With the second highest GDP per capita in Latin America (behind Uruguay), Chile has historically enjoyed among the highest levels of stability and prosperity in the region. However, widespread civil unrest broke out throughout the country in 2019 in protest of the government’s handling of the economy and perceived systemic inequality. Pursuant to a political accord, Chile held a plebiscite in October 2020 in which citizens chose to redraft the constitution. Uncertainty about the outcome of the redrafting process may impact investment. Due to Chile’s solid macroeconomic policy framework, the country boasts one of the strongest sovereign bond ratings in Latin America, which has provided fiscal space for the Chilean government to respond to the economic contraction resulting from the COVID-19 pandemic through stimulus packages and other measures. As a result, Chile’s economic growth in 2021 was, according to the Central Bank’s latest estimation, between 11.5 percent and 12 percent. The same institution forecasts Chile’s economic growth in 2022 will be in the range of 1 to 2 percent due largely to the gradual elimination of COVID-19 economic stimulus programs.
Chile has successfully attracted large amounts of Foreign Direct Investment (FDI) despite its relatively small domestic market. The country’s market-oriented policies have created significant opportunities for foreign investors to participate in the country’s economic growth. Chile has a sound legal framework and there is general respect for private property rights. Sectors that attract significant FDI include mining, finance/insurance, energy, telecommunications, chemical manufacturing, and wholesale trade. Mineral, hydrocarbon, and fossil fuel deposits within Chilean territory are restricted from foreign ownership, but companies may enter into contracts with the government to extract these resources. Corruption exists in Chile but on a much smaller scale than in most Latin American countries, ranking 27 – along with the United States – out of 180 countries worldwide and second in Latin America in Transparency International’s 2021 Corruption Perceptions Index.
Although Chile is an attractive destination for foreign investment, challenges remain. Legislative and constitutional reforms proposed in response to the social unrest and the pandemic have generated concerns about the future government policies on property rights, rule of law, tax structure, the role of government in the economy, and many other issues. Importantly, the legislation enabling the constitutional reform process requires that the new constitution must respect Chile’s character as a democratic republic, its judicial sentences, and its international treaties (including the U.S.-Chile Free Trade Agreement). Despite a general respect for intellectual property (IP) rights, Chile has not fully complied with its IP obligations set forth in the U.S.-Chile FTA and remains on the U.S. Trade Representative (USTR) Special 301 Report for not adequately enforcing IP rights. Environmental permitting processes, indigenous consultation requirements, and cumbersome court proceedings have made large project approvals increasingly time consuming and unpredictable, especially in cases with political sensitivities. The current administration has stated its willingness to continue attracting foreign investment.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Historically and for more than four decades, promoting FDI has been an essential part of the Chilean government’s national development strategy. The country’s market-oriented economic policy creates significant opportunities for foreign investors to participate. Laws and practices are not discriminatory against foreign investors, who receive treatment similar to Chilean nationals. Chile’s business climate is generally straightforward and transparent, and its policy framework has remained consistent despite developments such as civil unrest in 2019 and the COVID-19 pandemic. However, the permitting process for infrastructure, mining, and energy projects is contentious, especially regarding politically sensitive environmental impact assessments, water rights issues, and indigenous consultations. In July 2021, Chile began a constitutional reform process that is expected to produce a new constitution by July that Chileans will vote on whether to enact in September. Key issues under discussion through the Constitutional Assembly process include the political structure of the country, water rights, mining rights, environmental regulation, and the status of indigenous communities.
InvestChile is the government agency in charge of facilitating the entry and retention of FDI into Chile. It provides services related to investment attraction (information about investment opportunities); pre-investment (sector-specific advisory services, including legal); landing (access to certificates, funds and networks); and after-care (including assistance for exporting and re-investment).
Regarding government-investor dialogue, in May 2018, the Ministry of Economy created the Sustainable Projects Management Office (GPS). This agency provides support to investment projects, both domestic and foreign, serving as a first point of contact with the government and coordinating with different agencies in charge of evaluating investment projects, which aims to help resolve issues that emerge during the permitting process.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign investors have access to all productive activities, except for the domestic maritime freight sector, in which foreign ownership of companies is capped at 49 percent. Maritime transportation between Chilean ports is open since 2019 to foreign cruise vessels with more than 400 passengers. Some international reciprocity restrictions exist for fishing.
Most enterprises in Chile may be 100 percent owned by foreigners. Chile only restricts the right to private ownership or establishment in what it defines as certain “strategic” sectors, such as nuclear energy and mining. The current Constitution establishes the “absolute, exclusive, inalienable and permanent domain” of the Chilean state over all mineral, hydrocarbon, and fossil fuel deposits within Chilean territory. However, Chilean law allows the government to grant concession rights and lease agreements to individuals and companies for exploration and exploitation activities, and to assign contracts to private investors, without discrimination against foreign investors. The Constitutional Assembly is reviewing proposals that if enacted could affect mining operations of foreign investors.
Chile has not implemented an investment screening mechanism to protect key national security priorities. FDI is subject to pro forma screening by InvestChile. Businesses in general do not consider these screening mechanisms as barriers to investment because approval procedures are expeditious, and investments are usually approved. Some transactions require an anti-trust review by the office of the national economic prosecutor (Fiscalía Nacional Económica) and possibly by sector-specific regulators.
The Chilean government took significant steps towards business facilitation during the past decade. Starting in 2018, the government introduced updated electronic and online systems for providing some tax information, complaints related to contract enforcement, and online registration of closed corporations (non-public corporations). In June 2019, the Ministry of Economy launched the Unified System for Permits (SUPER), a new online single-window platform that brings together 182 license and permit procedures, simplifying the process of obtaining permits for investment projects.
According to the World Bank, Chile has one of the shortest and smoothest processes among Latin American and Caribbean countries – 11 procedures and 29 days – to establish a foreign-owned limited liability company (LLC). Drafting statutes of a company and obtaining an authorization number can be done online at the platform HYPERLINK hError! Hyperlink reference not valid.. Electronic signature and invoicing allow foreign investors to register a company, obtain a tax payer ID number and get legal receipts, invoices, credit and debit notes, and accountant registries. A company typically needs to register with Chile’s Internal Revenue Service, obtain a business license from a municipality, and register either with the Institute of Occupational Safety (public) or with one of three private nonprofit entities that provide work-related accident insurance, which is mandatory for employers. In addition to the steps required of a domestic company, a foreign company establishing a subsidiary in Chile must authenticate the parent company’s documents abroad and register the incoming capital with the Central Bank. This procedure, established under Chapter XIV of the Foreign Exchange Regulations, requires a notice of conversion of foreign currency into Chilean pesos when the investment exceeds $10,000. The registration process at the Registry of Commerce of Santiago is available online.
The Government of Chile does not have an active policy of promotion or incentives for outward investment, nor does it impose restrictions on it.
