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The Chilean Economy

The Chilean economy is recognised internationally as one of the most stable, open and competitive in Latin America. In more recent times the country has built its economic success on exportation of raw materials such as copper, housing a third of the world’s reserves, with mining being its biggest economic sector, followed closely by agriculture and forestry writes Rachel Smith.
 

Today, Chile attracts approximately the same amount of foreign direct investment (FDI) as Mexico, which is one of Latin America’s strongest economies, although Chile is far smaller in terms of geographical size. The country has an increasing middle and upper class and there is a strong effort to widen investment sources. The world’s largest producer of copper with approximately 200 years of copper reserves is Codelco Chile and with the opening up of Asian and European markets, the export of forestry products has significantly increased. Historically, mining has been Chile’s largest economic segment and a major growth driver in recent decades, accounting for 62% of exported goods in 2021. 
 

The nation has also become a leader in wine production and the ‘adventure tourism’ sub-sector has also benefited from an increase in global tourism. Chilean economic policies are founded on the principles of capital transparency and non-discrimination against foreign investors, who are attracted by the stability of Chile’s economic system, richness of natural resources, juridical security, minimal risk and high quality infrastructure. Due to it is open market principles, democratic government, ethical business practices, low corruption and the absence of tariffs, Chile stands out as a critical trading partner and export market for American businesses. 
 

Chile is highly regarded as one of the strongest investment destinations in Latin America and with few exceptions, foreign investors can fully own corporations in Chile as the country will only impose restrictions on private ownership or establishment in what would be deemed to be ‘strategic’ industries like nuclear energy and mining. With a population of 19.6 million spanning an area of 2,006,626 sq. km, Chile is considered a OECD high income country and has an extensive network of trade agreements which includes 25 free trade agreements, with preferential access to 64 economies. Renowned for having a stable macroeconomic context and low public debt, competitive, open markets and a strong financial system, the nation does suffer from issues stemming from inflation, although GDP was 301.2 billion USD in 2022. 
 

According to data from the Copper Commission of the State in Chile, the presence of leading international mining companies and their planned projects for the period of 2022-2030 which amount to $69 billion USD in investments, clearly demonstrate the great appeal that this nation has in the eyes of investors. Chile also holds about 45% of the world’s lithium reserves and is working on increasing production capacity. 
 

The energy sector is also booming in Chile and the installed capacity of solar and wind continues to grow with many projects under construction. The country ranks number one in the world in rankings of renewable energy, with the government recently announcing in 2020 the National Green Hydrogen Strategy for Chile to become one of the world’s major hydrogen exporters.
 

ADVANTAGES OF SETTING UP A BUSINESS IN CHILE

The country’s tax rates are much lower than the range of Latin American and European countries, making it an ideal economy to invest in. Chile can be considered a region with the most successful marketplace in Latin America, with business-friendly policies. The literacy rate of Chile was 96.40% in 2017, and so it is a prime location for skilled and talented human resources. Chile is also known as one of the safest nations for conducting business; in all of Latin America it presents some of the least political risk and the country is very stable pertaining to fiscal, social, political and economic systems, with low rates of crime. By putting emphasis on talent and supporting its policies with capital, Santiago, Chile has emerged as Latin America’s business capital, with Government programs that offer incentives drawing in a lot of expertise from the US and other countries. 
 

One method of setting up a business in Chile, is in the acquisition of an investor visa, which enables you to live in the country for 1-2 years. Investors may apply upon spending at least $500,000 USD on a project with a letter of sponsorship from InvestChile and a criminal history certificate being prerequisite documents for this visa. Selection of a new company name with Chile’s company registry, a registered office address and selection of a minimum of between 2-50 company shareholders are the next steps. 
 

Individuals domiciled in Chile are liable for an infinite amount of taxes on international income, depending on a progressive tax rate ranging from 0-45%, whereas corporations that acquire residency at incorporation are entitled to a 27% corporation tax. Non-residents paying taxes on their income of Chilean origin is regulated with a holding tax rate, typically fixed at 35%. This can vary based on the kind of income received or dispersed overseas. 

Foreigners who wish to live and work in Chile must apply for a Temporary Residence Visa, which is issued for a maximum of two years and may be made permanent in increments of two years. Foreign investors also have access to the official foreign exchange market without transaction fees and receive a moderate corporate tax benefit. 
 

InvestChile is the government agency responsible for promoting Chile in the global market as a destination for foreign direct investment, serving as a bridge between the interests of overseas investors and the business opportunities the country offers, providing specialised services in line with the nation’s economic development policies. 
 

THE FOUR MAIN TYPES OF BUSINESS STRUCTURE IN CHILE:

There are four main types of business structure available for the self-employed in Chile. These include: 
 

Individual Limited Liability Company - The best option for sole traders who are interested in establishing their business in Chile. The business legal entity known as the Empresa Individual de Responsabilidad Limitada (EIRL) functions independently from its owner and is allowed to carry out all civil and commercial operations. While the corporation is solely responsible for the value of all its assets, the business owner is only responsible for the number of capital investments. The firm name has to be descriptive of its operations or feature the identity of its founder. 
 

Limited Liability Company - This kind of company can have 2-50 shareholders, must mention one or more of the associates or the business it engages in, partners are free to choose the company’s operations, management, and there is no capital investment required. 
 

Stock Company - This kind of company is handled in a manner nearly equivalent to close corporations and subject to the same rules. It comprises one or more people and shares denote each person’s capital contribution. 
 

Corporation - This is comprised of a group of stockholders who create a common fund and a board of directors who make decisions based on a majority of votes. Each shareholder is responsible for their specific capital contribution only, the corporation must rigidly adhere to pay its initial share capital within three years, and there are two kinds of corporation; a public corporation and a close corporation.
 

The cost of incorporation in Chile is about $7,200 USD in the first year, with average fees for the opening of a bank account, tax registration and other fees climbing up to approximately $18,385 USD. The government has prioritised investment in the following five industries; mining, high end food, tourism, energy, and exportable technology services. After your company receives legal registration, you must open a bank account with a Chilean bank of your choice. Companies can setup corporate banks in either Chilean Pesos or US Dollars, as per the requirements of the business.   EG

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