul FIGUEROA 28 Feb 2020
Minister of Agriculture, Food and Rural Development Antonio WALKER 11 Mar 2018
Minister for National Assets Julio ISAMIT 28 Oct 2019
Minister of Public Works Alfredo MORENO 13 Jun 2019
Minister of Science, Technology, Knowledge and Innovation Andres COUVE 17 Dec 2018
Minister of Social Development and Family Karla RUBILAR 28 Jul 2020
Minister of the Environment Carolina SCHMIDT 9 Aug 2018
Minister of Culture, Arts and Heritage Consuelo VALDES 13 Aug 2018
Chadwick
Source: IHS and CIRCA People in Power © 2021 IHS Markit
Key figures - Parties and key figures - Political system and players - Political
President Sebastián Piñera
Sebastián Piñera, born on 1 December 1949, became the first democratically elected conservative head of
government in Chile in more than 50 years in 2010, ending two decades of centre-left rule. On 17 December 2017,
President Piñera won the run-off over Senator Alejandro Guillier and on 11 March 2018 took office for his second
term. An economist by training, Piñera studied at Santiago’s Pontifical Catholic University before obtaining a PhD
in Economics from Harvard. He is a successful businessperson who made his fortune by founding a pioneering
company that helped bring credit cards to Chile in the late 1970s. In the early 1990s, Piñera bought his first shares
in Chile’s national airline LAN Chile. In early 2018, Forbes estimated his total fortune at USD2.8 billion, making him
the fifth-richest person in Chile. In 1982, he was accused of fraudulent banking practices and a warrant was issued
for his arrest before he was cleared. In 2007, Chile’s stock exchange regulator fined him nearly USD700,000 for
buying shares in LAN while in possession of privileged information.
He supported the “No” option in the 1988 referendum on extending Augusto Pinochet’s regime. He then joined
National Renewal (Renovación Nacional: RN), using it as a platform for his presidential ambitions. After losing the
2005 election, he won in 2009 and again in 2017.
During his first government, he embarked on a socially liberal programme that involved the extension of social
welfare payments to poor families and support for initiatives on rights for same-sex partners. Despite a solid
economy during his government, he was considered as someone who lacks political tact, which cost him his

popularity. He also had to deal with large-scale student protests. He won the December 2017 run-off over Senator
Alejandro Guillier and took power in March 2018 for his second term in office. Piñera is seeking to amend tax and
labour changes implemented by former centre-left president Michelle Bachelet and is advancing on pension
system reform. Piñera ended 2019 with an approval rating of 11% after facing unprecedented levels of violent anti-
government protests. Efforts to remove him via impeachment failed to advance in Congress and he has called for
a referendum in April 2020 to modify Chile's constitution, a pledge that he has made to appease those who
protested against him.
Interior Minister Gonzalo Blumel
Gonzalo Blumel was born on 17 May 1978. He is an environmental civil engineer and holds a Master in Engineering
Science from the Pontifical Catholic University of Chile (UC), as well as a Master in Economics from the University of
Birmingham. He was appointed Minister of Interior and Public Security in October 2019 following a wave of anti-
government protests against Piñera. He replaced Andrés Chadwick in the Cabinet. He played a key role in the
agreement with the opposition and the process for a new constitution, with IHS Markit sources claiming that he
has mediated with members of the political opposition to ensure cross-party support to end violent protests
against the government. He is a close ally of President Piñera and has worked with him since 2013. After the end of
Piñera's first government, he was executive director of Avanza Chile Foundation, dedicated to preserving the
legacy of the president. When Piñera returned to the presidency, Blumel was appointed Minister General Secretary
of the Presidency, a position he held until he assumed his current position. He is the only one of the collaborators
who accompanied Piñera in the campaign for his second presidency, along with Andrés Chadwick and Cecilia
Pérez, who is still in the political committee.
Finance Minister Ignacio Briones
Ignacio Briones was born on 12 December 1972. He is a commercial engineer with a Master in Economics and
Political Science from the UC and is one of the founders and militants of Evópoli, a centre-right political party. Until
his appointment as finance minister, on 28 October 2019, replacing Felipe Larraín, in the framework of the social
crisis, he had been dean of the Government School of the Adolfo Ibáñez University since June 2014, and director of
the National Copper Corporation (Codelco) since 11 May 2018. From March 2010 to July 2013, during Sebastián
Piñera's first government, he was a co-ordinator of International Finance of the Ministry of Finance. Between 2013
and 2014, he served as Chile's ambassador to the Organisation for Economic Co-operation and Development
(OECD).
In terms of research and public policies, in 2012 Briones founded the Center for Horizontal Studies, in Evópoli, and
is founder and president of the Chilean Public Policy Society. He is a Doctor in Political Economy from the Institute
of Political Studies in Paris (2004), which has given him, as he claims, a vision in the support of an open and liberal
society. He is a pro-market individual and played an important role in the agreements for the 2020 budget. He is
trusted by President Piñera and is the second-highest ranked minister in terms of approval rating according to the
November 2019 Cadem survey, with 45% of approval.
National Renovation Front President Mario Desbordes Jiménez
Mario Desbordes Jiménez was born on 15 October 1968. Since March 2018, he is president of the National
Renovation party (Renovacion Nacional: RN), which is a member of the government alliance, Chile Vamos. Since
2010, he has been secretary general of the same political group. In 2017, he was elected as Congressman for the
8th district of the Metropolitan Region. Previously he was a member of Carabineros de Chile, the Chilean national
police force, where he graduated as a second lieutenant of Order and Security. He was also part of the
Gendarmerie of Chile, where he remained until March 2000. That same year, at the age of 32, he began his political
career entering the RN. In 2008–09 he was president of the RN in the Metropolitan Region and in 2010 he was
appointed by Piñera as undersecretary of investigations until 23 December 2010. On 24 December 2010, he
assumed as general secretary of the RN until March 2018 when he assumed the presidency of the party. As
president of the RN, he worked towards securing an agreement with opposition political parties on key issues of

the social agenda and in the agreement for peace; a new constitution was reached on 15 November. His position in
favour of substantive changes in matters such as health and pensions has earned him criticism from other
members of the coalition.
Major pressure groups - Civil society - Political system and players - Political
Confederation of Production and Commerce (Confederación de Producción y Comercio: CPC)
The CPC is Chile’s umbrella business lobby. The business sector has the most powerful interest groups. The CPC is
vocal in its advocacy of free-market economics and frequently expresses its opinions on government plans and
policies. It was overall against former president Michelle Bachelet’s labour and tax reforms, and contributed to
getting the 2014 tax reform simplified in January 2016, as well as adjusting a proposed labour reform that
strengthens unions, enacted in 2017. The CPC holds a closer relationship with the Piñera government.
Business lobby Sofofa (Sociedad de Fomento Fabril)
Sofofa is a member of the CPC and advocates the same principles. It was even more vocal than the CPC in its
criticism of Bachelet’s reform agenda, and closer to Piñera’s policies. Sofofa represents nearly 4,000 companies and
its members account for about 30% of Chilean GDP.
United Workers’ Trade Federation (Central Unitaria de Trabajadores: CUT)
About 20% of Chilean workers belong to a trade union, below the Latin American average of 25%, but have
increased their influence over the past two governments, helping shape the agenda. About a quarter of Chile’s
unions are affiliated to the main trade union federation, CUT, which has links to the Communist Party and was an
influential lobbyist in the discussions of the labour reform that strengthens unions, enacted in 2017. The Piñera
administration is trying to amend some aspects of that reform, including increasing the flexibility of labour
contracts and conditions. The CUT is a strong opponent of the changes.
Environmental pressure groups
Environmental pressure groups have emerged as significant players in shaping government policy and hampering
the development of some mining and energy projects, such as Pascua Lama, HidroAysén, and Alto Maipo,
including by taking them to court. However, environmental pressure groups and non-government organisations
tend to be highly atomised, campaigning on specific regional and local issues rather than acting in unison.
Constitution - State institutions - Political system and players - Political background:

Political - Chile
The 1980 constitution of the Republic of Chile established a presidential system of government consisting of three
completely independent branches: executive, legislature, and judiciary. There have been numerous reforms to the
constitution, which dates from General Augusto Pinochet’s military rule. One of the most important reforms was
approved in 2005 and abolished the positions of designated senators (often proposed by the military) and
senators-for-life. It also gave the president the power to remove the heads of the armed forces. The armed forces
were relieved of their responsibility as “institutional guarantors”. But for many, particularly on the left, the
constitution is fundamentally flawed because it was drawn up under dictatorship (1973–1990) without
parliamentary approval.
Following violent protests since October 2019, the government of Sebastian Piñera launched a process for a
referendum on a new constitution in October 2020.

Executive - State institutions - Political system and players - Political background:
Political - Chile
Executive power is vested in the president as head of state and government. The president is directly elected for a
four-year period with no right of re-election for a second consecutive term, although he/she can return at a later
date. Unless one candidate obtains an absolute majority in valid ballots, a second run-off election is held between
the two candidates with the largest number of votes. The president designates an unelected cabinet of ministers
to assist in the execution of his/her duties.
Legislature - State institutions - Political system and players - Political background:

Political - Chile
Chile has a bicameral National Congress, made up of a 43-member Senate (upper house) and a 155-member
Chamber of Deputies (lower house). Both are elected by popular vote. The Senate is scheduled to have 50
members in 2021 to correspond with the new division of the country. Senators serve an eight-year term, with half
of the seats contested every four years. Deputies serve four-year terms. A 2020 law limits the number of times
parliamentarians can be re-elected.
For over two decades, the country used a unique “binominal” voting system, which ensured that the two big
coalitions took almost all the seats in parliament. A new system approved in 2015 was used for the first time in the
November 2017 parliamentary election. The number of constituencies for the lower house elections was reduced
from 60 to 28. Each constituency returns between three and eight deputies, while for the Senate, each region will
return between two and five members, depending on the size of their population. Despite allowing for increased
representation in the legislature for smaller coalitions, the 2017 elections showed that the new system continues
to favour coalitions or pacts.
A change in the law in 2012 made voting voluntary and voters are registered automatically upon turning 18.
Chileans living abroad were allowed to vote for the first time in the 2017 election.
Judiciary - State institutions - Political system and players - Political background:

Political - Chile
Chile’s independent judiciary is made up of the Supreme Court, a Constitutional Court, regional Courts of Appeal,
and local and specialised tribunals. The highest court, the Supreme Court, consists of 21 members appointed for
life by the president with the backing of two-thirds of the Senate. The 21 members elect a president from within
their ranks every two years. Retirement is at the age of 75 at the latest. The 17 regional Courts of Appeal have
jurisdictions over one or more provinces and the majority have four judges, although the largest, Santiago, has 34.
Judges of these courts are selected by the president from a list submitted by the Supreme Court and are also
eligible to serve until the age of 75.
An extensive reform of the judicial system in 2000 affected mainly the criminal courts. It created an autonomous
body, the Office of the Prosecutor, dedicated to public criminal prosecution (previously done by judges). Its
attorneys have the power to investigate crimes and co-ordinate police forces in the investigation process, as well
as prepare and serve indictments before the criminal courts.
Regional and local - State institutions - Political system and players - Political
Chile is divided into 16 administrative regions, each headed by a presidentially appointed intendant (regional
governor). The regions are divided into 56 provinces, each headed by a governor, also appointed by the president.
Regional councillors are directly elected for four-year terms. At the local level, the country is divided into 346

municipalities, which are administered by a mayor and municipal councillors, who are elected for four-year terms.
In December 2016, a new law for the direct election of the heads of each of the 15 regions was promulgated, with
the first elections scheduled to take place in 2021. However, it is likely to suffer delays in its implementation due to
lack of clarity of the scope of the role and overall delays to the electoral calendar due to the coronavirus disease
2019 (COVID-19) virus pandemic.
Overview - External relations - Political background: Political - Chile

Chile has an open economy and free-trade agreements, including with China, European Union, and the United
States. Chile is a founding member of the Pacific Alliance (Alianza del Pacífico), a trade bloc comprising also
Colombia, Mexico, and Peru, and is promoting a new regional body Prosur, to replace the Union of South American
Nations (UNASUR). Relations with Peru have improved, with both respecting a 2014 International Court of Justice
(ICJ) ruling on a maritime dispute. In 2018, the ICJ ruled in favour of Chile in a maritime dispute with Bolivia, while
a case regarding the Silala waters is still at the Court.
United States - Bilateral - External relations - Political background: Political - Chile

Relations with the United States
Chile’s economic ties with the United States are robust. The country enjoys privileged status over its regional
neighbours in terms of trade and weapons deals with the US. The US is Chile’s second largest commercial partner
after China, with Chile importing USD13.7 billion from the US in 2019, and exporting USD9.5 billion.
A key development was the implementation of a free-trade agreement in January 2004, which in 2015 brought
about the removal of 100% of the formal trade tariffs between the two countries. Chile and the US have brokered
a number of additional economic and trade co-operation agreements as members of the Organisation for
Economic Co-operation and Development (OECD). The US is also an important source of foreign direct investment
(FDI) for Chile, reaching USD3.4 billion in 2019, second after China. In a reflection of the strength of the bilateral
relationship, and of the high regard in which Chile is held by US policy makers, in 2014 Chile became the only Latin
American country to be included in the US visa waiver programme. The two countries have additionally signed a
double taxation treaty, although as of 2020 it still needs to be ratified by the US Senate.
China - Bilateral - External relations - Political background: Political - Chile

