Chile continues to be a strong trading partner and export market for U.S. companies, largely due to its open market policies, zero tariffs, stable democratic government, solid business practices, and low corruption. While GDP growth over the last 30 years has averaged 5% per year, the Chilean economy has slowed recently, with just 1.9% growth in 2014 and projected GDP growth of 2.3% in 2015.
As the United States - Chile Free Trade Agreement (FTA) concludes its eleventh year, trade of products and services continues to be a resounding success, with an increase of over 330% in bilateral trade since implementation. As of January 1, 2004, duties were reduced to zero on 90% of U.S. exports to Chile, and in January 2015, all remaining tariffs were phased out, such that all U.S.-origin products now enter Chile tariff free.
In 2014, bilateral trade between the United States and Chile reached US$26.0 billion, down slightly from levels in 2012 and 2013. Specifically, the U.S. enjoys a trade surplus with Chile, exporting US$16.6 billion to Chile in 2014, while imports to the U.S. from Chile totaled US$9.4 billion. Overall, the U.S. is Chile’s #2 trading partner after China. However, the United States has a broader and more dynamic trading relationship with Chile, exporting over 1,800 different categories of U.S. products (as compared with 500 categories from China).
According to the United Nations Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) inflows to Chile in 2012 reached US$28.5 billion, and fell to US$20.3 billion in 2013. FDI inflows to Chile from the U.S. amounted to US$3.4 billion, and total FDI stock from the U.S. stood at US$39.8 billion in Chile at the end of 2012 (last year of information available).
Both macroeconomic stability and growing integration 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 international indices relating to economic freedom, transparency, and competitiveness. It also performs very well in terms of government efficiency, low levels of corruption, openness to foreign trade and was the highest ranked country in Latin America in terms of economic competitiveness, according to the World Economic Forum’s Global Competitiveness Report 2014-2015.
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 APEC, and a founding member of the Trans Pacific Partnership and UNASUR. In 2010, Chile became the 31st member of the OECD, only the second Latin American country to join after Mexico.
Chile has successfully negotiated Free Trade Agreements with 62 countries around the world, notably with Europe, China, India, and North America, among many others. As such, competition is fierce and Chile has given its nearly 17 million citizens unprecedented access to the world’s products and services. This offers a unique opportunity for U.S. exporters interested in expanding their businesses in arguably the most open and stable market in Latin America.
On September 10, 2014, the Chilean congress passed a major tax reform, aimed to collect additional revenue equal to 3% of Chile’s current GDP. The main changes affect income taxes, and will be phased in over four years, entering into force completely by the beginning of 2017. The top marginal rate for personal income tax will decrease from 40% to 35%, and corporate tax rate will rise from 20% to 27%. Most companies will now pay taxes on a partially integrated basis, under which shareholders will be allowed to use 65% of corporate tax payments against their personal income. Taxes on alcoholic beverages will rise from 15% to 20.5% for beers and wines, and from 27% to 31.5% for distilled beverages. Other new taxes that were also introduced include a “green tax” on sales of new vehicles and a capital gains tax on real estate sales. New provisions on tax compliance will limit evasion and strengthen the capabilities of the Chilean Internal Tax Service, or Servicio Interno de Impuestos (SII). A value-added tax (VAT) of 19% is applied to all goods and services, imported and domestic, and remained unchanged under the tax reform. The mining royalties and fuel tax, which together account for more than half of the country’s tax revenue, were also unchanged.
In 2010, the United States and Chile concluded the negotiations of a bilateral tax treaty that has not yet been ratified in either Congress.
Learn about Doing Business in Chile in our Country Commercial Guide (CCG). This comprehensive document presents an overview of the local commercial environment, using economic, political, and market analysis. It is prepared annually through the combined efforts of several U.S. Government agencies at the U.S. Embassy.