2. Bilateral Investment and Taxation Treaties
A. Bilateral Investment Treaties:
Chile has signed 55 Bilateral Investment Treaties (BITs), 40 of which are in force to date. There are agreements in force with Argentina, Australia, Austria, Belgium and Luxembourg, Bolivia, China, Colombia, Costa Rica, Croatia, Cuba, Czech Republic, Denmark, Dominican Republic, Ecuador, El Salvador, Finland, France, Germany, Greece, Guatemala, Honduras, Iceland, Italy, Malaysia, Nicaragua, Norway, Panama, Paraguay, Peru, Philippines, Poland, Portugal, Romania, South Korea, Spain, Sweden, Switzerland, Ukraine, the United Kingdom, Uruguay, and Venezuela.
Chile has 31 FTAs with 66 countries. On January 1, 2004, the United States and Chile brought into force the investment chapter in our bilateral FTA. Chile has additional investment chapters in force under FTAs, or supplementary investment agreements to the FTAs with Argentina, Australia, Brazil, Canada, China, Colombia, Hong Kong SAR, Japan, Mexico, Republic of Korea, Peru and the Pacific Alliance (composed of four countries: Chile, Colombia, Mexico and Peru). The investment chapter of the Comprehensive and Progressive Transpacific Partnership (CPTPP) has been signed but has not been approved by Chile’s Congress to allow it to enter into force. Chile is currently negotiating investment chapters that are part of FTA negotiations with the Pacific Alliance and Associated States (Australia, Canada, New Zealand, and Singapore), and with the European Union.
B. Bilateral or Multilateral Taxation Treaties and Agreements:
In 2010, Chile and the United States signed the U.S.-Chile Treaty to Avoid Double Taxation. The Chilean Congress ratified the treaty in September 2015. In May 2012, it was submitted to the U.S. Senate, and the Senate Foreign Relations Committee voted in favor of ratification on March 31, 2022. As of April 1, the treaty is pending full ratification by the Senate. Chile has 33 double taxation treaties in force with Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, France, Ireland, Italy, Japan, Malaysia, Mexico, New Zealand, Norway, Paraguay, Peru, Poland, Portugal, Russia, South Africa, South Korea, Spain, Sweden, Switzerland, Thailand, the United Kingdom, and Uruguay. Apart from the U.S.-Chile Treaty to Avoid Double Taxation, Chile has signed double taxation treaties with the Pacific Alliance countries (Colombia, Mexico and Peru), India, the United Arab Emirates and the Netherlands, that have not yet entered into force.
Chile’s 2020 Tax Modernization bill left the total income tax rate on dividends or profits earned by Chilean firms’ shareholders who are residents in other countries at 44.45 percent (which results from adding the 35 percent “retention tax” on dividends and profits to a 9.45 percent corporate income tax. Residents in countries with a bilateral taxation treaty in force with Chile are subject only to a 35 percent retention tax rate, and no corporate income tax. However, the Tax Modernization bill extends until 2026 a waiver of double taxation requirements for companies that operate out of countries with which Chile has a signed but not yet ratified bilateral tax treaty, such as the United States, so they also keep this 35 percent tax rate. The same tax legislation reformed real estate and income taxes and applied Chile’s 19 percent value-added tax to foreign digital services.
3. Legal Regime
Transparency of the Regulatory System
Chile’s legal, regulatory, and accounting systems are transparent and provide clear rules for competition and a level playing field for foreigners. They are consistent with international norms; however, environmental regulations – which include mandatory indigenous consultation required by the International Labor Organization’s Indigenous and Tribal Peoples Convention (ILO 169) – and other permitting processes have become lengthy and unpredictable, especially in politically sensitive cases.
Chile does not have a regulatory oversight body. Four institutions play key roles in the rule-making process: The General-Secretariat of the Presidency (SEGPRES), the Ministry of Finance, the Ministry of Economy, and the General Comptroller of the Republic. Most regulations come from the national government; however, some, in particular those related to land use, are decided at the local level. Both national and local governments are involved in the issuance of environmental permits. Regulatory processes are managed by governmental entities. NGOs and private sector associations may participate in public hearings or comment periods.
In Chile, non-listed companies follow norms issued by the Accountants Professional Association, while publicly listed companies use the International Financial Reporting Standards (IFRS). Since January 2018, IFRS 9 entered into force for companies in all sectors except for banking, in which IFRS 15 will be applied. IFRS 16 entered into force in January 2019. On January 1, 2022, Chile’s Financial Market Commission (CMF) began implementation of the IFRS 17 accounting standards in the Chilean insurance market.
The legislation process in Chile allows for public hearings during discussion of draft bills in both chambers of Congress. Draft bills submitted by the Executive Branch to the Congress are readily available for public comment. Ministries and regulatory agencies are required by law to give notice of proposed regulations, but there is no formal requirement in Chile for consultation with the general public, conducting regulatory impact assessments of proposed regulations, requesting comments, or reporting results of consultations. For lower-level regulations or norms that do not need congressional approval, there are no formal provisions for public hearing or comment. As a result, Chilean regulators and rulemaking bodies normally consult with stakeholders, but in a less formal manner.
All decrees and laws are published in the Diario Oficial (roughly similar to the Federal Register in the United States), but other types of regulations will not necessarily be found there. There are no other centralized online locations where regulations in Chile are published.
According to the OECD, compliance rates in Chile are generally high. The approach to enforcement remains punitive rather than preventive, and regulators still prefer to inspect rather than collaborate with regulated entities on fostering compliance. Each institution with regulation enforcement responsibilities has its own sanction procedures. Law 19.880 from 2003 establishes the principles for reversal and hierarchical recourse against decisions by the administration. An administrative act can be challenged by lodging an action in the ordinary courts of justice, or by administrative means with a petition to the Comptroller General of the Republic. Affected parties may also make a formal appeal to the Constitutional Court against a specific regulation.
Chile still lacks a comprehensive, “whole of government” regulatory reform program. The OECD’s April 2016 “Regulatory Policy in Chile” report asserts that Chile took steps to improve its rule-making process, but still lags behind the OECD average in assessing the impact of regulations, consulting with outside parties on their design and evaluating them over time. The World Bank´s Global Indicators of Regulatory Governance project finds that Chile is not part of the countries that have improved their regulatory governance framework since 2017.
Chile’s level of fiscal transparency is excellent. Information on the budget and debt obligations, including explicit and contingent liabilities, is easily accessible online.
International Regulatory Considerations
Chile does not share regulatory sovereignty with any regional economic bloc. However, several international norms or standards from multilateral organizations (UN, WIPO, ILO, among others) are referenced or incorporated into the country’s regulatory system. As a member of the WTO, the Chile notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).
Legal System and Judicial Independence
Chile’s legal system is based on civil law. Chile’s legal and regulatory framework provides for effective means for enforcing property and contractual rights.
Laws governing issues of interest to foreign investors are found in several statutes, including the Commercial Code of 1868, the Civil Code, the Labor Code and the General Banking Act. Chile has specialized courts for dealing with tax and labor issues.
The judicial system in Chile is generally transparent and independent. The likelihood of government intervention in court cases is low. If a state-owned firm is involved in the dispute, the Government of Chile may become directly involved through the State Defense Council, which represents the government interests in litigation cases related to expropriations.