Relations with China
Chile and China enjoy a strong commercial relationship, which has been buoyed by a free-trade agreement (FTA)
signed in 2006. China is Chile’s main trade partner, with imports from China totalling USD16.5 billion in 2019, and
exports reaching USD22.6 billion. Exports to China are largely primary goods and commodities, especially copper,
timber, and fruit products. In 2019, China also became the main source of foreign direct investment (FDI) to Chile,
totalling USD4.8 billion. In April 2019, President Sebastián Piñera visited China and signed an agreement to
encourage bilateral relations, promote trade, and reinforce strategic co-ordination in regional and international
issues. Previously, in November 2016, Chinese Premier Xi Jinping visited Chile and the two countries signed a
number of co-operation agreements. During a visit to China in May 2017, former president Michelle Bachelet signed
10 bilateral agreements with China, agreed to deepen the free-trade agreement, and announced the incorporation
of Chile to the Asian Infrastructure Investment Bank (BAII).
Americas - Bilateral - External relations - Political background: Political - Chile

Relations with Argentina

Current status
Both Chile and Argentina openly express their willingness to maintain strong bilateral relations, although these
have deteriorated slightly since President Alberto Fernández took office in Argentina in December 2019. He has
former president Cristina Fernández de Kirchner (CFK) as his vice-president and, although he has remained
generally moderate in international relations, his affinity with left-wing parties has slightly strained the
relationship with the centre-right government of President Sebastián Piñera. During a virtual meeting in April 2020
of the Puebla Group (Grupo de Puebla), which gathers left-wing parties across Latin America, Fernández called on
the Chilean opposition to regroup in order to come to power, which was seen by the Chilean government as
interference in domestic issues. The Chilean government also criticised Argentina when the latter quoted unofficial
or inaccurate figures of the coronavirus disease (COVID-19)-virus pandemic in Chile to compare the management of
the outbreak in both countries. Another point of contention is a bill being discussed in Argentina, which marks the
limits of an underwater platform in Tierra del Fuego, which Chile rejects.
However, all these issues are likely to be addressed via diplomatic channels, and the risk of military conflict
remains negligible. Argentina’s ambassador to Chile, former foreign minister Rafael Bielsa, has connections to
Chile as his brother Marcelo was for long time the coach of Chile’s national football team. Infrastructure projects
to improve connections and transport between both countries continue to be developed.
There is very significant cross-border interaction and commercial exchange between communities on either side of
the border, including large numbers of Argentine tourists visiting Chilean coastal resorts during December–
February each year. There is also a numerically significant Chilean diaspora resident in Argentina. Almost all
border disputes have been resolved, including the drawing of the frontier in the Southern Glaciers. The threat of
conflict between Argentina and Chile has been much reduced since the two countries narrowly avoided all-out
war over the Beagle Channel dispute in the 1970s and 1980s. Chile has supported Argentina’s demands of
sovereignty over the Falklands/Malvinas.
Bilateral relations to 2019
Bilateral relations were strongest under former Argentine president Mauricio Macri and President Sebastián Piñera
in Chile because of personal affinities and similar pro-market ideologies. They established a bi-national
commission to push forward the development of the Las Leñas International border tunnel, connecting San
Rafael (Argentina) and O’Higgins (Chile), while in October 2016 a tender process for the 14 km, USD1.6-billion Agua
Negra cross-border tunnel to connect San Juan (Argentina) with Coquimbo (Chile) was launched. The project will
be financed by an Inter-American Development Bank credit distributed proportionally between both countries. In
2019, both presidents signed an agreement to liberalise the trade of goods, services, and investment, as well as
eliminate mobile roaming.
Bilateral relations deteriorated in 2004 when Argentina’s then-president Néstor Kirchner announced that gas
exports to Chile would be cut to guarantee the supply of the domestic market. In 2017 the Argentine government
approved gas exports to Chile thanks to growth in production because of the Vaca Muerta deposit in Neuquén.
Diplomatic relations also soured in 2010 when Argentina granted political asylum to Sergio Galvarino Apablaza
Guerra, a Chilean Marxist guerrilla who was accused of killing a Chilean senator and kidnapping the son of a
newspaper owner.
In 2014, under the governments of Cristina Fernández and Michelle Bachelet, they committed to upgrade cross-
border infrastructure.
Relations with Bolivia

Relations between Chile and Bolivia are dominated by Bolivia’s attempt to regain access to the sea, after losing
parts of its territory to Chile following the 1879–83 War of the Pacific, which left the country landlocked. Relations
between Chile and Bolivia deteriorated when Evo Morales was president in Bolivia (2005–19), but military conflict is

unlikely. The interim government in place in Bolivia in 2020 has not adopted a specific policy in this regard, and
any government elected in the planned vote in September 2020 is unlikely to give up Bolivia’s claim to sea access.
Chile and Bolivia do not have embassies in each other’s countries, as in 1978 Bolivia broke off diplomatic relations,
but both countries maintain bilateral relations via consulates owing to the need to co-operate over issues such as
trade, security, and regional integration.
Despite the lack of sovereign maritime access for Bolivia, the 1904 Treaty stipulates that the country can use the
Chilean ports of Arica and Antofagasta for its exports. Around 75% of Bolivian exports pass through Chilean ports,
which have facilities such as free storage for a year of imports and 60 days of exports.
Bilateral relations improved during Chilean President Michelle Bachelet’s first government (2006–10), when both
countries discussed an agenda that included Bolivia’s demands for access to Pacific ports. Negotiations failed,
however, when Sebastián Piñera took office in Chile (2010–14) and Morales referred the case to the International
Court of Justice (ICJ) in April 2013, which further deteriorated relations. On 1 October 2018, the ICJ ruled that Chile
had no obligation to negotiate sovereign access to the Pacific Ocean with Bolivia, leaving Bolivia few options to
regain access. Chile and Bolivia have another dispute at the ICJ, over the use of the waters of the Silala river, which
the former claims is international, whereas the latter claims it is Bolivian. Armed conflict between Bolivia and Chile
is highly unlikely, as they are likely to continue to pursue a diplomatic settlement. Bolivian is also likely to avoid
military conflict, as the Chilean armed forces are far more significantly equipped and trained.
Relations with Peru

Relations between Chile and Peru have remained broadly positive in recent years, helped by high levels of trade
and investment, despite a traditional rivalry following the 1879 War of the Pacific. There are sporadic outbursts of
nationalist rhetoric and allegations of territorial incursions that are likely to cause occasional disruptions to cross-
border ties.
Both countries are founding members of the Pacific Alliance (Alianza del Pacífico) trading bloc (created in 2011)
along with Colombia and Mexico, becoming the second largest trade group in Latin America after MERCOSUR. They
have eliminated many trade tariffs between them, have a free-trade agreement in place, and enjoy increasingly
close economic ties. Several big Chilean retail chains have important investments in Peru.
A major traditional source of bilateral tension – the delineation of a disputed maritime border – was largely
diffused by an ICJ ruling in January 2014. The disagreement centred on control of a 37,900 km2 section of fish-rich
ocean. Peru had argued that accords regarding this area signed in 1952 and 1954 merely constituted fishing
agreements, while Chile argued they constituted formal border delineations. The ICJ ruled that Chile had to cede
approximately 21,000 km2 of maritime territory to Peru, but granted it sovereignty over the first 80 nautical miles
(148 km) due west of the border, allowing it to retain control of key fishing resources. Both countries have
accepted the ruling and have since co-operated in its implementation. There is an outstanding dispute on the land
border, with the Peruvian government creating in October 2015 a district in part of the disputed area, which Chile
protested against. The controversy is highly unlikely to escalate into an armed conflict. Former Peruvian president
Pedro Pablo Kuczynski pursued close bilateral relations with Chile and in a visit to Santiago in November 2016
agreed on the creation of a binational cabinet with Chile’s then-president Michelle Bachelet to facilitate decision
making on issues of mutual importance, which held its first meeting in July 2017. In November 2018 President
Martín Vizcarra, who took over after Kuczynski’s resignation in March 2018, met President Piñera in Santiago and
both signed an agreement to co-operate in six main areas: social and cultural integration, defence and security,
international trade, energy and mining issues, border integration, and infrastructure.
Global organisations - Multilateral - External relations - Political background:

Political - Chile
Despite traditionally pursuing its interests bilaterally, in recent years Chile has sought to expand its participation
in regional mechanisms, partly as a means to increase trade ties with its neighbours. It is a founding member of

the Pacific Alliance with Peru, Colombia and Mexico, and an associate member of Mercosur, the common market
between Argentina, Brazil, Paraguay, and Uruguay. Chile participates in Mercosur's Political Consultation and
Coordination Forum.
In 2019 Chile and six other countries (Argentina, Brazil, Colombia, Ecuador, Guyana, Paraguay and Peru) launched
the Forum for the Progress of South America (Foro para el Progreso de América del Sur: PROSUR), a regional bloc
that seeks the “integration and strengthening of the region” seen as a candidate to replace the Union of South
American Nations (UNASUR), following Venezuela’s political and economic crisis. Chile was one of 12 countries
negotiating a Pacific Rim trading bloc, the Trans-Pacific Partnership (TPP), from which US president Donald Trump
announced the US withdrawal in January 2017. In March 2018, Chile with 10 other countries, including Mexico,
Canada and Japan, signed the Comprehensive and Progressive Agreement Trans-Pacific Partnership (CPTPP) trade
deal, a version of the TPP that does not include the US but comprises around 14% of global GDP.
Regional organisations - Multilateral - External relations - Political background:

Political - Chile
Relations with the Pacific Alliance
The Pacific Alliance is a regional integration initiative that Chile, Colombia, Mexico, and Peru formed in 2011. Costa
Rica and Panama are also seeking membership. The Alliance's main objective is to deepen economic integration
between member states by enhancing free circulation of goods, services, capital, and people. Its constitutive
agreement came into force in July 2015, liberalising approximately 92% of trade in most goods (the rest will be
liberalised gradually). This formed a market of 225 million people and became the eighth-largest economy in the
world and the second-largest trade group in Latin America, after MERCOSUR. According to the bloc, it represents
38% of Latin America and the Caribbean’s GDP, 50% of the total trade, and attracts 45% of the foreign direct
investment (FDI). Agricultural products such as corn and sugar will remain protected and will be liberalised
gradually over the period to 2030. At least 52 countries have taken up observer status with the treaty, including
Australia, China, Canada, Germany, India, Japan, Singapore, South Korea, the United Kingdom, Argentina and the
United States. The Alliance operates through summits, without headquarters and a secretary-general.
One area in which progress has already been made is the co-ordination of the stock markets of member states.
Under the Latin American Integrated Market (Mercado Integrado Latinoamericano: MILA), common platforms
allow trading in stocks and expand access to investment capital between Chile, Colombia, Mexico, and Peru. In May
2020, the capitalisation of MILA reached USD619 billion, a 3% increase year on year. The Alliance's original leaders
were pro-business, and that remains the case in Chile, Colombia, and Peru. The pragmatism of these members is
positive for the region's investment environment. In Mexico, President Andrés Manuel López Obrador, in
government since 2018, is unlikely to withdraw, but also to promote the Pacific Alliance. Business rounds involve
finance ministers, investment promotion agencies, and company directors and CEOs. That said, despite all of its
potential benefits, the Alliance is unlikely to change trade and investment patterns within its member states
dramatically or immediately. The US, Europe, and China are the main export destinations for all members and this
is unlikely to change over the next decade. Inter-PA trade, by contrast, according to 2015 data represented only
5.6% of its members' overall trade. During 2017, the Pacific Alliance and MERCOSUR worked in a joint agenda to
facilitate trade within both blocs.

