Foreign direct investment (FDI) in Chile

FDI in Figures

In 2021, Chile saw FDI flows rise, mainly driven by investments made into mining and hydrocarbons. According to the World Investment Report 2022 published by UNCTAD, FDI flows to Chile rose by 32% to USD 13 billion (compared to USD 8.4 billion in 2020), sustained by several large acquisitions and renewed interest in the mining industry, with the number of international project finance deals increasing 80% to 88 projects.Out of these projects, one of the largest ones is the construction of a USD 3 billion ammonia production plant with onshore wind farm, electrolysers, and port facility. In fact, from a sector-specific perspective, Chile's commitment to a green transition has created the basis for attracting additional foreign capital into green energy industries. Moreover, 2021 also saw an increase in Greenfield investments, reaching 82. However, FDI stocks decreased from USD 188 billion in 2020 to USD 180 billion in 2021. The USA, Spain, Canada, the Netherlands, and the United Kingdom represent more than the half of the FDI stock. Investment are mainly oriented towards mining, financial services, energy, commerce, and manufacturing.

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 is highly regarded as one of the strongest investment destinations in Latin America and the country has made progress in facilitating starting a business procedures over the last few years by enabling online registration of closed corporations. However, the country's reliance on copper prices may negatively affect its economy and drive away some potential investors. In 2020, the Chinese tech company announced that it would invest on a second data centre in the country, boosting its cloud and AI platform in South America, and in 2021 a Chinese firm Sinovac invested USD 60 million on a vaccine manufacturing plant in Santiago. Additionally, according to the Economist Business Environment, Chile ranks 20 out of the 82 countries reviewed for their investment climate.

What to consider if you invest in Chile

Strong Points

Strong points for FDI in Chile:

• Macro-economic stability, good growth perspective
• A top Latin American importer per capita, enjoys excellent solvency
• High purchasing power (for Latin America)
• Wealth of natural resources (coper, agriculture)
• Internationalised Chilean companies
• Labour laws that tend to be favourable towards business, mainly due to the flexibility of working hours and uncomplicated procedures for the dismissal of employees
• Foreign companies can also benefit from privileged access to regional markets through different free trade agreements.

Weak Points

Weak points for FDI in Chile:

• Lack of innovation, very weak spending in research and development
• Investment in network industries is not substantial
• Vulnerability to fluctuations in commodity prices and dependence on Chinese imports
• Electric and road infrastructure is insufficient for the size of the territory
• Lack of qualified work force. The activity rate of the working population is rather low, in particular among women and young people.
• Persisting economic inequalities resulting in political and social tensions (e.g strike in mining sector), with protests regularly taking place

Government Measures to Motivate or Restrict FDI

Chile’s foreign investment policy is based on simplicity, transparency and non-discrimination towards foreign investors. Over the past years, the Government has worked to simplify investment procedures. On a fiscal level, foreign investors benefit from a moderate corporate tax and they are guaranteed access to the formal foreign exchange market, including free remittance of capital and profits. A new legal type of company has been developed, the 'Simplified Limited Company' (‘empresa individual de responsabilidad limitada' - EIRL) that allows a foreigner to create a business in Chile without needing a local partner. Also, joint stock companies can be formed without a local partner (but another legal entity is required).

The Government established a foreign investment promotion and attraction strategy that included the creation of a new national investment promotion agency, InvestChile. InvestChile assists overseas companies with their investments in Chile. The Government has identified five priority sectors for investment: mining industry services, sophisticated food industry, exportable technological services, tourism and energy/logistics.
Under Law Decree N° 600 (the so-called "Foreign Investment Statute"), a guaranteed income tax rate of 42% may be granted for ten years or, provided the capital investment project exceeds USD 50 million, 20 years for the development of industrial or extractive projects (the overall rate is comprised of the corporate tax on profits and withholding tax on dividend or branch profit distributions).

Bilateral investment conventions signed by Chile

Visit UNCTAD's Investment Policy Hub to consult the investment treaties signed by Chile.