Regulations can be challenged before the court system, the National Comptroller, or the Constitutional Court, depending on the nature of the claim.
Laws and Regulations on Foreign Direct Investment
Law 20,848 of 2015, established a new framework for foreign investment in Chile and created the Agency for the Promotion of Foreign Investment (APIE), successor to the former Foreign Investment Committee and which also acts under the name of “InvestChile.” The InvestChile website provides relevant laws, rules, procedures, and reporting requirements for investors. For more on FDI regulations and services for foreign investors, see the section on Policies Towards Foreign Direct Investment.
Competition and Antitrust Laws
Chile’s anti-trust law prohibits mergers or acquisitions that would prevent free competition in the industry at issue. An investor may voluntarily seek a ruling by an Anti-trust Court that a planned investment would not have competition implications. The national economic prosecutor (FNE) is an active institution in conducting investigations for competition-related cases and filing complaints before the Free Competition Tribunal (TDLC), which rules on those cases.
In January and March 2021, the TDLC approved two extra-judicial settlements between the FNE and Nestle, after the company faced two cases of anti-competitive clauses in the contracts with fresh milk producers. The settlement included a US$ 1.8 million payment from Nestle. On the other hand, in April 2021, the FNE cleared Nestle´s acquisition of Chilean premium chocolate maker La Fete, after finding that the two companies serve different market segments.
In March 2021, the FNE cleared Chinese state-owned enterprise State Grid International Development Limited’s (SGIDL) acquisition of Chilean energy company Compañia General de Electricidad (CGE).
In September 2020, the FNE imposed fines amounting to US$ 4.1 million on the Walt Disney Company and its subsidiary TWDC Enterprises 18 Corp. for failing to provide accurate information to adopt adequate mitigation measures during the approval process for its acquisition of Twenty-First Century Fox, Inc. In June 2021, the TDLC approved the payment of a US$ 220,000 fine for the second charge, while the investigation for the main charge remains ongoing.
In October 2021, the TDLC approved remedies agreed upon by Delta and LATAM airlines with the FNE to mitigate the risks to competition arising from Delta’s acquisition of a 20% minority stake in LATAM’s share capital, along with a joint venture and code share agreements for direct routes between the United States and Canada and between certain South American countries with the United States.
In October 2021, the FNE presented a collusion case against the three main securities transport companies that operate in Chile -Brink’s Chile S.A., Prosegur and Loomis-, for having entered into an agreement to fix the prices of its services between 2017 and 2018. The FNE asked the TDLC to apply fines amounting to US$ 63.4 million against the firms (US$30.5 million for Brink’s Chile S.A., US$25.8 million for Prosegur and US$6.4 million for Loomis), as well as fines between US$ 88,000 and US$ 135,000 against the general managers and the regional heads who were in charge of the Chile offices.
Expropriation and Compensation
Chilean law grants the government authority to expropriate property, including property of foreign investors, only on public interest or national interest grounds, on a non-discriminatory basis and in accordance with due process. The government has not nationalized a private firm since 1973. Expropriations of private land take place in a transparent manner, and typically only when the purpose is to build roads or other types of infrastructure. The law requires the payment of immediate compensation at fair market value, in addition to any applicable interest.
ICSID Convention and New York Convention
Since 1991, Chile has been a member state to the International Centre for the Settlement of Investment Disputes (ICSID Convention). In 1975, Chile became a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).
National arbitration law in Chile includes the Civil Procedure Code (Law Num. 1552, modified by Law Num. 20.217 of 2007), and the Law Num. 19.971 on International Commercial Arbitration.
Investor-State Dispute Settlement
Apart from the New York Convention, Chile is also a party to the Pan-American Convention on Private International Law (Bustamante Code) since 1934, the Inter-American Convention on International Commercial Arbitration (Panama Convention) since 1976, and the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States since 1992.
The U.S.-Chile FTA, in force since 2004, includes an investment chapter that provides the right for investors to submit claims under the ICSID Convention, the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules, or any other mutually agreed upon arbitral institution. So far, U.S. investors have filed no claims under the agreement.
Over the past 10 years, there were only four investment dispute cases brought by foreign investors against the state of Chile before the World Bank’s International Center for Settlement of Investment Disputes (ICSID) tribunal. In the first case, a Spanish-Chilean citizen demanded US$ 338.3 million in compensation for the expropriation of Chilean newspaper El Clarín in 1975 by Chile’s military regime. Despite an ICSID decision from 2016 in favor of the Chilean state, the claimant requested the nullification of the ruling, which extended the total duration of the case to 22 years. On January 7, 2020, ICSID issued a final ruling in favor of the Chilean state and rejecting the claimant’s case. The second case was brought in 2017 by Colombian firm Alsacia, which held concession contracts as operators of Transantiago, the public transportation system in Santiago de Chile. The firm claimed US$ 347 million for Chilean government actions that allegedly created unfavorable operating conditions for the claimants’ subsidiaries and resulted in bankruptcy proceedings. On January 7, 2021, ICSID ruled in favor of the Chilean state, rejecting the claims. Two more cases pending resolution were brought by foreign investors in 2021. On April 13, ISA Interchile, a subsidiary of the Colombian Interconexión Eléctrica SA (ISA) filed an arbitration request against Chile related to the Cardones-Polpaico electrical transmission project. The authorities issued fines for US$$ 72.8 million on the company for construction delays which ISA argues were due to unforeseeable circumstances. On August 13, French firms ADP International S.A. and VINCI Airports SAS, operators of the Santiago International Airport, filed an arbitration request in which they claim that the Chilean state should have adopted particular measures to alleviate the temporary drop in the concessionaire´s revenues as a result of the decrease in air traffic and commercial airport activity as a result of the COVID-19 pandemic and the sanitary measures taken by the State, such as border closures and imposition of quarantines. In both cases, the arbitration courts are expected to start their procedures in the first quarter of 2022.
Local courts respect and enforce foreign arbitration awards, and there is no history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
Mediation and binding arbitration exist in Chile as alternative dispute resolution mechanisms. A suit may also be brought in court under expedited procedures involving the abrogation of constitutional rights. The U.S.-Chile FTA investment chapter encourages consultations or negotiations before recourse to dispute settlement mechanisms. If the parties fail to resolve the matter, the investor may submit a claim for arbitration. Provisions in Section C of the FTA ensure that the proceedings are transparent by requiring that all documents submitted to or issued by the tribunal be available to the public, and by stipulating that proceedings be public. The FTA investment chapter establishes clear and specific terms for making proceedings more efficient and avoiding frivolous claims. Chilean law is generally to be applied to all contracts. However, arbitral tribunals decide disputes in accordance with FTA obligations and applicable international law. The tribunal must also accept amicus curiae submissions.