Economic - Chile
29 Jan 2021 - Global Economics | Profile
Forecast highlights: Economic - Chile

Chile’s economy advanced 5.2% quarter on quarter on a seasonally adjusted basis during third
quarter 2020 and declined 9.1% year on year—a period marked by total or partial lifting of strong
quarantine measures and mobility restrictions.
After bottoming out in May 2020, the economy continued to recover into November 2020, except
for a 0.5% contraction during October 2020. Real GDP growth declined an estimated 5.8% in
2020, but is projected to advance by 6.1% in 2021.
Copper prices stand above their 2019 year-end level. On average, the Chilean peso is forecast
to make gains overall into 2021.
To stimulate growth, the central bank maintains its policy rate at its technical minimum of 0.5%
and the use of nonconventional liquidity and credit support. Fiscal stimulus amounts to 9.8% of
GDP. Individuals can withdraw a limited amount out of their pension funds.
Changes since last forecast: Economic - Chile

January 2021 forecast
2021 2022
Current Prior Current Prior Rationale
GDP 6.1 6.2 3.2 3.2 The forecast for 2021 takes into account
(Percent change) continued recovery and increases in private
consumption.
Unemployment rate 8.2 8.2 8.3 8.3 The forecasts for the unemployment rate are
(Percent) in line with rigidities in the labor market that
will prevent a faster recovery of employment
into 2022.
Exchange rate 748 749 725 727 Higher copper prices and stronger mainland
(CLP/USD, year-end) Chinese demand are expected to support a
stronger Chilean peso. Downside risks
include uncertainty around the political
cycle and constitutional reforms.
Consumer price index 3.2 2.6 3.0 3.0 Higher inflation forecast for 2021 reflect
(Average over period) expected temporary pressures from stronger
domestic demand.
Near-term outlook - Near-term outlook: Economic - Chile

Although IHS Markit analysts expect the moderate recovery to continue into 2021, we project the economy will
only return to end-2019 levels in 2022.
Chile’s economy advanced by 5.2% during the third quarter compared with the prior quarter of
2020, after struggling to secure strong growth for three quarters. During the end of 2019,
protests halted domestic demand and caused a spike in uncertainty, and during the first half of
2020, lower copper prices and concerns over the spread of the COVID-19 virus prevented an
economic recovery.
Stronger copper prices will be supported by improving mainland Chinese demand and fading
supply disruptions caused by COVID-19, helping boost external and fiscal revenues.
The Chilean economy is very open—exports and imports individually account for 29% of GDP.
The major trading partner is mainland China, followed by the United States, making it particularly
vulnerable to the forecast economic downturn in both countries.
Accelerating machinery and equipment demand drove a modest 3.7% advance in fixed
investment during third quarter 2020, following a weak showing owing to a deteriorated business
climate and spike in uncertainty related to COVID-19, new economic policies, the plan to rewrite
the constitution, and the risk of further social unrest.
On the back of supportive monetary policy and early withdrawals of pension savings, private
consumption is projected to recover strongly in 2021. Fiscal spending will continue to expand to
provide fiscal relief from the economic downturn and provide additional funding for health care.
During 2020, quarantine measures marked nearly five months under lockdown in the capital city
of Santiago, the hardest-hit region in Chile, with nearly 70% of all confirmed cases. Chile has
relatively improved against worsening in some regional peers, currently standing behind Brazil,
Argentina, Colombia, Mexico, and Peru in terms of total cases.
The central bank will keep rates at its 0.5% technical minimum and will utilize unorthodox monetary policy to
boost liquidity and credit.
Throughout 2019, the central bank cut rates from 3% to 1.75% to counteract weakness in the
copper sector and negative impact from the social unrest in the fourth quarter of 2019. In March
2020, the bank cut rates to a 0.5% technical minimum and is expected to keep its monetary
policy rate unchanged into 2021.
The central bank also extended a foreign exchange intervention program through January 2021
—instead of the original May 2020—to counteract volatility in the path of the Chilean peso. In the
short term, the price of copper, Chile’s key export, will drive the path of the Chilean peso, except
in times of extreme uncertainty.
Falling interest rates, global financial tightening, regional political and health uncertainty, and
sharply weaker growth forecasts have led to significant depreciation of the peso. Recent gains in
the Chilean peso have been made on the back of uncertainty regarding the US response to
COVID-19, which has weakened the dollar, and stronger copper prices, which have strengthened
the Chilean peso.
The projections for copper prices have been modestly revised upward for 2021. The peso is
expected to appreciate on average by 6.1% in 2021 owing to higher copper prices and easing
uncertainty.
During 2020, annual inflation decelerated since February through August, accelerating during
September on the back of a transitory impulse to household consumption of goods, driven by an
early withdrawal of up to 10% pension savings, as well as supply shortages related to such
higher demand. Annual inflation remained strong during October at 2.95%, slowing to 2.73%
during November, and ended the year at 3.0%. Low energy prices and a stronger peso will lower
import prices and keep inflation contained into 2021.
The government has increased its COVID-19 spending plan to USD26 billion.

The government originally planned to spend USD11.75 billion to respond to the health crisis, but
on 15 June 2020, it passed a second spending plan worth USD12 billion. Including additional
smaller projects to provide cash payments to families and pensioners and maintain employment,
the total has reached an estimated USD27.8 billion, or 9.8% of (2019) GDP, following the
announcement of a USD1.5 billion spending plan specifically for the middle class.
The spending bill related to the COVID-19 virus outbreak includes paying the salaries of those
forced out of work because of isolation efforts, utilizing state unemployment insurance to
compensate for lost income, and introducing tax breaks and postponement of tax payments for
small and medium-sized businesses, as well as bonuses for lower-income individuals. The bill
also increases the public health budget by 2%. According to the World Bank Health Nutrition and
Population Statistics, Chile has insufficient resources when facing a health crisis: Chile averages
1.1 physicians per 1,000 people, compared with Argentina’s 4. Chile has 2.2 hospital beds per
1,000 people, compared with Argentina’s 5.
During 2020, President Pinera ratified a law allowing up to two withdrawals of up to 10% of
savings available in the pension system. The move is expected to support weak private
consumption, but over the medium term, the downside is the weakening of the health of the
pension system by reducing savings overtime. The downside risk is an increase in economic
uncertainty in the medium term and suggests that further economic policy changes could come in
the future.
A rule of thumb is that for every cent copper prices fall the treasury of Chile losses USD60 million.
The central government has been proactive in shifting dependency from copper revenue to tax
revenue, which now accounts for more than 80% of government revenue.
During 2020, the International Monetary Fund (IMF) has approved a flexible line of credit worth
USD23.8 billion, or about 8% of GDP to support foreign exchange reserve levels, as well as fiscal
spending to support liquidity for individuals and businesses.
Data - Near-term outlook: Economic - Chile

Chile: Recent economic developments (percent change year on year, unless otherwise
specified)
Dec 20 Nov 20 Oct 20 Sep 20 Aug 20 Jul 20 2020 2019
CPI, headline 3.0 2.7 2.9 3.1 2.4 2.5 3.0 2.6
CLP/USD exchange rate (average) -4.56 -1.45 9.35 7.76 9.98 14.44 12.71 9.59
Retail sales, real NA 14.4 14.9 -10.0 -20.8 -43.6 -23.6 -4.4
Manufacturing output NA -1.7 6.0 5.3 -8.2 -7.5 -3.1 0.8
Authorized building permits NA -28.2 -43.6 -9.2 12.6 -59.6 -27.3 5.8
Hourly wage, real NA 1.9 1.0 0.6 0.4 0.3 0.5 2.0
Source: Chile's National Statistics Institute (INE), Central Bank of Chile © 2021 IHS Markit
Key indicators and forecasts - Near-term outlook: Economic - Chile

Historical
data edge 2019 2020 2021 2022 2023 2024 2025
Real GDP and its components (percent change)
Gross domestic product 2019 1.0 -5.8 6.1 3.1 3.2 3.2 3.5
Domestic demand 2019 1.0 -9.1 7.2 3.0 3.7 3.4 3.8
Exports of goods & nonfactor services 2019 -2.3 -1.6 3.9 4.9 3.0 3.8 3.3
Imports of goods & nonfactor services 2019 -2.3 -13.0 7.5 4.3 4.7 4.4 4.3
Real per-capita GDP 2018 -0.2 -6.6 5.6 2.9 3.2 3.3 3.5
Nominal GDP (billions of current US dollars)
Gross domestic product 2019 282.4 248.5 276.1 294.3 322.0 346.7 370.8
Domestic demand 2019 283.5 238.6 269.1 289.2 320.0 345.5 371.0
Exports of goods & nonfactor services 2019 79.6 77.3 81.6 84.2 89.1 96.4 102.7
Imports of goods & nonfactor services 2019 80.6 67.4 74.6 79.2 87.1 95.2 102.8
Nominal per-capita GDP 2018 14,902 12,999 14,372 15,286 16,729 18,022 19,272
Prices (percent change)
GDP deflator 2019 2.8 5.3 -1.7 2.7 2.8 3.3 3.5
Consumer price index 2019 2.6 3.0 3.2 3.0 2.8 2.9 2.9
Wholesale price index 2019 1.9 7.1 7.5 3.0 2.9 3.0 2.9

Historical
data edge 2019 2020 2021 2022 2023 2024 2025
Terms of trade 2019 -0.8 2.8 -1.4 -3.3 -2.2 -0.4 -0.4
Other indicators
Industrial production (percent change) 2019 -0.6 -0.8 2.7 3.6 3.4 3.0 2.5
Retail sales (percent change) 2019 -4.4 -22.5 3.2 -0.1 0.5 0.1 0.6
Unemployment rate (percent) 2019 7.2 11.2 8.2 8.3 7.8 7.8 7.7
Population (millions) 2018 19.0 19.1 19.2 19.3 19.2 19.2 19.2
Percent change 2018 1.2 0.9 0.5 0.2 0.0 -0.1 0.0
Exchange rate (year end, per USD) 2020 744.62 711.24 748.29 725.18 712.05 708.80 713.35
Percent change 2020 7.0 -4.5 5.2 -3.1 -1.8 -0.5 0.6
Broad money supply (percent change) 2019 10.7 1.0 2.2 4.9 4.7 5.2 4.5
Fiscal balance (percent of GDP) 2019 0.8 0.7 0.2 0.4 0.5 0.5 0.5
Policy interest rate (percent per annum) 2020 1.75 0.50 0.50 1.84 3.06 3.50 3.91
Short-term interest rate (percent per annum) 2019 8.80 7.81 7.03 6.88 7.94 9.17 9.69
Long-term interest rate (percent per annum) 2019 3.48 2.81 3.35 3.76 4.07 4.51 4.97

Global - Forecast assumptions: Economic - Chile

Global COVID-19 virus infections and deaths remain high in early 2021, while the rollout of
vaccines is uneven across geographies. The forecast assumes that new infections will decline in
the months ahead and vaccines will be widely available to large segments of populations by mid-
2021.
Major central banks will keep extraordinary policy support in place until economic recoveries are
well-established. This support include asset purchases, credit facilities, liquidity programs, and
regulatory forbearance. The US Federal Reserve will begin to raise its policy rate in late 2026,
followed by the European Central Bank and Bank of England in 2028 and the Bank of Japan in
2029. Policy rates will then gradually rise to their neutral rates in the 2030s.
The US forecast incorporates a new USD900-billion federal stimulus package that extends
emergency unemployment programs, increases unemployment insurance benefits, provides
transfers payments to individuals and states, and replenishes the Payroll Protection Program.
The forecast does not yet include additional stimulus measures proposed by President Joe
Biden.
As expected, the United Kingdom and the European Union reached a trade agreement that
allows zero-tariff, zero-quota trade in goods. Future trading relationships for much of the services
economy and financial sector remain undefined. UK service providers are expected to face non-
tariff barriers, including regulations and licensing requirements.
The price of Dated Brent crude oil is assumed to rise from an average of USD42/barrel in 2020
to USD48/barrel in 2021 and USD56/barrel in 2022 as demand strengthens. The real oil price in
constant 2019 dollars will settle near USD67/barrel in the 2030s and then gradually decline in the
2040s.
The dollar’s trade-weighted exchange rate will fall 8% from the fourth quarter of 2020 through the

end of 2022 in response to low US interest rates, increased investor risk tolerance, and
persistently large US current-account deficits.
The forecast incorporates trade agreements, tariffs, and quotas currently in effect, including the
US-Mexico-Canada Agreement.
Global forecast assumptions

2020Q1 2020Q2 2020Q3 2020Q4 2021Q1 2021Q2 2021Q3 2021Q4 2022Q1
Brent crude-oil price (USD/barrel) 50.42 29.38 42.97 44.32 46.00 45.00 49.67 52.67 54.50
US federal funds rate (percent) 0.65 0.08 0.09 0.10 0.09 0.09 0.09 0.09 0.09
ECB refinancing rate (percent) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
US dollar per euro (quarter average) 1.10 1.10 1.17 1.19 1.25 1.25 1.24 1.25 1.26
Yen per US dollar (quarter average) 108.92 107.58 106.16 104.48 102.96 103.23 103.44 103.01 102.49

Country - Forecast assumptions: Economic - Chile

Copper prices will average USD3.35 per pound in 2021, anticipating stronger prices as mainland
Chinese demand picks up pace.
The Chilean peso is forecast to appreciate on average in 2021 owing to higher copper prices
and a decline in uncertainty.
Copper demand shocks and the spread of the COVID-19 virus made 2020 even more
challenging, following economic weakening caused by social and political unrest towards end-
2019. Into 2021, undermined business climate and consumer and business confidence are
projected to improve.
The fiscal response will continue to be significant. The focus of spending to address concerns
that sparked social unrest in 2019 (mainly economic inequality) has shifted to COVID-19-related
issues, including health care and income relief.
Risks and alternative scenarios: Economic - Chile

Overall risk to the forecast
The spread of COVID-19, combined with weak copper prices, exacerbates economic weaknesses caused by protests
and political unrest. Domestic demand starts to recover as social isolation policies are lifted. The planned rollout
of the Pfizer-BioNtech vaccine—with the goal of protecting the first group of 15 million Chileans—is expected to be
growth supportive into the first half of 2021.
Downside risks
Volatility in global commodity prices, sudden flights to quality, and sharp currency depreciations
in emerging markets place greater than forecast upward pressures on domestic inflation in a
context of significant domestic idle production capacity and labor force.
Chile’s increased spending and lower copper export revenue cause a larger-than-anticipated
deterioration in the fiscal deficit. This spurs a sovereign risk downgrade.
Copper prices fail to recover strongly into the first half of 2021. Chile’s mining sector remains
weak, hurting exports and fiscal revenues.

