Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Chile continues to be a strong trading partner and export market for U.S. companies, largely due to its open market policies, zero tariffs, solid business practices, and low corruption index. Regarded as a regional leader, Chile has a history of economic and political stability, transparency, and strong democratic institutions, which gave it the ability to address widespread social unrest through political means and peaceful elections. Chile is also admired for how it mitigated the spread of COVID-19 through a strong program of mobility restrictions but also a vaccination campaign in which over 90% of the population has been fully vaccinated.
However, after a 40-year run of economic stability, Chile has entered a period of uncertainty. Investors and the business community are apprehensive about current government proposals to expand the role of government in the economy and provide expansive social services by reducing the involvement of the private sector. Since his term began in March 2022, President Gabriel Boric and his team have proposed broad tax reforms to finance additional social programs outlined in his agenda. Although Congress is divided evenly among left- and right-leaning political parties, some pending legislation could bring significant change to business rules and regulations, particularly in industries such as mining, energy, water, healthcare, and financial services. In September 2022, Chileans rejected a new constitution drafted in response to the civil unrest in October 2019 to replace the current constitution established in 1980 under the Pinochet regime. However, analysts expect economic uncertainty to continue into 2023 as Congress takes on reforms, whether under a new constitutional process or President Boric’s agenda.
As in other countries, Chile is experiencing economic shocks. In addition to the lingering effects of the COVID-19 pandemic, energy and overall price increases resulting from Russia’s invasion of Ukraine have exacerbated inflation. After soaring consumer prices raised inflation rates by nearly 12.5% and the Chilean peso hit a sharp devaluation in June 2022, the Central Bank raised interest rates to 9.75% in July – a historic high. Nevertheless, analysts still forecast modest economic growth of 1-2% for 2022 and either no growth or a slight contraction for 2023. Volatility in the price of copper has also impacted the economy. Despite economic uncertainty, the overall perception of the Chilean market is good, given global conditions.
Bilateral trade in goods and services quadrupled since the inception of the United States - Chile Free Trade Agreement (U.S.-Chile FTA), now concluding its nineteenth year. As of January 1, 2004, duties were reduced to zero on 90 percent of U.S. exports to Chile, and in January 2015, all remaining tariffs were phased out, such that all U.S.-origin products enter Chile tariff-free, except for some alcoholic products and luxury goods. In 2021, bilateral trade in goods between the United States and Chile totaled $30 billion, and bilateral trade in services for 2020 totaled $6 billion. Overall, bilateral trade flows between the United States and Chile are well-balanced, with the United States exporting mineral fuels and machinery in exchange for Chile’s copper and agricultural products.
Chile continues to pursue market-oriented strategies, expand global commercial ties, and actively participate in international issues and hemispheric free trade. Chile is a member of the Pacific Alliance, the Rio Group, an associate member of Mercosur, a full member of the Asia Pacific Economic Cooperation (APEC), and the Union of South American Nations (UNASUR). Chile became the 31st member of the Organization for Economic Cooperation and Development (OECD) in 2010, only the second Latin American country to join after Mexico.