In Chile, the Judiciary Code and the Code of Civil Procedure govern domestic arbitration. Local courts respect and enforce foreign arbitral awards and judgments of foreign courts. Chile has a dual arbitration system in terms of regulation, meaning that different bodies of law govern domestic and international arbitration. International commercial arbitration is governed by the International Commercial Arbitration Act that is modeled on the 1985 UNCITRAL Model Law on International Commercial Arbitration. In addition to this statute, there is also Decree Law Number 2349 that regulates International Contracts for the Public Sector and sets forth a specific legal framework for the State and its entities to submit their disputes to international arbitration.
No Chilean state-owned enterprises (SOEs) have been involved in investment disputes in recent decades. A Chilean government agency filed an arbitration case in February 2021 against a U.S. firm at the International Chamber of Commerce International Court of Arbitration. The case remains pending.
Chile’s Insolvency Law from 1982 was updated in October 2014. The current law aims to clarify and simplify liquidation and reorganization procedures for businesses to prevent criminalizing bankruptcy. It also established the new Superintendence of Insolvency and created specialized insolvency courts. The new insolvency law requires creditors’ approval to select the insolvency representative and to sell debtors’ substantial assets. The creditor also has the right to object to decisions accepting or rejecting creditors’ claims. However, the creditor cannot request information from the insolvency representative. The creditor may file for insolvency of the debtor, but for liquidation purposes only. The creditors are divided into classes for the purposes of voting on the reorganization plan; each class votes separately, and creditors in the same class are treated equally.
4. Industrial Policies
The Chilean government generally does not subsidize foreign investment, nor does it issue guarantees or joint financing for FDI projects. There are, however, some incentives directed toward isolated geographical zones and to the information technology sector. These benefits relate to co-financing of feasibility studies as well as to incentives for the purchase of land in industrial zones, the hiring of local labor, and the facilitation of project financing. Other important incentives include accelerated depreciation accounting for tax purposes and legal guarantees for remitting profits and capital. Additionally, the Start-Up Chile program provides selected entrepreneurs with grants of up to US$ 80,000, along with a Chilean work visa to develop a “startup” business in Chile over a period of four to seven months. Chile has other special incentive programs aimed at promoting investment and employment in remote regions, as well as other areas that suffer development lags.
Foreign Trade Zones/Free Ports/Trade Facilitation
Chile has two free trade zones: one in the northern port city of Iquique (Tarapaca Region) and the other in the far south port city of Punta Arenas (Magallanes Region). Merchants and manufacturers in these zones are exempt from corporate income tax, value added taxes (VAT) – on operations and services that take place inside the free trade zone – and customs duties. The same exemptions also apply to manufacturers in the Chacalluta and Las Americas Industrial Park in Arica (Arica and Parinacota Region). Mining, fishing, and financial services are not eligible for free zone concessions. Foreign-owned firms have the same investment opportunities in these zones as Chilean firms. The process for setting up a subsidiary is the same inside as outside the zones, regardless of whether the company is domestic or foreign-owned.
Performance and Data Localization Requirements
Chile mandates that 85 percent of a firm’s workers must be local employees. Exceptions are described in Section 11. The costs associated with migration regulations do not significantly inhibit the mobility of foreign investors and their employees.
Chile does not follow “forced localization.” A draft bill that is pending in Chile’s Congress could result in additional requirements (owner’s consent) for international data transfers in cases involving jurisdictions with data protection regimes below Chile’s standards. The bill, modeled after the European Union’s General Data Protection Regulation (GDPR) also proposes the creation of an independent Chilean Data Protection Agency that would be responsible for enforcing data protection standards.
Neither Chile’s Foreign Investment Promotion Agency nor the Central Bank applies performance requirements in their reviews of proposed investment projects. The investment chapter in the U.S.–Chile FTA establishes rules prohibiting performance requirements that apply to all investments, whether by a third party or domestic investors. The FTA investment chapter also regulates the use of mandatory performance requirements as a condition for receiving incentives and spells out certain exceptions. These include government procurement, qualifications for export and foreign aid programs, and non-discriminatory health, safety, and environmental requirements.
5. Protection of Property Rights
Property rights and interests are recognized and generally enforced in Chile. Chile ranked 63 out of 190 economies in the “Registering Property” category of the World Bank’s 2020 Doing Business report. There is a recognized and generally reliable system for recording mortgages and other forms of liens.
There are no restrictions on foreign ownership of buildings and land, and no time limit on the property rights acquired by them. The only exception, based on national security grounds, is for land located in border territories, which may not be owned by nationals or firms from border countries, without prior authorization of the President of Chile. There are no restrictions to foreign and/or non-resident investors regarding land leases or acquisitions. In the Doing Business specific index for “quality of land administration” (which includes reliability of infrastructure, transparency of information, geographic coverage and land dispute resolution), Chile obtains a score of 14 out of 30.
Unoccupied properties can always be claimed by their legal owners and, as usurpation is a criminal offense, several kinds of eviction procedures are allowed by the law, though they can sometimes be onerous and lengthy.
Intellectual Property Rights
According to the U.S. Chamber of Commerce’s International IP Index, Chile’s legal framework provides for fair and transparent use of compulsory licensing; extends necessary exclusive rights to copyright holders and maintains a voluntary notification system; and provides for civil and procedural remedies. However, IP protection challenges remain. Chile’s framework for trade secret protection has been deemed insufficient by private stakeholders. Pharmaceutical products suffer from relatively weak patenting procedures, the absence of an effective patent enforcement and resolution mechanism, and some gaps in regulation governing data protection.
Two important IP-related laws are pending in the Chilean Congress. A draft bill submitted to Congress in October 2018 would reform Chile’s Industrial Property Law. The new IP bill aims to reduce timeframes, modernize procedures, and increase legal certainty for patents and trademarks registration. On April 9, 2019, the bill was passed by the Lower Chamber and sent to the Senate. Meanwhile, a reform bill on Chile’s pharmaceutical drugs law called “Ley de Fármacos II”, originated in the Senate but was extensively amended by the opposition-controlled Lower Chamber, and has been under review by a mixed committee of both houses of the Chilean Congress since May 2020. While the pharmaceutical industry reports that the reconciliation process addressed some of their concerns regarding the new regulations, it identified the lack of coverage being offered in price regulations as an outstanding issue of concern.
A new legislation that modernizes certain aspects of Chile’s patent and IP regime – Ley Corta 21335 – entered into force on January 5, 2022. The new law modernizes procedures for industrial designs and trademarks registration; criminalizes trademark falsification with stronger fines and introducing prison terms of up to three years; introduces provisional patents, so that innovators can initiate a patent registration procedure while being afforded 12 months to gather necessary information; strengthens patent enforcement measures, allowing affected patent owners to request the transfer of an infringing registered patent and not only its annulment; and broadens the definition of trade secrets.
On February 7, 2022, a new law against trade in illicit and counterfeit goods, with a focus on disrupting organized criminal activity, entered into force. The scope of the law covers counterfeiting, the reproduction or unauthorized sale of literary, artistic, and scientific works protected by IPR, as well as phonograms, videos, phonographic records, cassettes, videocassettes, films or motion pictures, and computer programs.