High unemployment and significant decline in economic growth trigger social protests.
Uncertainty increases over a second-wave of the COVID-19 virus.
Upside risks
Globally, governments respond quickly and efficiently to combat the spread of the COVID-19
virus, allowing the global economy to quickly recover.
Protests remain contained, while discussions over constitutional reforms advance during 2021—
the last year of President Sebastián Piñera’s administration.
The central bank continues to honor its commitment to the inflation-targeting program and the
floating exchange rate regime—it is successful in bringing inflation to target. Fiscal policy is able
to contain the fiscal deficit and debt levels.
Special topic: Chile’s protests significantly weakened the growth outlook; downside
risks mount amid low global growth prospects - Special topics: Economic - Chile
Major protests in October and November caused infrastructure damage, disrupted commutes, closed local
businesses, and revamped the government’s spending agenda. Protests began over a minor transit rate hike but
spilled into a broader call for economic equality of all kinds, including income equality, better-quality pensions,
and greater access to healthcare and higher education. The immediate impact was a 2.1% annual decline in the
fourth quarter. Confidence indexes of all kinds took a sharp downward turn—consumer, business, mining,
industry, and construction were pessimistic in December. Within six weeks, the Chilean peso depreciated 16% to
reach a historical low. A month later, inflation reached a more-than-yearly high of 3% year on year (y/y), which was
then surpassed by 3.5% inflation in January and 3.9% in February. Inflation decelerated in March, April, May, June,
and July and should remain contained for the remainder of the year. While the economy recovered mildly during
the first quarter, we expect growth to decline as the impact of the spread of the virus that causes coronavirus
disease 2019 (COVID-19) hampers exports and contains private consumption and investment.
The central bank and government have both responded. The efficacy of their response is uncertain. Most
recently the central bank maintained rates at 0.5% and extended the exchange rate support system. The bank’s
goal is to ensure domestic demand can recover and that the financial system can function smoothly, they will
achieve this by lowering interest rates and promoting the flow of credit. For example, the bank has created
funding facilities for banks that increase the number of loans they provide. The government has responded with
USD26-billion aid package, which amounts to 9.8% of GDP. The package is wide-ranging and includes extended
unemployment benefits, a suspension of the monthly corporate income tax, postponement of value added and
income tax payments, and increases state banks’ credit capacity by providing financing to individuals and small
businesses.
The increased government spending will drive up fiscal and public debts, but an overhaul of Chile’s economic
model and institutions is not in our baseline. The 2020 budget has now ballooned when compared with austere
2019 budget. While the increased spending will raise the fiscal deficit and public-debt levels beyond what was
previously forecast, part of the increased spending will be offset by withdrawals from the stabilization fund and an
increase in taxes on the very wealthy. Chile is in a relatively good position to increase spending thanks to its
investment grade rating, which means it can access international debt at low interest rates, as well as its
manageable debt profile and solid level of international reserve cover. We do not believe that the current external
shocks threaten Chile’s strong institutional credibility, reduce the independence of its central bank, or diminish its
reputation for proper macroeconomic and fiscal management in the long term.
Medium- and long-term outlook - Medium- and long-term outlook: Economic - Chile
IHS Markit forecasts Chilean medium- and long-term GDP growth around 3.4% and 3.5%, respectively. IHS
Markit expects Chile’s labor force to advance at an average 0.5% in the long term. Although growth in the working
population is expected to decline, the rate of participation in the labor force should increase during the forecast
horizon, especially since the participation of women—which remains almost constant at about 49%—is still low
with respect to the observed experience in industrialized countries. To achieve this, reforms should be introduced
to bring more flexibility to the labor market. Still, the lack of flexibility to lay off workers during recessions makes
businesses more cautious about hiring new workers even under strong growth conditions.
Chile’s macroeconomic fundamentals will remain strong in the long term, projecting healthy growth of the
accumulation of physical capital that will lead the economic expansion. In the medium term, capacity
restrictions will preclude a higher economic expansion unless investment continues to grow vigorously and
provides new and better infrastructure to the country. Looking further out and from a demand perspective, real
fixed investment growth will lead the expansion, supported by large infrastructure, energy, and mining projects to
be developed in the long term. To increase productivity, it is necessary to make further enhancements in human
capital accumulation and create the conditions to improve efficiency in domestic financial and labor markets.
President Sebastián Piñera’s popularity has plummeted after protests. President Pinera’s immediate response
to the protests was not well received, despite making economic, fiscal, and social concessions, his approval rating
is at a low 10%. The process to rewrite the constitution will be delayed while social isolation policies are in place,
meaning an elevated level of political uncertainty will linger into 2021. Despite his unpopularity, we do not believe
he will be forced to resign.
Major structural issues will continue to prevent Chile’s long-term growth from achieving an annual average
closer to 4.0%. A main structural issue that will prevent Chile’s long-term GDP growth from reaching an average of
4.0% is the limited diversification of Chilean exports. Export earnings rely heavily on natural resources, essentially
mining (copper), forestry, industrialized products, fish, and fruits. To achieve higher sustainable growth rates, Chile
should expand its exportable base, which should occur in time as gains from trade liberalization materialize.
Second, improvements in income distribution are needed to support continued domestic demand growth.
President Michelle Bachelet’s administration worked toward achieving higher social and income equality, although
the results, if successful, will be observed in the longer term. The social unrest of late 2019 has brought this issue
into focus again—progress could be accelerated as the government responds to calls for better economic equality
of all kinds. Lastly, energy-supply sources remain a conditioning factor for economic growth, although Chile has
recently started to attract renewable energy projects such as solar and wind.
Data - Medium- and long-term outlook: Economic - Chile

Chile: National income accounts
Average level or
Historical compound growth
data edge 2019 2020 2021 2022 2023 2024-29 2024-49
Billions of current local currency units
Gross domestic product 2019 198,484 196,823 205,380 217,436 230,645 294,908 644,984
Domestic demand 2019 199,206 188,966 200,192 213,731 229,168 297,209 658,157
Private consumption 2019 125,049 121,103 138,480 145,435 155,185 202,100 446,008
Government consumption 2019 28,955 31,252 32,034 34,083 36,097 45,363 97,734
Fixed capital formation 2019 44,441 40,429 42,589 45,998 49,145 63,972 145,789
Change in inventories 2019 -0.7 -1.6 -0.7 0.1 -0.1 -0.1 0.0
Net exports 2019 -722 7,857 5,188 3,705 1,478 -2,301 -13,173
Exports of goods & nonfactor services 2019 55,936 61,251 60,671 62,253 63,845 80,436 173,037
Imports of goods & nonfactor services 2019 56,658 53,394 55,483 58,549 62,367 82,738 186,210
Percent change at constant prices
Gross domestic product 2019 1.0 -5.8 6.1 3.1 3.2 3.7 3.6
Domestic demand 2019 1.0 -9.1 7.2 3.0 3.7 4.0 3.6
Private consumption 2019 1.1 -6.4 9.2 2.1 3.8 4.1 3.5
Government consumption 2019 0.0 -3.5 4.5 3.3 3.1 3.8 3.6
Fixed capital formation 2019 4.3 -13.5 5.4 4.7 3.9 4.1 3.7
Change in inventories (contrib. to growth) 2019 -0.7 -1.6 -0.7 0.1 -0.1 -0.1 0.0
Net exports 2019 2.3 263.2 -40.1 17.5 -29.6 -101.6 -1.8
Exports of goods & nonfactor services 2019 -2.3 -1.6 3.9 4.9 3.0 3.3 3.4
Imports of goods & nonfactor services 2019 -2.3 -13.0 7.5 4.3 4.7 4.4 3.5
Billions of current US dollars
Gross domestic product 2019 282.4 248.5 276.1 294.3 322.0 408.7 782.7
Domestic demand 2019 283.5 238.6 269.1 289.2 320.0 411.9 798.7
Private consumption 2019 177.9 152.9 186.2 196.8 216.7 280.1 541.4
Government consumption 2019 41.2 39.5 43.1 46.1 50.4 62.9 118.6
Fixed capital formation 2019 63.2 51.0 57.3 62.2 68.6 88.7 176.7
Change in inventories 2019 1.1 -4.8 -17.4 -15.9 -15.7 -19.7 -38.1
Net exports 2019 -1.0 9.9 7.0 5.0 2.1 -3.2 -15.9
Exports of goods & nonfactor services 2019 79.6 77.3 81.6 84.2 89.1 111.5 210.0

Chile: National income accounts
Average level or
data edge 2019 2020 2021 2022 2023 2024-29 2024-49
Imports of goods & nonfactor services 2019 80.6 67.4 74.6 79.2 87.1 114.7 226.0

Chile: Inflation and financial indicators

Average level or
data edge 2019 2020 2021 2022 2023 2024-29 2024-49
Government finances (billions of LCU)
Revenues 2019 42,252 45,006 49,147 53,607 58,608 NA NA

Percent change 2019 1.1 6.5 9.2 9.1 9.3 NA NA
Expenditures 2019 40,399 41,175 42,962 45,163 48,052 NA NA
Percent change 2019 5.6 1.9 4.3 5.1 6.4 NA NA
Balance 2019 1,523 1,450 511 824 1,044 NA NA
Percent of GDP 2019 0.8 0.7 0.2 0.4 0.5 NA NA
Inflation indicators (percent change)
GDP deflator 2019 2.8 5.3 -1.7 2.7 2.8 3.3 3.2
Consumer price index 2019 2.6 3.0 3.2 3.0 2.8 2.9 3.0
Wholesale price index 2019 1.9 7.1 7.5 3.0 2.9 3.0 3.0
Export prices 2019 4.8 11.3 -4.7 -2.1 -0.4 3.2 3.2
Import prices 2019 5.6 8.3 -3.3 1.2 1.8 3.6 3.4
Monetary indicators
M1 (billions of LCU) 2019 42,471 41,811 43,826 46,642 47,461 52,529 113,764
Percent change 2019 19.8 -1.6 4.8 6.4 1.8 3.4 6.0
Broad money (billions of LCU) 2019 255,856 258,298 263,952 276,999 289,976 338,967 853,441
Percent change 2019 10.7 1.0 2.2 4.9 4.7 4.3 8.1
Policy interest rate (percent) 2020 1.75 0.50 0.50 1.84 3.06 4.22 4.32
Short-term interest rate (percent) 2019 8.80 7.81 7.03 6.88 7.94 10.01 9.72
Long-term interest rate (percent) 2019 3.48 2.81 3.35 3.76 4.07 5.32 5.81
Exchange rates (per US dollar)
Annual average 2020 702.78 792.08 743.80 738.92 716.23 720.54 799.17
Percent change 2020 9.6 12.7 -6.1 -0.7 -3.1 0.5 0.9
Year-end 2020 744.62 711.24 748.29 725.18 712.05 722.99 803.02
Percent change 2020 7.0 -4.5 5.2 -3.1 -1.8 0.6 0.9
Purchasing power parity 2019 418.29 435.68 420.30 423.54 427.28 445.73 489.27
Percent change 2019 1.0 4.2 -3.5 0.8 0.9 1.1 0.9

Chile: Balance of payments

Average level or
data edge 2019 2020 2021 2022 2023 2024-29 2024-49
Current account (billions of current US dollars)
Current-account balance 2019 -10.9 0.3 -3.9 -3.4 -6.8 -14.2 -14.4
Balance on goods 2019 4.1 15.0 14.2 12.8 10.1 5.2 -9.8
Goods, credit (exports) 2019 69.9 69.5 71.8 73.9 78.1 97.0 176.0
Goods, debit (imports) 2019 65.8 54.4 57.5 61.1 68.0 91.9 185.8
Balance on services 2019 -5.1 -5.2 -7.3 -7.9 -8.1 -8.4 -6.0
Services, credit (exports) 2019 9.4 7.3 9.7 10.3 10.9 14.4 33.9
Services, debit (imports) 2019 14.5 12.5 17.0 18.2 19.0 22.8 40.0
Balance on primary income 2019 -11.3 -10.3 -11.3 -8.7 -10.0 -16.1 -12.1
Primary income, credit 2019 9.8 10.4 12.8 13.8 15.2 19.6 25.7
Primary income, debit 2019 21.1 20.7 24.1 22.5 25.1 35.6 37.8
Current-account balance (% of GDP) 2019 -3.9 0.1 -1.4 -1.2 -2.1 -3.5 -2.2
Capital account (billions of current US dollars)
Balance on capital account excl. reserves 2019 1.1 0.0 0.0 0.0 0.0 0.0 0.0
Net direct investment 2019 3.5 7.5 16.0 14.0 13.2 13.3 3.1
Net incurrence of liabilities (inflow) 2019 11.9 9.2 1.8 1.9 -0.1 -0.1 -1.6
Net acquisition of financial assets (outflow) 2019 8.4 1.7 -14.2 -12.1 -13.3 -13.3 -4.7
Net portfolio investment 2019 8.4 10.8 10.8 7.5 8.0 10.7 12.6
Net incurrence of liabilities (inflow) 2019 11.7 11.4 16.9 14.4 16.2 19.5 20.5
Net acquisition of financial assets (outflow) 2019 3.3 0.6 6.1 6.9 8.2 8.8 7.9
Net other investment 2019 -1.9 -9.7 -14.2 -6.4 -6.0 -6.0 6.8
Net incurrence of liabilities (inflow) 2019 0.6 -1.1 -14.5 -5.4 -4.0 -2.5 11.9
Net acquisition of financial assets (outflow) 2019 2.5 8.6 -0.3 1.0 2.0 3.5 5.1
Reserves, related items (change in reserves) 2019 -0.2 2.9 4.7 6.8 5.3 4.6 2.6
Related items
Exchange rate (year-end, per US dollar) 2020 744.62 711.24 748.29 725.18 712.05 722.99 803.02
Forex reserves (billions of current US dollars) 2019 40.64 44.27 48.98 55.76 61.09 77.99 102.45

