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Doing Business in Chile
Considered one of the world’s best places to do business. Chile has more free trade agreements than any other nation, except Singapore. With a long-standing free-market orientation, Chile offers excellent commercial opportunities for U.S. products and services.
Facts to consider before expanding your business to Chile
Before building your business expansion strategy, you need to know the economy, business laws, legal framework, and Chile’s working culture. SERVIAP gives you high-level facts to understand the risks and opportunities of doing business in Chile.
The Economy
The economy of Chile is a market economy and high-income economy as ranked by the World Bank, and is considered one of South America's most prosperous nations, leading the region in competitiveness, income per capita, globalization, economic freedom, and low perception of corruption.
The importance of small and medium-sized companies
Small and medium enterprises (SMEs) are essential to almost all economies globally, but especially to those in developing countries because of their employment and income distribution.
Chile’s extraordinary economic growth record is based on nearly two decades of fiscal reform and monetary discipline. Between 1984 and 1998, the annual gross domestic product (GDP) growth rate ranged from 5% to 12%, with an average of 7.7%. Even in the face of external shocks between 1999 and 2002, Chile maintained a positive growth rate. Chile’s growth rate outpaced the average of the high-income member countries of the Organization for Economic Cooperation and Development (OECD). Such strong growth results from strong fiscal and monetary discipline, a relatively well-developed financial system, modern institutions, and a supportive business environment.
Opportunities and Investments of Chile Market
Chile’s national economy has minimized vulnerability to external shocks, increasing its prospects for sustained growth. This highly valued condition with international capital markets has earned Chile an A+ credit rating, the highest in Latin America. Chile is stable, prosperous, and consistently ranks high on global indices relating to economic freedom, transparency, and competitiveness. It also performs very well in terms of government efficiency, low levels of corruption, and openness to foreign trade.
Population Characteristics
Demographic
As of 2021, Chile has a population of 19.1 million people. Its population growth rate has decreased in recent decades due to a declining birth rate. By 2050 the population is expected to reach approximately 20.2 million people.
The Spanish spoken in Chile is distinctively accented and quite unlike that of neighboring South American countries. This is because the final syllables and “s” sounds are dropped. Some consonants have a soft pronunciation. There are also several indigenous languages spoken in Chile: Mapudungun,
Quechua, Aymara and Rapa Nui.
Many Chileans are Roman Catholics (60% approximately), and around 15% are Christian Protestant, making it one of the nations in Latin America with the most significant Protestant influence. About 25% of Chileans are religiously non-affiliated or state that religion is not essential in their lives.
Geography
Chile’s territory extends from the northern desert of the Atacama, the driest in the world, to the southern end of South America, Cape Horn. Chile extends through three continents, South America, Antarctica, and Oceania – Easter Island.
It averages 177 km or 110 m from the Pacific Ocean to its border with Argentina from east to west. Its terrain consists of low mountains along or near the coast, the central longitudes are fertile plains where agriculture thrives, and the eastern part of the country is made up of the Andes Mountains. This part of the Andes has one of the highest snow-covered peaks in the world, along with many glaciers The southern part of the country consists of small islands and peninsulas clusters.
Consumer preferences
The GDP per capita (PPP) in Chile is approximately USD 25,155 (World Bank, 2019). The average salary per full-time worker per month is CHP 573,964 (Instituto Nacional de Estadísticas – INE). Because inflation has risen faster than wage growth at the end of the year, purchasing power has declined in
2019.
The country's growth has enabled consumers to have better quality products. Price remains the main factor in purchasing decisions, but other determinants are quality, durability, technology, customer service, customer experience, and availability.
With regards to payments, cash is the most widespread. About 58% of the population uses debit cards, while credit cards are used by only 30% of the population.
Economic opportunities
Workforce and laws
Unlike the US, you cannot ask about anything else that is not necessary to know for the job position. During the recruitment stage, any decisions you make not related to the requirements and qualities needed for the job are considered discrimination and barred by law.
More Chileans have been seeking temporary employment and freelancing jobs in the last past few years. Many locals will seek out jobs or work with a recruitment agency with a high unemployment rate.
Human Talent
Chile’s educational system was structured along the 19th-century French and German models and is highly regarded among Latin American countries.
Chile had experienced rapidly increasing enrollments at high-education levels and an opening of access to all segments of society; this enrollment growth has almost exclusively been within the private sector and led primarily by market forces, with 80% of students today enrolled at a private institution of higher education.
Technological ecosystem
According to the Global Innovation Index, Chile ranks first in Latin America for innovation. The South American country is spending more on research and development than it was before the 2008 crisis. This spending by the government is spurring innovation through investments in startups and loosening restrictions for larger companies looking to penetrate the Latin American market. Chile is also ranked 14th for the number of firms created each year.
Facilities for foreign investment
Chilean economic policies, which are founded on the principle of capital transparency and non-discrimination against foreign investors, comprise one of the country's strengths. Investors are also attracted by the richness of Chile's natural resources, the stability of its macro-economic system, its
growth potential, its juridical security, its low level of risk, and the high quality of its infrastructure.
Chile's Culture
The Chilean population is approximately half of European descent and half of Native American descent (with about 4% African). Chileans are genetically and culturally less indigenous than neighboring Andean nations to the north, similar to Argentinians.
Spanish is the official language, and unlike other South American nations that have experienced immigration from all around the world, Chile’s culture and ethnicities are relatively homogenous throughout. Only 10% of Chile’s population considers themselves indigenous; however, most of this
group comprises the Mapuche ethnicities, whose traditional customs have had a significant influence on Chile’s modern culture.
Gastronomy in Chile
Chilean gastronomy is a combination of traditional Spanish cuisine, Chilean Mapuche culture, and local ingredients, with later important influences from other European cuisines, mainly from Germany, Italy, the United Kingdom, and France.
The food tradition and recipes in Chile are notable for the variety of flavors and ingredients. The country's diverse geography and climate host a wide range of agricultural produce, fruits, and vegetables. Chile is also one of the world's largest wine producers, and many Chilean recipes are enhanced and accompanied by local wines.
In traditional restaurants you would find most menus changing through the seasons. In winter, soups, stews, and dishes eaten with a spoon are at the forefront; cazuela (casserole), caldillo de congrio (conger stock), milcao (grated potatoes stew) or charquicán (dried meat stew) are a must have. In summer however, the food is lighter and made with fresh products; gambas al pil pil (shrimps in garlic), ensalada de digüeñes (cyttaria fungus salad), chorillana (fried fine onions, meat and eggs) and many more. Finally, Curanto. This dish is made for a minimum of 25 people. It is more than a traditional dish, it's a celebration that mixes fish, beef, chicken, seaweed and potatoes and congregates people together.
Risks of investing in Chile
Natural disasters such as earthquakes, tsunamis, and wildfire are common in Chile. Equipment and technologies to monitor and respond to these threats are in constant demand. Chile’s wildfire season lasts from November through April and has worsened over the last decade due to climate change and an ongoing historic drought.
The Chilean market for safety and security is highly competitive. U.S. companies must compete with foreign suppliers from China, India, Spain, Germany, Brazil, and other countries. U.S. technology is highly regarded in the Chilean market; however, the price has always been a priority in Chile.
Conclusion
Chileans have gained more economic prosperity than almost any other Latin American country due to their dynamic culture and resource-rich land and sea. Considered a top Latin American importer, a paradise for foreign companies, different free trade agreements, and a skilled workforce. It may seem easy to do business in Chile, but anyone looking to do business in this country is advised to get local corporate support like ServiAp, someone that shares your global perspective. Reach out to our team in Chile, we are happy to help you with your new business venture.
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