The Intellectual Property Brigade (BRIDEPI) of the Chilean Investigative Police (PDI) reported that it seized 41,349 counterfeit products in 2021, worth a total of US$ 491,844, and arrested nine individuals on charges related to IPR infringement. Additionally, the National Customs Service reported that, between January and September 2021 (latest data available) it seized more than 4.9 million counterfeit products worth a total of US$ 54 million.
Chile’s IPR enforcement remains relatively lax, particularly in relation to piracy, copyright, and patent protection, while prosecution of IP infringement is hindered by gaps in the legal framework and a lack of expertise in IP law among judges. Rights holders indicate a need for greater resources devoted to customs operations and a better-defined procedure for dealing with small packages containing infringing goods. The legal basis for detaining and seizing suspected transshipments is also insufficiently clear.
Since 2007, Chile has been on the Special 301 Priority Watch List (PWL). In October 2018, Chile’s Congress successfully passed a law that criminalizes satellite piracy. In December 2021, the Ministry of Culture, Arts, and Heritage took positive action by introducing legislation in the Chilean Congress to implement a legal framework to penalize the circumvention of technology protection measures (TPM) by amending Chile’s existing IPR law. This legislation remains pending in Congress. However, other challenges remain, related to longstanding IPR issues under the U.S.-Chile FTA: the pending implementation of UPOV 91; the implementation of an effective patent linkage in connection with applications to market pharmaceutical products; adequate protection for undisclosed data generated to obtain marketing approval for pharmaceutical products; and amendments to Chile’s Internet Service Provider liability regime to permit effective action against Internet piracy.
Chile is not listed in the USTR’s Notorious Markets List. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at HYPERLINK hError! Hyperlink reference not valid..
6. Financial Sector
Capital Markets and Portfolio Investment
Chile’s authorities are committed to developing capital markets and keeping them open to foreign portfolio investors. Foreign firms offer services in Chile in areas such as financial information, data processing, financial advisory services, portfolio management, voluntary saving plans and pension funds. Under the U.S.-Chile FTA, Chile opened up significantly its insurance sector, with very limited exceptions. The Santiago Stock Exchange is Chile’s dominant stock exchange, and the third largest in Latin America. However, when compared to other OECD countries, it has lower market liquidity.
Existing policies facilitate the free flow of financial resources into Chile’s product and factor markets and adjustment to external shocks in a commodity export-dependent economy. Chile accepted the obligations of Article VIII (sections 2, 3 and 4) and maintains a free-floating exchange rate system, free of restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and its various instruments are available to foreigners. The Central Bank reserves the right to restrict foreign investors’ access to internal credit if a credit shortage exists. To date, this authority has not been exercised.
Money and Banking System
Nearly one fourth of Chileans have a credit card from a bank and nearly one third have a non-bank credit card, but less than 20 percent have a checking account. However, financial inclusion is higher than banking penetration: a large number of lower-income Chilean residents have a CuentaRut, which is a commission-free card with an electronic account available for all, launched by the state-owned Banco Estado, also the largest provider of microcredit in Chile.
The Chilean banking system is healthy and competitive, and many Chilean banks already meet Basel III standards. The new General Banking Act (LGB), published in January 2019, defined general guidelines for establishing a capital adequacy system in line with Basel standards, and gave the CMF the authority to establish the capital framework. All Basel III regulations were published in December 2020, and the CMF started the implementation process of Basel III requirements to last to December 1, 2025. The system’s liquidity position (Liquidity Coverage Ratio) remains above regulatory limits (70%). Capital adequacy ratio of the system equaled 14.9 percent as of December 2021 and remains robust even when including discounts due to market and/or operational risks. Non-performing loans decreased after August 2020 due to government relief measures for households, including legislation authorizing two rounds of withdrawals from pension accounts. As of January 2022, non-performing loans equaled 1.26 percent compared to 1.54 percent as of January 2021) when measured by the standard 90 days past due criterion.
As of November 2021, the total assets of the Chilean banking system amounted to US$ 428.6 billion, according to the Superintendence of Banks and Financial Institutions. The largest six banks (Banco de Crédito e Inversiones, Banco Santander-Chile, Banco Estado, Banco de Chile, Scotiabank Chile and Itaú-Corpbanca) accounted for 88 percent of the system’s assets. Chile’s Central Bank conducts the country’s monetary policy, is constitutionally autonomous from the government, and is not subject to regulation by the Superintendence of Banks.
Foreign banks have an important presence in Chile, comprising three out of the six largest banks of the system. Out of 17 banks currently in Chile, five are foreign-owned but legally established banks in Chile and four are branches of foreign banks. Both categories are subject to the requirements set out under the Chilean banking law. There are also 21 representative offices of foreign banks in Chile. There are no reports of correspondent banking relationships withdrawal in Chile.
In order to open a bank account in Chile, a foreigner must present his/her Chilean ID Card or passport, Chilean tax ID number, proof of address, proof of income/solvency, photo, and fingerprints.
Foreign Exchange and Remittances
Law 20.848, which regulates FDI (described in section 1), prohibits arbitrary discrimination against foreign investors and guarantees access to the formal foreign exchange market, as well as the free remittance of capital and profits generated by investments. There are no other restrictions or limitations placed on foreign investors for the conversion, transfer or remittance of funds associated with an investment.
Investors, importers, and others are guaranteed access to foreign exchange in the official inter-bank currency market without restriction. The Central Bank of Chile (CBC) reserves the right to deny access to the inter-bank currency market for royalty payments in excess of five percent of sales. The same restriction applies to payments for the use of patents that exceed five percent of sales. In such cases, firms would have access to the informal market. The Chilean tax service reserves the right to prevent royalties of over five percent of sales from being counted as expenses for domestic tax purposes.
Chile has a free floating (flexible) exchange rate system. Exchange rates of foreign currencies are fully determined by the market. The CBC reserves the right to intervene under exceptional circumstances to correct significant deviations of the currency from its fundamentals. This authority was used in 2019 following an unusual 20.5 percent depreciation of the Chilean peso (CLP) after six weeks of civil unrest, an unprecedented circumstance that triggered a similarly unusual US$ 20 billion intervention (half of the CBC foreign currency reserves) that successfully arrested the currency slide.
Remittances of profits generated by investments are allowed at any time after tax obligations are fulfilled; remittances of capital can be made after one year following the date of entry into the country. In practice, this permanency requirement does not constitute a restriction for productive investment, because projects normally need more than one year to mature. Under the investment chapter of the U.S.–Chile FTA, the parties must allow free transfer and without delay of covered investments into and out of its territory. These include transfers of profits, royalties, sales proceeds, and other remittances related to the investment. However, for certain types of short-term capital flows this chapter allows Chile to impose transfer restrictions for up to 12 months as long as those restrictions do not substantially impede transfers. If restrictions are found to impede transfers substantially, damages accrue from the date of the initiation of the measure. In practice, these restrictions have not been applied in the last two decades.