Currency convertibility: Economic - Chile

Chile’s central bank maintains a flexible monetary policy based on inflation targeting. Chile’s exchange rate regime
is free-floating. However, the central bank is able to intervene in selling or purchasing hard currency according to
its goals under exceptional circumstances. Since 2008, the central bank has heavily intervened three times in
foreign exchange markets to counter sharp peso appreciation. In April 2008, it purchased USD8 billion through a
series of USD50-million daily transactions. In January 2011, it purchased USD12 billion. Most recently, the central
bank announced a third currency intervention program where it will spend USD20 billion to stabilize the peso,
following protests during October and November 2019 that depreciated the currency to a historic low. This policy
was then extended to counteract negative economic outcomes from the spread of COVID-19. The deterioration in
the business environment, and business and consumer sentiment are expected to continue reversing into 2021,
once calm and confidence are restored to the economy. We anticipate that the administration led by President
Sebastián Piñera will continue to strongly support the private sector and foreign direct investment.
The Chilean peso is freely convertible beyond national borders. There are few barriers in Chile on accessing foreign

currency and repatriating profits and capital, and there is no significant currency black market. Anyone entering
Chile is restricted to importing a maximum of USD10,000 in cash or its equivalent in another currency. We
anticipate that these rules will remain in place in the medium term.
Anyone investing USD5 million or more in Chile has been able to do so under the foreign investment statute,
Decree Law (DL) 600, which has guaranteed access to foreign exchange at market rates and includes tax-stability
clauses. The government of Michelle Bachelet had pledged to scrap DL 600 at the end of 2015 in the framework of
the tax reform, arguing it was redundant because its provisions were enshrined elsewhere in Chilean legislation.
The new foreign investment legislation—passed in mid-June 2015—replaced DL 600 since 1 January 2016,
respecting contracts signed prior to the modification.
Data - External trade - Economic background: Economic - Chile

Chile: Major trading partners, 2019
Exports Imports
Country Billion USD Share (%) Country Billion USD Share (%)
China (mainland) 22.69 32.5 China (mainland) 16.53 23.7
United States 9.56 13.7 United States 13.74 19.7
Japan 6.41 9.2 Brazil 5.65 8.1
South Korea 4.61 6.6 Argentina 3.54 5.1
Brazil 3.16 4.5 Germany 2.78 4.0
Peru 1.80 2.6 Japan 2.44 3.5
Netherlands 1.58 2.3 Mexico 2.04 2.9
Taiwan 1.55 2.2 Spain 1.67 2.4
Mexico 1.34 1.9 France 1.65 2.4
Spain 1.28 1.8 Ecuador 1.58 2.3
Source: IMF, Direction of Trade © 2020 IHS Markit

Exports Imports
China (mainland) 17.32 24.4 United States 10.01 16.9
Japan 7.72 10.9 China (mainland) 9.97 16.8
United States 6.92 9.7 Argentina 4.69 7.9
Brazil 4.22 5.9 Brazil 4.66 7.9
South Korea 4.21 5.9 South Korea 3.48 5.9
Netherlands 2.62 3.7 Japan 3.39 5.7
Italy 2.45 3.4 Germany 2.35 4.0
Taiwan 2.07 2.9 Mexico 2.12 3.6
Mexico 1.92 2.7 Colombia 1.56 2.6
Belgium 1.80 2.5 Peru 1.37 2.3

Exports Imports
Japan 2.55 13.2 Argentina 2.87 15.5
United Kingdom 1.07 5.6 Brazil 1.33 7.2
Brazil 0.95 4.9 China (mainland) 0.95 5.1
China (mainland) 0.91 4.7 Japan 0.71 3.8
Mexico 0.82 4.2 Germany 0.62 3.3
Italy 0.82 4.2 Mexico 0.62 3.3
South Korea 0.80 4.1 South Korea 0.54 2.9
Argentina 0.64 3.3 Canada 0.51 2.8
France 0.63 3.3 France 0.45 2.4

Exports Imports
Japan 1.39 16.0 Japan 0.57 7.9
Germany 0.98 11.3 Brazil 0.56 7.8
United Kingdom 0.56 6.4 Germany 0.52 7.2
Brazil 0.49 5.6 Argentina 0.50 7.0
Italy 0.41 4.7 France 0.30 4.1
France 0.40 4.6 Nigeria 0.26 3.6
Netherlands 0.31 3.6 Canada 0.22 3.1
Taiwan 0.28 3.2 Gabon 0.20 2.8
Spain 0.27 3.1 Italy 0.19 2.7
Chile: Top-12 Commodities

Exports Imports
Share of 2020 2019 Share of 2020 2019
2019 (%) (Mil. USD) (Mil. USD) 2019 (%) (Mil. USD) (Mil. USD)
1. Mining of metals & stone 29.2 20,958 17,957 Motor vehicles 8.5 6,126 4,514
2. Nonferrous metals 24.0 17,399 14,743 Food Products 6.9 4,763 3,696
3. Agriculture 14.6 10,508 8,975 Refined petroleum products 6.6 4,707 3,523
4. Food Products 12.5 9,339 7,693 Oil & gas mining 5.4 3,698 2,876
5. Paper & pulp 6.0 4,247 3,715 Aircraft & spacecraft 3.9 2,700 2,078
6. Basic chemicals 3.9 2,927 2,418 Transmitters, routers, telephony 4.2 2,659 2,234
7. Beverages 2.8 2,117 1,729 Wearing apparel 4.2 2,620 2,259
8. Wood products (ex. furniture) 1.3 967 810 Iron & steel 3.9 2,579 2,068
9. Iron & steel 0.8 668 507 Computers & related equipment 2.6 1,790 1,406
10. Fire & safety, brushes, other nec 0.7 578 415 Fire & safety, brushes, other nec 2.6 1,738 1,386
11. Fertilizers 0.6 449 365 Basic chemicals 2.6 1,707 1,377
12. Plastics products 0.4 307 237 Lifting & handling 2.4 1,702 1,266

Chile: Top-12 Commodities
Exports Imports
Share of 2020 2019 Share of 2020 2019
2019 (%) (Mil. USD) (Mil. USD) 2019 (%) (Mil. USD) (Mil. USD)
Top-12 total 96.9 53.9
All commodities 100.0 72,873 61,485 100.0 67,134 53,245
Last updated: 17 July 2020

Source: Comparative Industry Service, IHS Markit © 2020 IHS Markit
Key sectors data - Key sectors - Economic development - Economic background:

Economic - Chile
Chile: Top-10 Sectors Ranked by Value Added
2020 level Percent change % GDP
(Billion USD) (2021, real) (Nominal)
1. Mining of metals & stone (B07,B08,B09) 28.7 3.7 12.3
2. Real estate activities(L) 21.8 3.6 9.3
3. Public admin & defense, other services (O,S,T,U) 16.3 4.3 7.0
4. Construction(F) 15.2 2.0 6.5
5. Education(P) 12.3 11.6 5.3
6. Retail trade, except of motor vehicles and motorcycles(G47) 11.5 6.7 4.9
7. Human health and social work activities(Q) 11.3 13.2 4.8
8. Wholesale trade, except of motor vehicles and 11.2 6.3 4.8
motorcycles(G46)
9. Agriculture, forestry and fishing(A) 9.3 3.8 4.0
10. Manufacture of food products(C10) 8.7 4.3 3.7
Top-10 Total 146.4 62.6
Updated: 22 January 2021

Source: Comparative Industry Service, IHS Markit © 2021 IHS Markit

Legal - Chile
9 Dec 2020 - Country Risk | Profile
Overview: Legal - Chile

Legislation covering foreign investment is transparent and clearly defined in Chile. Foreign investors enjoy the
same rights as nationals and are able to operate in almost all areas. Courts are independent and legal institutions
firmly consolidated. However, court proceedings can be subject to long delays and high costs remain a barrier to
pursuing legal action. An elected constituent convention will draft a new constitution in 2021, likely creating
uncertainty about potential changes to Chile's pro-business legal framework and strong legal protection for
property rights.
Analysis - Contract alteration threats: Legal - Chile

Companies investing in Chile are unlikely to have contracts revised by the state, but
environmental and legal challenges likely to delay mining and energy projects
Chile has a strong track record of respecting contracts; however, mining and energy sector investors are likely to
face vociferous opposition from a well-organised environmental lobby capable of forcing the delay or cancellation
of high-profile projects.
The influence of environmental groups has increased over the past years. In 2014, then-president Michelle
Bachelet's government revoked the environmental licence for the 2,750 megawatt HidroAysén hydroelectric
project in Patagonia – a USD3.2-billion joint venture between Chile's Colbún and Spain's Endesa – which was later
cancelled. The USD3.05-billion Alto Maipo hydroelectric project has also faced strong opposition from
environmental groups and local residents during its construction. However, energy firm AES Gener confirmed in
February that the project is expected to begin operations in January 2021.
Canada's Barrick Gold Corporation halted work at its Pascua Lama project on the Chilean-Argentine border in
October 2013 because of environmental complaints by local indigenous groups. In January 2018, the
Superintendency of the Environment ordered the definitive shutdown of the project. In 2020, the project closed
definitely.
The existing environmental framework consists of an environment ministry and a superintendency for compliance
and enforcement, with tough environmental regulations and high fines for companies that breach them. There are
three environmental courts: in the cities of Antofagasta (north), Santiago (central), and Valdivia (south). The
institutional framework allows everyone, including private persons, to challenge a given project at courts,
increasing the risk of delays because of legal challenges. The government of Sebastián Piñera is proposing changes
to the Environmental Impact Assessment System (Sistema de Evaluacion de Impacto Ambiental), including
eliminating the Council of Ministers as a decision-making body to reduce political interference in the process and
changes to the citizens’ consultation process. A glacier protection law submitted in 2019 to Congress by
opposition parliamentarians is still in Congress in 2020.
The Chilean state tends to leave dispute resolution to the courts and renegotiate terms of business in partnership
with foreign parties. Chile is a member of International Centre for Settlement of Investment Disputes (ICSID) and
has 48 bilateral investment agreements as part of wider free-trade agreements. In March 2018, Chile signed the
Comprehensive and Progressive Agreement Trans-Pacific Partnership (CPTPP) trade deal with 10 other countries,
including Canada, Japan, and Mexico. Ratification is still pending in Congress.
Analysis - Contract enforcement: Legal - Chile

Contract enforcement disputes are likely to face delays, although local courts are
efficient compared with the rest of Latin America
Foreign investors enjoy the same legal protection as national investors in local courts. Courts are independent,
corruption is generally low, and legal institutions are firmly consolidated. However, court proceedings can be
subject to delays and high costs remain a barrier to pursuing legal action. Despite this, Chile’s courts experience
fewer delays from the time the case is presented until payment, according to the World Bank’s 2020 Doing
Business report, which ranked Chile 54th out of 190 economies for contract enforcement, with an average of 519
days compared with the 774.2 days in the Latin American region, an improvement following reforms in 2018 that
allowed initial complaints to be filed electronically.
Expropriation risks: Legal - Chile

The state is highly unlikely to seize company assets despite opposition demands for
lithium nationalisation
Chile is one of the countries with most free-trade agreements in place and many of those agreements contain
clauses to specifically protect company assets from expropriation. Confiscation, expropriation, or nationalisation
have generally not been on the agenda and only recent legislative proposals have raised the possibility of
exceptional cases.
The government of Sebastián Piñera, who is close to the business sector, has amended a bill to reform the water
code, introduced by the previous government, aimed at prioritising water for consumption and sanitation. Water
rights in Chile are permanent and private. The bill would allow for greater regulation of the use of water resources
and establish 30-year renewable concessions of as-yet-unallocated water resources. Current owners of water
rights would maintain them indefinitely.
The government is unlikely to privatise the country's few remaining state-owned assets, notably state mining firm
Codelco, the world's largest copper producer. Opinion polls regularly suggest that Chileans want Codelco to
remain in state hands and no government is likely to propose its sale. Lithium development also remains under
state control, as it is considered a ‘strategic’ mineral. However, some sectors of the opposition proposed a bill
declaring lithium and lithium producer SQM as “assets of national interest”, but a proposal to allow expropriation
was found to be unconstitutional. Ownership of natural resources is likely to be part of the discussion during the
process of drafting a new constitution, in a process that will start with a referendum on the issue on 25 October.
Aside from Codelco and state-energy company ENAP, the state has sold other minor state assets. In 2011, it
reduced its stake in water company Aguas Andinas from 35% to 5% and cut its stakes in energy company Essbio
and water company Esval, both to 5%.
Data: Legal - Chile

