Economic Development in Chile

Chile’s economy is considered one of the most developed in Latin America. It boasts high income levels, low corruption, and a rapidly growing GDP, which has increased by about 5% annually since 2010. Discover how Chileans have managed to create comfortable conditions for living and doing business.

Chile stretches along the southwestern coast of South America for more than 4,600 kilometers, providing access to both the Pacific and Atlantic Oceans. This geographical position supports mining, year-round agriculture, fishing, construction of large seaports, and industrial production.

History of Chile’s Economic Development

Chile is often regarded as the most “European” country in South America due to its favorable business conditions, sound economic policies, and high level of security. However, this has not always been the case. Chile’s history is marked by difficult events, including a long dictatorship, poverty, nationalization, and major earthquakes.

Industrialization began relatively early in Chile. In the mid-19th century, large deposits of copper, coal, silver, and saltpeter were discovered, attracting hundreds of thousands of immigrants from Europe, many of whom were highly skilled workers. This influx helped avoid social inequality, slavery, and technological backwardness amid global industrial growth.

The Priority Migration Act of 1845 attracted educated and professional immigrants, who helped build new cities and instilled democratic principles in the native population. Unlike other Latin American countries, dictatorships were rare in Chile.

Copper mining became Chile’s main economic driver. The growing demand for copper in the 1960s allowed wages to rise by 25%, a record in South America. President Salvador Allende nationalized the mining companies, but this move did not yield the expected results.

In the early 1970s, interest in copper declined, world prices fell, and Chile faced an economic crisis with soaring inflation. A military coup in 1973 brought Augusto Pinochet topower, who implemented a plan to restore the economy and transition to a market system through privatization.

Another economic breakthrough occurred in the early 1990s after Pinochet’s fall. Under President Patricio Aylwin, economic reforms boosted Chile’s GDP growth to 7% annually, reduced inflation to 12%, and lowered unemployment by nearly 5%. Foreign investment surged as Chile returned to the international stage. Since the early 1990s, Chile’s GDP has continued to grow, doubling in the last 15 years, outpacing the world average.

Main Economic Sectors

Chileans are fortunate with the natural resources of their homeland, which include large deposits of minerals essential for high-tech equipment production, such as molybdenum, lithium, and rhenium. Chile’s exports of these elements account for more than half of the world market. Agriculture and wine production are also significant industries.

Minerals

Chile’s economy is based on extractive industries, particularly copper mining, which accounts for over 30% of the world market. Both private companies and the state-owned CODELCO engage in mining. The country also exports copper products and valuable steel additives. Government support includes grants, tax breaks, and tax refunds, attracting investors to establish new fields.

Other significant resources include iron, zinc, natural nitrate, gold, silver, and lithium. Given the growth in lithium battery production for electric vehicles and digital technology, this sector has great prospects.

Agriculture

In addition to minerals, wine production and agriculture are crucial to the Chilean economy. The country exports a variety of fruits, including grapes, blueberries, plums, and kiwis. Chile is also a significant supplier of avocados to the world market. There are about 9,000 wine producers in the country; the mountainous terrain and mild climate allow for grape cultivation on sunny slopes. The production of vegetables, wheat, and livestock meets the domestic market’s needs, providing the local population with essential food products.

Tourism

When discussing the Chilean economy, it is essential to highlight the rapid growth of the tourism sector. The number of visitors to the country has doubled in the last 10 years, now exceeding 6 million annually. Tourism contributes significantly to GDP and shows substantial investment dynamics. Despite the high income from incoming tourists, there are many untapped opportunities in the country that could be interesting for starting a business.

Renewable Energy Market Analysis

Chilean authorities anticipate significant growth in the solar energy market. The installed base is expected to reach 8.40 GW in 2024 and 21.61 GW in 2029, with a compound annual growth rate of more than 20%. The growing demand for solar energy and the decreasing cost of power supply systems are stimulating the energy sector of the country’s economy. The largest power companies have agreed to phase out coal-fired power plants, with the goal of completing the decommissioning of old substations by 2040. This transition will create additional demand for the installation of new energy capacity.

Economic Policy

Chile’s main trading partners are China, the United States, Japan, and Brazil. The country is part of APEC, promoting economic growth through open trade and a democratic investment regime. China is the main trading partner, with bilateral trade reaching $48 billion. Trade with the USA amounts to $21 billion.

MERCOSUR, the common market of South America, aims to develop the region economically, improve well-being, and reduce U.S. influence. Chile and other member countries benefit from:

• Free movement of goods, services, and labor;
• Uniform tariff rates;
• Coordinated macroeconomic and sectoral policies.

Problems and Challenges

Chile’s main economic challenge is its dependence on copper and lithium prices. Exporting metals alone will not sustain the economy at a high level. The state aims to lead in the “green” energy sector, with prospects for investors as authorities plan for green energy to exceed 70% by 2030. Chile’s good reputation among international investors helps overcome global market challenges.

The upcoming 2025 presidential elections may cause some unrest but are unlikely to change the economic situation significantly. The main political issue in the near future is the potential constitutional change.

Prospects for the Future

Chile’s economy is developing steadily. Key factors include participation in the Organization for Economic Cooperation and Development, numerous trade agreements, and demand for minerals. Although there was a slight economic stagnation in early 2020, indicators improved by 2023, driven by global market participation.

Another positive factor is the favorable environment for foreign entrepreneurs. It is easy to register a company in Chile with minimal formalities and no corruption, attracting foreign businesspeople.

Chile’s economy has transformed from an underdeveloped agricultural country to one of the world’s most market-oriented economies. The structure of the Chilean economy aims to improve citizens’ living standards and supply the labor market with new personnel. Additionally, obtaining Chilean citizenship is straightforward, offering advantages to business owners. For example, a passport can be obtained by giving birth in Chile due to the “law of the soil,” granting citizenship to anyone born in the country. The child’s parents can then follow a simplified procedure to obtain permanent residence and eventually a Chilean passport.