Sovereign Wealth Funds
The Government of Chile maintains two sovereign wealth funds (SWFs) built with savings from years with fiscal surpluses. The Economic and Social Stabilization Fund (FEES) was established in 2007 and was valued at US$ 6.4 billion as of January 2022. The purpose of the FEES is to fund public debt payments and temporary deficit spending, in order to keep a countercyclical fiscal policy. The Pensions Reserve Fund (FRP) was built up in 2006 and amounted to US$ 7.2 billion as of January 2022. The purpose of the FRP is to anticipate future needs of payments to those eligible to receive pensions, but whose contributions to the private pension system fall below a minimum threshold.
Chile is a member of the International Working Group of Sovereign Wealth Funds (IWG) and adheres to the Santiago Principles.
Chile’s government policy is to invest SWFs entirely abroad into instruments denominated in foreign currencies, including sovereign bonds and related instruments, corporate and high-yield bonds, mortgage-backed securities from U.S. agencies, and stocks.
7. State-Owned Enterprises
Chile had 28 state-owned enterprises (SOEs) in operation as of 2020. Twenty-seven SOEs are commercial companies and the newest one (FOINSA) is an infrastructure fund that was created to facilitate public-private partnership projects. 25 SOEs are not listed and are fully owned by the government, while the remaining three are majority government owned. Ten Chilean SOEs operate in the port management sector, six in the services sector, three in the defense sector, three in the mining sector (including CODELCO, the world’s largest copper producer, and ENAP, an oil and gas company), two in transportation, one in the water sector, one is a TV station, and one is a state-owned bank (Banco Estado). The state holds a minority stake in four water companies as a result of a privatization process. In 2020, total assets of Chilean SOEs amounted to US$ 89.3 billion, while their total net income was US$ 833.7 million. SOEs employed 47,225 people in 2020.
Twenty SOEs in Chile fall under the supervision of the Public Enterprises System (SEP), a state holding in charge of overseeing SOE governance. The rest – including the largest SOEs such as CODELCO, ENAP and Banco Estado – have their own governance and report to government ministries. Allocation of seats on the boards of Chilean SOEs is determined by the SEP, as described above, or outlined by the laws that regulate them. In CODELCO’s corporate governance, there is a mix between seats appointed by recommendation from an independent high-level civil service committee, and seats allocated by political authorities in the government.
A list of SOEs made by the Budget Directorate, including their financial management information, is available in the following link: http://www.dipres.gob.cl/599/w3-propertyvalue-20890.html.
In general, Chilean SOEs work under hard budget constraints and compete under the same regulatory and tax frameworks as private firms. The exception is ENAP, which is the only company allowed to refine oil in Chile. As an OECD member, Chile adheres to the OECD Guidelines on Corporate Governance for SOEs.
Chile does not have a privatization program.
8. Responsible Business Conduct
Awareness of the need to ensure corporate social responsibility has grown over the last two decades in Chile. However, NGOs and academics who monitor this issue believe that risk mapping and management practices still do not sufficiently reflect its importance.
The government of Chile encourages foreign and local enterprises to follow generally accepted Responsible Business Conduct (RBC) principles and uses the United Nations’ Rio+20 Conference statements as its principal reference. Chile adhered in 1997 to the OECD Guidelines for Multinational Enterprises. It also recognizes the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy; the UN Guiding Principles on Business and Human Rights; the UN Global Compact’s Ten Principles and the ISO 26000 Guidance on Social Responsibility. The government established a National Contact Point (NCP) for OECD MNE guidelines located at the Undersecretariat for International Economic Relations, and has a Responsible Business Conduct Division, whose chief is also the NCP. In August 2017, Chile released its National Action Plan on Business and Human Rights based on the UN Guiding Principles. Separately, the Council on Social Responsibility for Sustainable Development, coordinated by Chile’s Ministry of Economy, is currently developing a National Policy on Social Responsibility. On January 31, 2020, the CMF closed the public comments period on proposed new annual reporting requirements on social responsibility and sustainable development by publicly traded companies.
Regarding procurement decisions, ChileCompra, the agency in charge of centralizing Chile’s public procurement, incorporates the existence of a Clean Production Certificate and an ISO 14001-2004 certificate on environmental management as part of its criteria to assign public purchases.
No high profile or controversial instances of corporate impact on human rights have occurred in Chile in recent years.
The Chilean government effectively and fairly enforces domestic labor, employment, consumer, and environmental protection laws. There are no dispute settlement cases against Chile related to the Labor and Environment Chapters of the Free Trade Agreements signed by Chile.
Regarding the protection of shareholders, the Superintendence of Securities and Insurance (SVS) has the responsibility of regulating and supervising all listed companies in Chile. Companies are generally required to have an audit committee, a directors committee, an anti-money laundering committee and an anti-terrorism finance committee. Laws do not require companies to have a nominating/corporate governance committee or a compensation committee. Compensation programs are typically established by the board of directors and/or the directors committee.
Independent NGOs in Chile promote and freely monitor RBC. Examples include NGO Accion RSE: http://www.accionrse.cl/, the Catholic University of Valparaiso’s Center for Social Responsibility and Sustainable Development VINCULAR: http://www.vincular.cl/, ProHumana Foundation and the Andres Bello University’s Center Vitrina Ambiental.
Chile is an OECD member, but is not participating actively in the implementation of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas.
Chile is not part of the Extractive Industries Transparency Initiative (EITI). Chile joined The Montreux Document on Private Military and Security Companies in 2009. However, there are no private security companies based in Chile participating in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).
Chile is a signatory to the Paris Agreement. The Environment Ministry published the country’s 2050 Long-Term Climate Strategy (ECLP) roadmap to fulfill Chile’s climate change commitments over a 30-year timeframe. The ECLP was incorporated into Law 21.455, the Framework Law of Climate Change, that was enacted on June 13, 2022. The law includes Chile’s Nationally Determined Contribution (NDC) to the Paris Agreement, including mitigation and adaptation measures related to climate change.
Chile committed to reach net zero emissions by 2050. To reach this goal, the government outlined its main policy measures along six categories: sustainable industry and mining; green hydrogen production; sustainable construction of housing and public/commercial buildings; electromobility in the public transport system; phasing out coal-fired power generation plants; and other energy efficiency measures.
Under the Framework Law of Climate Change, the Environment Ministry is responsible for drawing up an emissions mitigation plan with limits for each productive sector. The plan is expected to include specific strategies and goals for the main sectors contributing to greenhouse gas emissions. These are expected to include: in the energy sector, phasing out coal-fired power plants, with an aim to close 18 plants by 2025 and the remaining plants by 2040; in the mining sector, reduction of greenhouse gas emissions to a minimum level by 2050 under the ECLP (both for emissions generated from the extraction and production processes, and indirectly, such as from electric power consumption); in the agricultural sector, Chile adhered to the COP26 goal to reduce methane (CH4) emissions by 30% by 2030.
Chile introduced an emissions compensation mechanism in 2020 for companies that pay green taxes, which are currently applied to emissions of particulate matter, sulfur dioxide, nitrogen oxide and carbon dioxide. This mechanism created a form of regulated carbon market, which allows industries to reduce their tax burden by financing emission reduction or emission absorption projects carried out by NGOs, foundations, or other institutions. Some examples of projects that can use this mechanism include energy efficiency initiatives, heater replacement, clean transportation, and reforestation.