Key indicators - regulation and contracts
2017 OECD avg.
Doing business indicators
Trade facilitation, lead time (days)*

Import 12.0 10.1
Export 15.0 10.8
Enforce a contract, time required (days) 480.0 571.1
Start a business
Time required (days) 5.5 8.4

Key indicators - regulation and contracts
2017 OECD avg.
Number of procedures 7.0 5.0
Registration of property
Time required (days) 28.5 22.3
Number of procedures 6.0 4.8
Time to resolve insolvency (years) 2.0 1.8
Taxation indicators
Time to prepare and pay taxes (hours) 291.0 164.6

Tax payments, number 7.0 10.7
*Latest available: 2014

Source: World Bank © 2018 IHS Markit
Legal system - Legal background: Legal - Chile

The Chilean legal system is derived from the French and Spanish legal tradition (Civil Legal System). The law is
compiled in codes, and the judges’ main task is to apply the law to particular cases as it was intended by
legislation. Consequently, court judgements deciding a certain case are not binding on other cases. The judiciary is
independent and corruption is generally low compared with other Latin American countries.
Dispute resolution - Business regulation - Legal background: Legal - Chile

The Chilean legislation recognises the possibility of resolving commercial disputes through private arbitration,
and their rulings are binding. There are three kinds of arbitrators: the arbiter at law (the procedure and the final
judgment are governed by law, as in a regular court); the arbitrator ex aequo et bono (the procedure is regulated
by the agreement of the parties and the final judgment is ruled on the arbitrator according to his or her sense of
the fairness of the procedure); and the mix arbitrator (the procedure is regulated by agreement of the parties, but
the final judgment must be based in law).
Chile is a member of the International Centre for the Settlement of Investment Disputes (ICSID) and a contracting
state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).
Company law and corporate governance - Business regulation - Legal background:

Legal - Chile
Foreign investors can invest via: general partnership, unlimited liability partnerships, some special forms of mining
companies, limited liability partnerships, a mixed type of company with the characteristics of a partnership and of
a corporation, branches of foreign corporations, corporations (public or closed), and stock companies.
Joint ventures are not recognised as a separate legal entity, but different legal entities may operate under a joint-
venture structure provided a prior special tax and accounting ruling is obtained from the Internal Revenue Service.
Investments of at least USD5 million in mining, industrial, forestry, energy, infrastructure, telecommunications, or
research and development are exempt from VAT on imports of capital goods for up to the first USD5 million,
under Law No. 20.848 (2016).
The “OPA law” (Public Tender Offers) strengthens minority shareholder rights by enhancing disclosure and
establishing directors’ committees that serve a role similar to audit committees. Two 2009 corporate governance
laws, designed to bring Chilean legislation in to line with OECD standards, established new protection for minority
shareholders through enhanced transparency standards and addressed use of privileged information and

conflicts of interest. Law No. 21.000 (2017) replaced the Superintendence of Securities and Insurance (SVS) with a
Financial Market Commission (CMF), changing the regulatory structure of Chile’s capital market from a one-person
supervision model (superintendent) to a collegiate body (four members and one president).
Bankruptcy - Business regulation - Legal background: Legal - Chile

A 2014 bankruptcy law made the bankruptcy process easier by clarifying and simplifying the provisions on
liquidation and company reorganisation. It makes it easier for a debtor to remain in business during the
insolvency process. The law also established a public office responsible for the insolvency proceedings and
created specialised insolvency courts (previously, cases were heard in ordinary civil tribunals). For the first time in
Chile, the law also sets down rules for cross-border insolvency proceedings.
Competition - Business regulation - Legal background: Legal - Chile

Infringement of competition law is common, as the small, tight-knit nature of the country’s business community
lends itself to collusion. The main antitrust law is the Law on Protection of Competition, DL 211 (1973). A 2016 law
toughened punishments for businesses found guilty of collusion, with those involved in cartels risking being jailed
for up to 10 years. The body charged with investigating suspected cases of collusion is the National Economic
Prosecutor’s Office (Fiscalía Nacional Económica: FNE), and its head is the Fiscal Nacional Económico, or national
economic prosecutor. The tribunal that rules on antitrust cases is the Tribunal for Defence of Free Competition
(Tribunal de Defensa de la Libre Competencia: TDLC). In 2020 the government submitted several bills to Congress,
including raising penalties for corruption in basic goods sectors, giving the FNE the prerogative to lift banking
secret, and introducing leniency agreements for whistleblowers.
Employment - Business regulation - Legal background: Legal - Chile

A labour law that came into force in 2017 strengthened unions by banning the replacement of striking workers
and setting the last collective agreement as the “baseline” for future negotiations. Companies are also obliged to
provide unions with more strategic information ahead of labour negotiations. Chilean legislation recognises three
kinds of labour contracts: individual contracts, collective contracts entered into between an employer and a
union, and collective bargaining between an employer and a group of workers not organised under a labour union
(negotiating groups). In 2020 President Sebastián Piñera introduced regulation relating remote working, due to the
coronavirus disease 2019 (COVID-19) virus outbreak. Other proposals from his government include the regulation
of negotiating groups and a review of the definition of minimum services that cannot be disrupted during a strike.
A government bill in Congress aimed at changing the 45-hour working week to 180 hours per month to be decided
by an agreement between employer and employee is unlikely to advance in the legislature.
Environmental - Business regulation - Legal background: Legal - Chile

A Ministry of Environment was established in 2010, as well as a Superintendency for the Environment
(Superintendencia del Medio Ambiente: SMA), an Environmental Assessment System (Servicio de Evaluación
Ambiental: SEIA), and three specialised environmental courts – one in the north, one in the centre, and one in the
south of the country – to deal with environmental disputes. Companies proposing projects that are potentially
damaging to the environment must seek regulatory approval from the SEA. The SMA’s role is to sanction
infringements of environmental law. Environmental activism has grown considerably in Chile in recent years, and
has successfully campaigned against several major energy and mining projects.
Intellectual property - Business regulation - Legal background: Legal - Chile

Chile has a negative reputation for failing to adequately protect trademarks, patents, and copyrights. Since 2007, it

has been on the US “priority watch list"” on intellectual property (IP) rights protection.
Chile has agreed to comply with the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) accord.
Under the agreement, the government created a body charged with seizing illegal copies of products protected by
patents registered with the World Intellectual Property Organization (WIPO), of which Chile is a member. There is
also a special police unit dedicated to helping the judiciary in the investigation and prosecution of IP crimes. Free-
trade agreements (FTAs), particularly with the US, provide additional safeguards against IP theft, as they require
Chile to comply with the Patent Cooperation Treaty (1984) and the Trademark Law Treaty (1994). Patent rights
last for 20 years, trademark rights, for 10 (and can be renewed), while copyright protection is the life of the author
plus 70 years.
Land - Business regulation - Legal background: Legal - Chile

Legislation to protect indigenous lands was approved in 1993, but its implementation has been patchy. Under the
law, land pertaining to indigenous communities cannot be sold off, but can be traded for land of equivalent value
provided that all parties consent. Lands belonging to indigenous communities cannot be leased, and in the case of
individual property, tenancy is permitted only within a period of no longer than five years. In 2008, Chile ratified
Convention No. 169 of the International Labour Organization (ILO), which contains provisions for the protection of
the land rights of indigenous peoples. Native forests are protected by law.
Investment protection - Business regulation - Legal background: Legal - Chile

A 2016 foreign investment law (No. 20.848) repealed Decree Law (DL) 600 and created the foreign direct investment
promotion agency InvestChile, which replaced the Foreign Investment Committee. DL 600 obliged a foreign
company investing in the country to sign a contract with the state (not required under current legislation). In
return, the state gave the investor guaranteed access to foreign-exchange markets, both for incoming capital and
outgoing profits. The biggest change was that foreign investors will no longer be entitled to apply for a 10-year
fixed corporate tax rate. However, the DL provisions will continue to apply to investments made before 1 January
2016 and there is a grace period between 2016 and 2020, during which companies can still opt for an invariable tax
rate over a 10-year period, but at a rate of 44.45% – slightly higher than the previous 42%.
Chile encourages foreign investment, but there are restrictions on investment in certain sectors deemed to be
strategic, such as lithium and hydrocarbons exploration.
Procurement - Business regulation - Legal background: Legal - Chile

The 2003 Law on Procurement established the Dirección de Compras y Contratación Pública, a state body that
oversees procurement through its internet portal ChileCompra (www.chilecompra.cl). The portal is publicly
accessible and authorities are required to publish information on it relating to their purchases. The law covers
ministries, regional, provincial, and local governments, the central bank, and the armed forces (apart from for the
procurement of weapons and military vehicles), while state companies are exempt. ChileProveedores is the
national register of approved suppliers.
Major international agreements - Business regulation - Legal background: Legal -

Chile
Chile has free-trade agreements in place with over 60 countries including China, the European Union, and the
United States. It is a member of the Organisation for Economic Co-operation and Development (OECD), an
associate member of the South American trade bloc, MERCOSUR, and a founding member of the Pacific Alliance
alongside Colombia, Mexico, and Peru. In March 2018, Chile and 10 other countries, including Canada, Japan, and
Mexico, signed the Comprehensive and Progressive Agreement Trans-Pacific Partnership (CPTPP) trade deal. Chile

is also a founder member of PROSUR, a regional bloc aiming to replace the Union of South American Nations
(UNASUR).
Chile is a World Trade Organization (WTO) member and a signatory to the World Bank’s International Centre for
Settlement of Investment Disputes (ICSID). Chile is a contracting state of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York Convention), and as a member of the Asia-Pacific Economic
Cooperation (APEC) forum is obliged to follow its arbitration and alternative dispute resolution (ADR) guidelines.

Tax - Chile
Overview: Tax - Chile

Chile's tax system underwent a major change under the government of Michelle Bachelet (2014-18) through the
creation of a dual-tax system and a gradual increase in corporate tax from 20% to 27% in 2018. President Sebastián
Piñera initially sought to return to one single 'integrated' system, which allows shareholders to use 100% of
corporate income tax in their personal income tax. However, violent protests that started in October 2019
demanding a stronger social agenda forced the government to backtrack on this. The government is offering tax
breaks to small and medium-sized enterprises to deal with COVID-19. Economic contraction post-pandemic is
likely to lead to further tax increases for the wealthiest.
Analysis - Taxation risks: Tax - Chile

Tax breaks to contain economic effects of COVID-19-virus outbreak are being
implemented, but post-pandemic tax rises likely due to looming recession
A 2014 tax reform under former president Michelle Bachelet increased Chile’s standard corporate tax rate from
20% to 25% or 27% over Bachelet’s four-year term (2014–18). The reform was simplified in 2016, leaving one tax
system that raises tax for large companies to 27%. President Sebastián Piñera tried to reinstate the “integrated”
system, by which 100% of the corporate tax that has been paid can be used as credit into the shareholder’s
personal income tax (which was reduced to 65% under Bachelet's semi-integrated system), but this failed to
advance in Congress. Following violent and massive protests that started in October 2019 in demand for a
stronger social agenda, the government adjusted the proposal and approved tax changes in early 2020, with the
agreement of the opposition. The bill reduced taxes for the most vulnerable population, offered tax breaks to
small- and medium-sized enterprises (SMEs), and increased taxes for the wealthy. For example, it proposes a
wealth tax for property worth over CLP400 million (USD0.5 million), and raises the personal income tax for the
richest 1% of the population from 35% to 40%. The COVID-19-virus outbreak has led to the government
implementing further tax breaks and offering soft loans, particularly for SMEs. However, economic contraction
post-pandemic is likely to lead to further tax increases for the wealthiest in order to finance the fiscal deficit. The
Decree Law 600, established in 1974 to promote foreign investment, was eliminated in January 2016, and foreign
investors had until January 2020 to apply to a tax invariability benefit given to contracts signed prior to 2016.
Foreign mining firms operating in Chile pay royalties of between 4% and 9%, depending on operating margins, and
projects begun after 2010 pay between 5% and 9%. After 2024, when a tax invariability agreement expires, firms
will pay between 5% and 14%. A bill submitted by the opposition to Congress in 2019 proposes introducing a
royalty for copper and lithium mining. According to the World Bank’s Doing Business 2020 report, a company in
Chile contributes 34% of profit in taxes. Value-added tax is 19%. Chile has double-taxation agreements with 32
countries, including Argentina, Brazil, Canada, Mexico, Switzerland, and the United Kingdom. The government’s
fiscal position is healthy. The Ministry of Finance oversees two sovereign wealth funds; as of September 2020, with
a combined value of approximately USD21 billion. Chile also has ample foreign reserves (estimated at USD38.2
billion as of October 2020).