Chile has previously sought to incorporate environmental considerations into public procurements. In 2012, the government published the Socially Responsible Purchasing Policy, which contained strategic sustainability guidelines, which are non-binding recommendations. In 2016, the Ministry of the Environment launched a public procurement policy with environmental criteria, both for the bidder’s operations and the characteristics of the products purchased.
Chile applies, in a non-discriminatory manner, various laws to combat corruption of public officials, including the 2009 Transparency Law that mandated disclosure of public information related to all areas of government and created an autonomous Transparency Council in charge of overseeing its application. Subsequent amendments expanded the number of public trust positions required to release financial disclosure, mandated disclosure in greater detail, and allowed for stronger penalties for noncompliance.
In March 2020, the administration of former President Piñera proposed new legislation aimed at combatting corruption, as well as economic and electoral crimes. The four new pieces of legislation, part of the Piñera administration’s “anti-abuse agenda” launched in December 2019 in response to societal demands to increase penalties for white-collar crimes, seeks to strengthen enforcement and increase penalties for collusion among firms; increase penalties for insider trading; provide protections for whistleblowers seeking to expose state corruption; and expand the statute of limitations for electoral crimes.
Anti-corruption laws, in particular mandatory asset disclosure, do extend to family members of officials. Political parties are subject to laws that limit campaign financing and require transparency in party governance and contributions to parties and campaigns.
Regarding government procurement, the website of ChileCompra (central public procurement agency) allows users to anonymously report irregularities in procurement. There is a decree that defines sanctions for public officials who do not adequately justify direct contracts. The Corporate Criminal Liability Law provides that corporate entities can have their compliance programs certified. Chile’s Securities and Insurance Superintendence (SVS) authorizes a group of local firms to review companies’ compliance programs and certify them as sufficient. Certifying firms are listed on the SVS website.
Private companies have increasingly incorporated internal control measures, as well as ethics committees as part of their corporate governance, and compliance management sections. Additionally, Chile Transparente (Chilean branch of Transparency International) developed a Corruption Prevention System to provide assistance to private firms to facilitate their compliance with the Corporate Criminal Liability Law.
Chile signed and ratified the Organization of American States (OAS) Convention against Corruption. The country also ratified the UN Anticorruption Convention on September 13, 2006. Chile is also an active member of the Open Government Partnership (OGP) and, as an OECD member, adopted the OECD Anti-Bribery Convention.
NGOs that investigate corruption operate in a free and adequately protected manner.
U.S. firms have not identified corruption as an obstacle to FDI.
Observatorio Fiscal (focused on public spending)
Don Carlos 2983, Oficina 3, Las Condes, Santiago, Chile
(+562) (2) 4572 975 firstname.lastname@example.org
10. Political and Security Environment
Pursuant to a political accord in response to the 2019 civil unrest, Chile held a plebiscite in October 2020 in which citizens voted to draft a new constitution. The process to create and ratify the new constitution launched on July 4, 2021 and will continue to mid-2022. Uncertainty over what changes could be made to Chile’s political and regulatory environment could negatively impact investor confidence. Importantly, the legislation enabling the constitutional reform process requires that the new constitution must respect Chile’s character as a democratic republic, its judicial sentences, and its international treaties (including the U.S.-Chile Free Trade Agreement).
Prior to 2019, there were generally few incidents of politically motivated attacks on investment projects or installations with the exception of the southern Araucania region and its neighboring Arauco province in the southwest of Bio-Bio region. This area, home to nearly half a million indigenous inhabitants, has seen an ongoing trend of politically motivated violence and organized criminal activity. Land claims and conflicts with forestry companies are the main grievances underneath the radicalization of a relatively small number of indigenous Mapuche communities, which has led to the rise of organized groups that pursue their demands by violent means. Incidents include arson attacks on churches, farms, forestry plantations, forestry contractors’ machinery and vehicles, and private vehicles, as well as occupation of private lands, resulting in over a half-dozen deaths (including some by police forces), injuries, and damage to property. The indigenous issue has been further politicized due to anger among landowners, forestry transport contractors, and farmers affected by violence, as well as the illegal killing of a young Mapuche activist by special police forces in 2018 and the controversy over accusations of fraud by the police during the investigation of indigenous organized groups. In March 2020, a truck driver died in an arson attack on his vehicle.
Since 2007, Chile has experienced a number of small-scale attacks with explosive and incendiary devices, targeting mostly banks, police stations, and public spaces throughout Santiago, including metro stations, universities, and churches. ATMs have been blown up in the late evenings or early mornings. Anarchist groups often claim responsibility for these acts, as well as violent incidents during student and labor protests. In January 2017, an eco-terrorist group claimed responsibility for a parcel bomb that detonated at the home of the chairman of the board of Chilean state-owned mining giant CODELCO. The same group detonated a bomb of similar characteristics in 2019 at a bus stop in downtown Santiago, causing five injuries, and sent a letter bomb to the office of the president of the Metro system, which was defused by police. One suspect was arrested in 2019 and the investigation of the crimes is ongoing. Another group sent package bombs to a police station in the Santiago metro area, wounding 8 police officers, and to a former Interior Minister, which was defused by police. Two suspects were arrested in 2020, and the investigation remains ongoing at the time of this report. Then-President Piñera announced a 15-day State of Emergency in October 2021 in four southern provinces in the Araucania and Biobio regions. Piñera emphasized the State of Emergency was intended to combat drug trafficking, terrorism, and organized crime. The enactment of the State of Emergency placed the respective zones under a military authority designated by the president and empowered the armed forces to support law enforcement functions, prohibit public gatherings, and control the entry and exit of people in the four provinces, which have large populations of indigenous Mapuche among its 1.6 million residents. Congress authorized multiple extensions to the State of Emergency until March 26. On March 15, the Minister of Interior traveled to the Araucania region to initiate dialogue on the conflict between indigenous Mapuche communities and the Chilean government, however, armed gunmen prevented the minister from entering the community of Temucuicui. The State of Emergency lapsed on March 26 after the Boric government decided not to seek an extension from Congress.
While the security environment is generally safe, street crime, carjackings, telephone scams, and residential break-ins are common, especially in larger cities. Vehicle thefts are a serious problem in Valparaiso and northern Chile (from Iquique to Arica). On occasion, illegal activity by striking workers resulted in damage to corporate property or a disruption of operations. Some firms have publicly expressed concern that during a contentious strike, law enforcement has appeared to be reluctant to protect private property.
After a truck driver died in Antofagasta February 10 following an altercation with irregular immigrants from Venezuela, federations of northern truck drivers created road blockages and supply-chain disruptions to demand the Piñera administration implement increased safety measures. On February 14, the government initiated a State of Emergency in provinces along Chile’s northern border with Bolivia and Peru, sending soldiers to support law enforcement efforts. The State of Emergency is set to expire on April 15.
Chilean civil society is active and demonstrations occur frequently. Although the vast majority of demonstrations are peaceful, criminal elements have taken advantage of civil society protests to loot stores along the protest route and clash with the police. Annual demonstrations to mark March 29, the Day of the Young Combatant; September 11, the anniversary of the 1973 coup against the government of President Salvador Allende; and October 18, the anniversary of the outbreak of the 2019 civil unrest, have resulted in damage to property, looting, and scuffles between police and protesters.
11. Labor Policies and Practices
Unemployment in Chile averaged 9.1 percent of the labor force during 2021, while the labor participation rate was 58.5 percent of the working age population. Data on the labor participation of migrants is still pending. Chilean workers are adequately skilled and some sectors such as mining, agriculture, and fishing employ highly skilled workers. In general, there is an adequate availability of technicians and professionals. Estimates made by the National Institute of Statistics (INE) suggest informal employment in Chile constitutes 28.3 percent of the workforce.
Article 19 of the Labor Code stipulates that employers must hire Chileans for at least 85 percent of their staff, except in the case of firms with less than 25 employees. However, Article 20 of the Labor Code includes several provisions under which foreign employees can exceed 25 percent, independent of the size of the company.
In general, employees who have been working for at least one year are entitled to a statutory severance pay, upon dismissal without cause, equivalent to 30 days of the last monthly remuneration earned, for each year of service. The upper limit is 330 days (11 years of service) for workers with a contract in force for one year or more. The same amount is payable to a worker whose contract is terminated for economic reasons. Upon termination, regardless of the reason, domestic workers are entitled to an unemployment insurance benefit funded by the employee and employer contributions to an individual unemployment fund equivalent to three percent of the monthly remuneration. The employer’s contributions shall be paid for a maximum of 11 years by the same employer. Another fund made up of employer and government contributions is used for complementary unemployment payments when needed.
Labor and environmental laws are not waived in order to attract or retain investments.
During 2020, Labor Directorate data showed that 12,355 unions and 2,524 workers federations were active. In the same period, 273,706 workers were covered by collective bargaining agreements. Collective bargaining coverage rates are higher in the manufacturing (47,083), wholesale and retail; motor vehicles and motorcycles repair (43,676), and transportation and storage (20,468). Unions can form nationwide labor associations and can affiliate with international labor federations. Contracts are normally negotiated at the company level. Workers in public institutions do not have collective bargaining rights, but national public workers’ associations undertake annual negotiations with the government.
The Labor Directorate under the Ministry of Labor is responsible for enforcing labor laws and regulations. Both employers and workers may request labor mediation from the Labor Directorate, which is an alternate dispute resolution model aimed at facilitating communication and agreement between both parties.
Labor Directorate data shows that 494 legal strikes occurred in 2020, involving 86,152 workers. As legal strikes in Chile have a restricted scope and duration, in general they do not present a risk for foreign investment.
Chile has and generally enforces laws and regulations in accordance with internationally recognized labor rights of: freedom of association and collective bargaining, the elimination of forced labor, child labor, including the minimum age for work, discrimination with respect to employment and occupation, and acceptable conditions of work related to minimum wage, occupational safety and health, and hours of work. The maximum number of labor hours allowed per week in Chile is 45. On January 1, 2022, Chile raised its monthly minimum wage to CLP 350,000 – US$ 437 – for all occupations, including household domestic staff, more than twice the official poverty line. Workers older than 64 or younger than 19 years old are eligible for a special minimum wage of CLP 261,092 (US$ 326) a month. Information on potential gaps in law or practice with international labor standards by the International Labor Organization is pending.
Collective bargaining is not allowed in companies or organizations dependent upon the Defense Ministry or whose employees are prohibited from striking, such as in health care, law enforcement, and public utilities. Labor courts can require workers to resume work upon a determination that a strike causes serious risk to health, national security, the supply of goods or services to the population, or to the national economy.
The United States-Chile Free Trade Agreement (FTA) entered into force on January 1, 2004. The FTA requires the United States and Chile to maintain effective labor and environmental enforcement.
On November 16, 2021, the government enacted a law enabling teleworking for workers who are the legal guardians of children in preschool or below the age of 12 and for those workers who are the caregivers of individuals with specials needs or with limited physical mobility whenever the government declares a State of Constitutional Exception as a result of a public calamity (such as events produced by the nature) or public health events (including a pandemic). A bill lowering the maximum number of labor hours allowed per week in Chile from 45 to 40 hours is still pending approval by the Senate.
12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs
Chile is ineligible for DFC funding as it is classified as a high-income economy per the World Bank.
Since 2013, Overseas Private Investment Corporation (OPIC) partnered with U.S. solar energy developers to finance five large-scale power facilities throughout the Atacama Desert in northern Chile, one of which remains operational. Other OPIC-financed projects in the country include the run-of-river hydropower project Alto Maipo, and the toll road Vespucio Norte Express. Due to the World Bank’s classification of Chile as a high-income country, U.S. International Development Finance Corporation financing for the country is unavailable.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M US$)
* Source for Host Country Data: Central Bank of Chile.
Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment
Outward Direct Investment
“0” reflects amounts rounded to +/- US$ 500,000.
According to the IMF’s Coordinated Direct Investment Survey (CDIS), total stock of FDI in Chile in 2020 amounted to US$ 188.9 billion, compared to US$ 254.3 billion in 2019. Canada, the United States and Spain are the main sources of FDI to Chile with US$ 30.6 billion, US$ 29.0 billion and US$ 21.5 billion, respectively, concentrating 42.9 percent of the total.
Chile’s outward direct investment stock in 2020 amounted to US$ 188.9 billion, compared to US$ 71.7 billion in 2020, a significant decrease compared to US$ 130.2 billion in 2019. It remains concentrated in South America, where Brazil, Peru, Colombia and Argentina together represented 49 percent of total Chilean outward FDI. The United States accounted for 14.1 percent of the total, an increase compared to 2019 when it represented 9.2 percent of the total.
The data below is consistent with host country statistics. Although not included in the table below, tax havens are relevant destinations of outward FDI to Chile, with the British Virgin Islands, Panama, Luxembourg, and Cayman Islands ranking sixth, seventh, ninth and tenth in inbound sources of FDI, respectively, according to the Central Bank of Chile. The Cayman Islands and Bermuda rank sixth and seventh and tenth, respectively, among Chile´s main inward FDI source.
Table 4: Sources of Portfolio Investment
According to the IMF’s Coordinated Portfolio Investment Survey (CPIS), total stock of portfolio investment in Chile as of June 2021 amounted to US$ 200.4 billion, of which US$ 164.6 billion were equity and investment funds shares, and the rest were debt securities. The United States and Luxembourg (a tax haven) were the main sources of portfolio investment to Chile with US $71.3 billion and $54.9 billion, representing 35.6 percent and 27.4 percent of the total, respectively. Both countries also represent 65 percent of the total of equity investment. Ireland, the United Kingdom and Germany are the following top sources of equity portfolio investment to Chile, while the United States, Mexico and Japan are the top sources of debt securities investment.
14. Contact for More Information
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