Operational - Chile
Overview: Operational - Chile

Chile’s operational environment is marked by positive attitudes towards foreign direct investment, highly
developed infrastructure, low levels of corruption compared to the rest of the region, and a relatively liberal
labour market. Its operational outlook is underpinned by consolidated institutions and solid macroeconomic
stability. However, the process to re-write the constitution in 2021 is likely to lead to some changes in the
economic model, increasing the role of the state in the economy. Increased environmental scrutiny is likely to
lead to projects being challenged in courts, causing delays and raising cancellation risks, including in mining and
energy.
Labour relations risks: Operational - Chile

Strike risks likely to increase in 2021 due to job losses following COVID-19-virus
pandemic and unions’ demands during the rewrite of Constitution
Strikes risks are likely to increase in 2021, as further job losses are likely because of the negative impact of the
COVID-19-virus pandemic, particularly if the government withdraws job protection subsidies. Separately, workers
and unions are likely to use the opportunity and voice their demands during the process of rewriting Chile’s
constitution, as decided in the October 2020 referendum, increasing the likelihood of industrial action. A 2017
labour reform that strengthens the unions' negotiating power forbids the replacement of striking workers and
establishes the most recent collective agreement as "baseline" for upcoming negotiations. President Sebastián
Piñera tried to amend the 2017 legislation, including clarifying the role of negotiating groups and defining
"minimum services" that cannot be disrupted during a strike, while expanding the use of "adaptability pacts"
(allowing the employer to negotiate specific working conditions with individual workers). However, the bill failed
to advance in Congress, where his Chile Let's Go (Chile Vamos) coalition lacks a majority.
Massive civil unrest since October 2019 forced Piñera to reverse course and focus on a social agenda instead of a
pro-business one. He announced minimum wage increases from CLP300,000 (USD402) to CLP350,000 per month.
On labour, he abandoned his proposed changes to increase flexibility in the labour market and turned his focus
towards job protection in the context of the social crisis and the COVID-19-virus outbreak. The outbreak also
contributed in expediting approval of a bill to regulate remote working, which had previously been criticised by
opposition parties and unions.
Strikes in the mining sector are common, particularly as mining workers are used to high pay and generous end-of-
conflict bonuses. Contracts in the sector are usually negotiated at a set date every three to four years, but
companies are increasingly opening wage talks early in a bid to pre-emptively discourage potential industrial
action. Strikes are usually called for 24 hours, but can extend for two to three weeks. Road blockades at the
entrances of mines can cause significant business disruption, while property damage, although generally
uncommon, sometimes occurs. Unplanned strikes in the sector are illegal. In 2017, workers at Escondida mine
went on strike for 44 days, causing losses of at least USD740 million for the company and reducing Chile's copper
output by at least 12%, according to the Ministry of Mining.
Chilean ports are also susceptible to strike action, and a dispute in one area can lead to industrial action in all
ports nationwide because of solidarity strikes. In 2014, one such strike lasted 22 days. In November 2018, a strike
at the port of Valparaíso lasted more than two weeks, causing the diversion of vessels.

Corruption risks: Operational - Chile
The government is likely to continue to implement anti-corruption measures, but
agenda to lose priority to economic and social crisis
Bribery and corruption risks remain lower in Chile compared with other countries in the region, despite several
corruption scandals involving politicians and business elites since 2014. However, Chile does not experience the
endemic corruption evident in some neighbouring countries because of high levels of accountability and
transparency, combined with low levels of bureaucracy by regional standards. Former president Michelle Bachelet
pushed through a "transparency" law during her first mandate (2006–10) in order to improve access to public
information and accountability levels. The Penta holding company – with investments in banking and insurance –
and non-metallic mining company SQM were investigated for alleged illegal campaign financing. The cases
undermined the business and political classes, and the Bachelet government launched an “Integrity and
Transparency Agenda” (APT), consisting of executive action and 18 bills. The measures included a 2016 law
regulating the financing of political parties, forbidding donations from companies and receiving of state funds.
Other measures included strengthening the electoral courts and improving disclosure requirements for members
of the government.
Congress passed a dozen major APT-related bills, particularly in the beginning of President Sebastián Piñera's
term. The government is likely to continue implementing the anti-corruption agenda, albeit at slower pace, as the
issue loses priority to the economic and social crisis.
The judiciary is independent and does not discriminate between national and foreign investors, and is generally
free from political interference. The national police force ("Carabineros"), traditionally a respected institution with
officers unlikely to be susceptible to bribery, has seen its reputation undermined by two cases revealed in 2017:
one on a USD40-million alleged embezzlement, the biggest fraud case in the history of the institution, involving
high-ranking officers, and a second one over alleged manipulation of evidence during counter-terrorism
operations. Investigations into the allegedly unlawful killing of an indigenous Mapuche community member in
November 2018 by the police and accusations of excessive use of force during the protests in late 2019 have put
further strain on the institution.
Overview - Infrastructure - Operational background: Operational - Chile

Infrastructure: Chile
Roads
Total road network length (km) 77,801

Paved (km) NA
Unpaved (km) NA
Railways
Total rail network length (km) 7,282

Standard gauge (mm) 1,000
Waterways
Navigable waterways length (km) NA
Airports
Number of commercial airports (those 28

with International Civil Aviation
Organization, ICAO, codes)
Ports
Number of ports 40

Name of all ports Antofagasta, Arica, Barquito, Caldera (Chile), Caleta
Coloso, Castro, Chanaral, Coquimbo, Coronel,
Guayacan, Huasco, Iquique, Isla de Pascua, Isla
Guarello, La Chimba Cove, Lirquen, Magellan Strait Area,
Mejillones, Patillos Cove, Penco, Port Williams, Puerto
Chacabuco, Puerto Corral, Puerto Montt, Puerto Natales,
Puerto Patache, Puerto Punta Chungo, Puerto Punta
Totoralillo, Punta Arenas, Punta Lackwater, Quellon,
Quemchi, Quintero, San Antonio, San Vicente,
Talcahuano, Taltal, Tocopilla, Valdivia, Valparaiso.
Communications
Telephones: Fixed lines (mil.) 2.997

Subscriptions per 100 inhabitants 16
Telephones: Mobile cellular (mil.) 25.178
Telephones: International country code 56
Internet country code .cl
Broadband subscribers (mil.) 3.250
Internet users per cent of population (%) 82.33%
Source: IHS Markit, International Telecommunications Union, CIA World Factbook, Jane's
© 2020 IHS Markit

Security - Chile
23 Nov 2020 - Country Risk | Profile
Overview - War risks: Security - Chile

In October 2018, the International Court of Justice (ICJ) ruled that Chile did not have the obligation to negotiate
with Bolivia sovereign access to the sea, lost during the War of the Pacific (1879–83), but Bolivia is unlikely to drop
this demand. There is another dispute with Bolivia at the ICJ, presented by Chile in 2016 over the use of the Silala
waters. However, war between both countries is very unlikely.
Interstate war - War risks: Security - Chile

Border dispute between Chile and Bolivia unlikely to lead to war; bilateral relations
will remain tense despite ICJ ruling
Relations between Chile and Bolivia deteriorated when Evo Morales was president in Bolivia (2005–19), but military
conflict is unlikely. In 2013, Bolivia took Chile to the International Court of Justice (ICJ) over its claim for sovereign
access to the sea, as they lost land in the 1879–83 War of the Pacific. In October 2018, the ICJ ruled that Chile does
not have the obligation to negotiate sovereign access to the Pacific Ocean with Bolivia, but the latter is likely to
continue to defend its case via other means, while seeking other ports in the region for trade.
Given Chile's military superiority, Bolivia centred its policy on economic and diplomatic rather than military
measures; for example, restricting natural gas exports to Chile and publicising the case in international fora. There
have been isolated incidents involving both armies at the countries' border, with Bolivian soldiers detained in
northern Chile for entering the country without permission. In 2016, diplomatic relations became more strained
with a dispute over Chile's access to the Silala waters, which Chile then took to the ICJ. Other issues that have
contributed to the deterioration are then-President Morales claiming that Chile does not meet international
commitments during ports disruption in Chile, which Bolivia uses for trade. However, risk of interstate war is very
low. The president elected in 2020 is unlikely to give up Bolivia's claim to sea access.
Diplomatic relations with Peru have improved in recent years, despite being historically poor as a consequence of
the War of the Pacific. Both countries (together with Colombia and Mexico) founded the Pacific Alliance trade bloc
in 2012, and dropped trade tariffs on bilateral trade in 2013. In January 2014, the ICJ issued a ruling on a long-
running dispute over the countries' maritime border, handing 21,000 square kilometres of Chilean sea to Peru.
Both parties vowed to abide by the ruling. Fishing vessels in the area face moderate risks of seizure from the
navies of either country. An outstanding dispute on the land border that stemmed from the ruling is likely to be
solved via diplomacy. The risk of war with Peru is very low.
Chile and Argentina enjoy improved military relations from the near war at the end of the 1970s over the Beagle
Channel, when both had military governments. Chile has supported Argentine claims to the Falkland Islands/Las
Malvinas. There is no risk of war.
Overview - Terrorism risks: Security - Chile

Chile has faced unprecedented levels of property damage since October 2019, but the commercial and
government buildings have been targeted (arson and vandalism) by protesters rather than terrorist groups.
Anarchist groups, however, are likely to have participated in many of the violent attacks against property, though
the use of improvised explosive devices has not been widespread. Mapuche indigenous extremists in the southern
Araucanía region often carry out arson attacks on rural estates, cargo trucks, warehouses, and assets of forestry
firms, in demand of land ownership and rights.

Hotspots and targets - Terrorism risks: Security - Chile
Forestry firms and cargo face risks of arson attacks by extremists in Araucanía and
Bio-bío; arson and vandalism likely in Santiago
Mapuche extremists are likely to undertake attacks against private assets mainly in the southern Araucanía region
and also in the neighbouring Biobío, Los Ríos, and Los Lagos regions. The Mapuche are Chile's largest indigenous
group and claim restitution of ancestral land. President Sebastián Piñera has pledged changes to the anti-
terrorism law, including expanding the figure of undercover agents. According to business lobby organisation
Multigremial de la Araucanía, there were 311 incidents of rural violence in the Araucanía, Bio-bío, Los Lagos, and
Los Ríos regions in 2019, compared with 321 cases for 2018, with 121 arson attacks in 2019. Targets of arson and
vandalism include cargo lorries, farm buildings, warehouses, machinery, and vehicles owned or used by
agricultural firms or forestry companies. Transport and cargo companies are increasingly targeted. The intensity
and organisation of the attacks have increased in recent years. At least seven trucks and one bus were burnt
within 24 hours in Route 5 (Pan American Highway) in May 2020, and 15 trucks were burnt in October in Araucania
region. In April 2020, a car bomb was detonated at Lleulleu bridge in Arauco province, Bio-bío region. There is a
danger of attacks to cargo in-transit on Route 5 , particularly close to Ercilla. The municipalities of Cañete,
Collipulli, Lanco, Padre de las Casas, Tirúa, and Vilcún are also hotspots. Energy projects, including hydro-electric
projects and electricity pylons, and helicopters and light aircraft are also at risk.
Violent protests in main cities, especially in Santiago centre and peripheral or low-income areas, such as La
Pintana, Puente Alto, San Bernardo, Quilicura, La Granja, and Pudahuel have involved arson against public
transport infrastructure, including metro stations, government offices, and police assets, as well as looting of retail
stores and vandalism affecting private and public assets. Specific perpetrators have not been identified but are
likely to include a combination of criminal gangs and anarchist groups. Improvised explosive device (IED) attacks
attributed to anarchist groups are a threat in Santiago. The IEDs employed by anarchists are small and tend to
cause minor property damage. Most of the groups have only a handful of members, are often leaderless and
disorganised. Two IED attacks against the Santiago metro in July 2014 and September 2014 – the second injured
14 people – suggested that the targets expanded to include public transport infrastructure and that not all
perpetrators try to avoid mass casualties. In January 2019, an IED was detonated at a bus station in Santiago city
centre, injuring five people. An eco-terrorist group claimed the attack. Typical targets include public buses, banks
and cash machines, churches, company offices, courthouses, embassies, political party offices/headquarters, and
government buildings.
Overview - Social stability and unrest risks: Security - Chile

The most violent protests in the last 30 years began in October 2019 over high living costs and social grievances,
such as low pensions and a poor healthcare system. At least 118 Santiago Metro stations were damaged, hundreds
of supermarkets looted, and an estimated USD4.5-billion worth of damage done to infrastructure, affecting all
main cities. The successful completion of a referendum on a new constitution, a key demand by demonstrators, in
October 2020 reduces the risk of massive violent unrest, with localised protests at specific hotspots, particularly in
Santiago city centre, more likely. The economic effects of the COVID-19-virus pandemic, mainly rising
unemployment and poverty, are potential triggers of further protests.
Protests and riots - Social stability and unrest risks: Security - Chile
Protests over the economic effects of COVID-19 and for pension, labour, and education
reforms are likely in the one-year outlook, but unlikely to escalate to late 2019
violence levels
The successful completion on 25 October of a referendum on a new constitution, and the victory of the option
“yes” by a landslide (78%) reduce the risk of violent and massive protests. A redraft of the constitution was a key
demand by demonstrators in late 2019. However, other social grievances that triggered violent protests in October
2019 − inequality, poor basic services, and low pensions − have not been structurally addressed. To quell
demonstrators, President Sebastián Piñera adjusted the government’s agenda to prioritise socially oriented
measures, such as an overhaul of the pension system and healthcare improvements, but these were delayed as
they lost priority to COVID-19-virus-related measures.
The post-COVID-19 economic crisis is likely to lead to economic contraction, double-digit unemployment, and a
rise in poverty, acting as further triggers for social unrest. However, differently from October and November 2019,
when massive and violent protests were almost uninterrupted, fresh protests are likely to be focused on
hotspots, mainly in Santiago city centre, along the Alameda avenue, from Plaza Italia/Plaza Baquedano towards
Estación Central, and low-income or peripheral areas, such as Puente Alto, La Pintana, Pudahuel, La Granja, and
Quilicura. Protests in the centre of main cities, such as Concepción, Valparaíso and Antofagasta are also likely. If
the police prove unable to control the protests, or if they are seen again as using excessive force, the risk of
protests becoming widespread throughout the city and country will increase. Retail stores will remain the main
targets of looting, while public transport infrastructure, police stations and vehicles, and government buildings
are likely targets of arson.
The wave of violent protests that began on 18 October 2019 was initially triggered by an increase in Metro fares.
Demonstrators damaged Metro stations and set some on fire, and burnt public buses and looted supermarkets,
warehouses, and shopping centres. Pharmacies, bank branches, petrol stations, churches, government offices, and
police stations across most cities, but especially Santiago, Valparaíso, and Concepción were also targeted. At least
118 Metro stations in Santiago were damaged, with estimated losses of at least USD300 million. The government
estimated that damage to infrastructure amounted to at least USD4.5 billion.
Specific dates also trigger mobilisations that frequently turn violent, causing property damage. These include 29
March (the Day of the Young Combatant); 1 May (Workers’ Day); 1 June (the president’s state-of-the-nation
address); and 11 September (the anniversary of the 1973 military coup).
Overview - Risks to individuals: Security - Chile

The main security concern for foreigners is petty crime, particularly pick pocketing and mugging in city centres and
poorer neighbourhoods. Crime hotspots for visitors include tourist areas in the capital, Santiago (such as
Bellavista and the city centre), Valparaíso (Cerro Alegre, Cerro Concepción, and areas near the port), Viña del Mar,
and Antofagasta. The Santiago and Araucanía regions are the most common locations for small improvised
explosive device attacks by anarchists and arson attacks by Mapuche groups, which typically focus on property in
the Araucanía and neighbouring regions.
Overview - Risks to cargo/transport: Security - Chile

Cargo risks are concentrated in ports and some border crossings, where unions and customs workers often resort
to industrial action. The northern border with Bolivia is a hotspot for cargo theft. Disruption to ground cargo from
protests and roadblocks is also common on the main routes into Santiago and the Route 5 through the southern
Araucanía and nearby regions. In Araucanía and Bio-bío and to a lesser extent Los Ríos and Los Lagos regions,
cargo trucks are target of arson attacks by Mapuche extremists, particularly those belonging to or serving forestry
and agricultural firms.
Overview - Risks to property: Security - Chile

Retail and public transport assets, as well as banks, pharmacies, government offices, vehicles, and police stations
in Santiago and main cities have been target of arson, looting, and vandalism during violent anti-government
protests that began in October 2019. There is also a risk of minor property damage by anarchist groups, generally
using small improvised explosive devices. In Araucanía and neighbouring regions, Mapuche extremists typically
mount arson attacks against vehicles, storehouses, and industrial equipment from the forestry and agricultural
sectors, particularly in towns such as Ercilla, Victoria, Collipulli and Cañete.
Overview - Crime: Security - Chile

Public security remains one of the main concerns of the population despite Chile and its capital Santiago having
one of the lowest murder rates in Latin America (3.8 victims per 100,000 inhabitants nationwide and 4.6 in Greater
Santiago in 2019). Kidnapping and extortion are almost unheard of. Armed robberies, mugging, and petty crime are
more common, and there are regular explosive attacks on cashpoint machines. Confidence in the police, who had
generally enjoyed a good reputation for efficiency and incorruptibility, suffered in 2018 because of embezzlement
investigations and allegations of proof manipulation, and since late 2019, over excessive use of force when
containing protests.
Trafficking - Crime: Security - Chile

Drug
Cocaine from the Andes is trafficked through Chile towards the European Union, the United States, Africa, and
ports in Asia. The UN International Narcotics Control Board 2019 report warned that Chile has become one of the
main transit countries for cocaine seized in Spain (one of the major entry points for the European market), after
Colombia and Brazil. The country's principal attraction for drug traffickers is its well-developed infrastructure,
facilitating the swift transit of cargoes. This is particularly true of its northern ports, an exit route for cocaine
trafficked from landlocked Bolivia. Chile's status as a US trade partner, reinforced by a free-trade agreement (FTA),
means that shipments and packages originating from the country are often subject to less rigorous customs
checks than those from some other South American countries. Chile is also an important source of precursor
chemicals for cocaine production, which are transited through the country towards the major production areas in
the Andes and sourced from its well-developed petrochemical industry. Although drug trafficking overall is not a
major security threat in Chile and the country's law enforcement has one of the best records for drug seizures in
South America, a recent increase in seizures suggests that the problem could be growing, albeit at a manageable
level compared with its regional neighbours. Furthermore, national authorities have highlighted that during the
last 10 years, there has been a significant increase in synthetic drug trade, such as ecstasy, in the country, with
1,638,491 doses seized in 2019 compared with the 2,304 doses seized in 2010. According to data from the
Carabineros police, 11.2 tonnes of illicit drugs were seized in 2019, with 80% of the total seized in the northern part
of the country; the Investigative Police (Policia de Investigaciones de Chile: PDI) seized 21 tonnes of illicit drugs in
2019.
Successive governments have sought to step up action against drug trafficking, launching plans to tackle drug
trafficking along the country's land borders with Peru and Bolivia, as well as along its northern coast. The
Northern Frontier initiative, launched in 2011, focused on the regions of Antofagasta, Arica-Parinacota, and
Tarapacá and involved the ministries of the interior and defence, as well as the police, investigative police, armed
forces, customs and directorate-general of maritime territory, and merchant marine and livestock service. The
initiative had some success in the extreme northern region of Arica-Parinacota. However, detectives say that as a
consequence, traffickers moved south, and that the Antofagasta region became the principal entry route for
drugs. According to the Observatory on Drug Trafficking, the largest volume of seizures in the country are grouped
in the northern regions, with Arica-Parinacota and Tarapacá registering the largest seizures of cocaine, and
Tarapacá and Antofagasta with the largest seizures of cocaine paste.
In April 2020, detectives from the Investigative Police seized 3 tonnes of marijuana and cocaine in a single raid at
the Santiago Airport, the biggest drug haul ever registered at that location. In November 2019, Chile's Navy along
with the Investigative Police seized more than 4.2 tonnes of marijuana, valued at almost USD25 million, in an
operation carried out in the O’Higgins and Coquimbo regions.

Arms
Although arms trafficking was common under the military dictatorship, the trade is now carried out primarily by
members of transnational organisations rather than Chilean nationals. However, there have been some signs of
an increase in Chilean small-arms trafficking, with the appearance of a growing number of illegal assault rifles
manufactured in Russia and Eastern European countries, primarily in the hands of drug-trafficking organisations
operating in Santiago and other major cities. Furthermore, in May 2018, authorities carried 14 raids and dismantled
for the first time a Chilean gang dedicated to arms trafficking from the US, shipping arms from Houston, Texas and
entering them to the country through the Arica port.
The ownership of registered arms is legal in Chile, but the state has tightened restrictions on where they can be
purchased and how many a person can own. According to the General Directorate of National Mobilisation
(Dirección General de Movilización Nacional: DGMN), by May 2020 there were 832,722 firearms registered in Chile.
According to data from the United Nations Office on Drugs and Crime (UNODC) in 2016, there were an estimated
76,900 illicit firearms in the country.
People
People trafficking exists at a generally low level and is not a serious problem in Chile. However, during recent years
with an influx of immigration, especially from other Latin American countries, there has been a rise in the number
of cases. According to PDI data, crimes associated with human trafficking have increased from 27 cases registered
in 2017 to 376 in 2019, with all the cases in 2019 corresponding to immigrants. In the US Department of State 2019
Trafficking in Persons Report, Chile is listed in the tier-1 countries as it complies with the Trafficking Victims
Protection Act (TVPA)'s minimum standards. Although the report highlights that the government has increased its
prosecution efforts, sentences have been insufficient because the majority of the sentenced traffickers have not
served actual prison terms. Anti-trafficking police units opened investigations into 23 sex trafficking and 16 new
labour trafficking cases in Chile in 2019.
Financial crime and counterfeiting - Crime: Security - Chile

The Council for the Defence of the State (Consejo de Defensa del Estado: CDE) is involved in the implementation of
anti-money laundering legislation. It is charged with pursuing state co-operation in obtaining access to
information that could assist efforts to combat financial crime. Under the legislation, financial entities are required
to report any suspicious transactions to the Superintendency of Banks and Financial Institutions
(Superintendencia de Bancos e Instituciones Financieras: SBIF). Every transaction more than USD10,000 must be
registered, including information related to all involved parties. The SBIF receives such information every 15 days
and will in turn inform the CDE of any questionable transactions within about 48 hours. However, banking secrecy
provisions continue to limit Chile's ability to investigate and disclose potential money-laundering offences. The
system in force in Chile regarding the confiscation and forfeiture of assets arising from criminal activities meets
international standards, but Chilean legislation lacks a provision for the establishment of mechanisms to share
forfeited property with other jurisdictions. Legislation passed in 2006 created the Financial Analysis Unit (Unidad
de Análisis Financiero: UAF) as a decentralised public service attached to the finance ministry. The UAF's mission is
to prevent the financial system and other sectors of economic activity from being used to commit money-
laundering offences and any suspicious transaction are reported to the Public Ministry through financial
intelligence reports. The Public Ministry is solely responsible for investigating and criminally prosecuting money
laundering and terrorism-financing crimes. In 2015, law No. 20,818 entered into force providing new anti-money
laundering regulations that improved the mechanisms for prevention, detection, control, investigation, and
prosecution and included a directive where more than 1,000 public services and bodies are obliged to inform the
UAF of all suspicious operations. The Public Ministry convicted 167 people for money laundering in the country in
2019, a 59% increase when compared with 2018.

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Country/Territory Report - Chile

2 Feb 2021 - Economics and Country Risk

Executive summary - Chile

Our take: Executive summary - Chile

Risk ratings: Executive summary - Chile

Political: Executive summary - Chile

© IHS Markit 2021

Source: CIRCA People in Power © 2021 IHS Markit

Forecast summary - Economic: Executive summary - Chile

Data and forecasts - Economic: Executive summary - Chile

Last update 15 January 2021

© IHS Markit 2021 Page 2 of 47

Legal - Business environment: Executive summary - Chile

Tax - Business environment: Executive summary - Chile

Operational - Business environment: Executive summary - Chile

War risks - Security: Executive summary - Chile

© IHS Markit 2021 Page 3 of 47

Social stability and unrest risks - Security: Executive summary - Chile

Risks to individuals - Security: Executive summary - Chile

Risks to cargo/transport - Security: Executive summary - Chile

Risks to property - Security: Executive summary - Chile

© IHS Markit 2021 Page 4 of 47

Overview: Political - Chile

Analysis - Government stability: Political - Chile

© IHS Markit 2021 Page 5 of 47

Source: CIRCA People in Power © 2021 IHS Markit

Analysis - Policy direction and predictability: Political - Chile

© IHS Markit 2021 Page 6 of 47

Analysis - Opposition prospects and programme: Political - Chile

Data - Opposition prospects and programme: Political - Chile

© IHS Markit 2021 Page 7 of 47

National Renewal (Renovación Nacional: RN)

Christian Democratic Party (Partido Demócrata Cristiano de Chile: PDC)

© IHS Markit 2021 Page 8 of 47

Socialist Party (Partido Socialista: PS)

Broad Front (Frente Amplio: FA) coalition

© IHS Markit 2021 Page 9 of 47

Source: IHS and CIRCA People in Power © 2021 IHS Markit

© IHS Markit 2021 Page 10 of 47

Interior Minister Gonzalo Blumel

Finance Minister Ignacio Briones

National Renovation Front President Mario Desbordes Jiménez

© IHS Markit 2021 Page 11 of 47

Business lobby Sofofa (Sociedad de Fomento Fabril)

United Workers’ Trade Federation (Central Unitaria de Trabajadores: CUT)

Environmental pressure groups

Constitution - State institutions - Political system and players - Political background:

© IHS Markit 2021 Page 12 of 47

Legislature - State institutions - Political system and players - Political background:

Judiciary - State institutions - Political system and players - Political background:

© IHS Markit 2021 Page 13 of 47

Overview - External relations - Political background: Political - Chile

United States - Bilateral - External relations - Political background: Political - Chile

China - Bilateral - External relations - Political background: Political - Chile

Americas - Bilateral - External relations - Political background: Political - Chile

© IHS Markit 2021 Page 14 of 47

Bilateral relations to 2019

Relations with Bolivia

© IHS Markit 2021 Page 15 of 47

Relations with Peru

Global organisations - Multilateral - External relations - Political background:

© IHS Markit 2021 Page 16 of 47

Regional organisations - Multilateral - External relations - Political background:

© IHS Markit 2021 Page 17 of 47