major macro economic indicators
|GDP growth (%)
|Inflation (yearly average, %)
|Budget balance (% GDP)
|Current account balance (% GDP)
|Public debt (% GDP)
(e): Estimate (f): Forecast
- Mineral resources (leading producer of copper and second-largest producer of lithium, in high demand to support the energy transition), agricultural, fisheries, and forestry resources, potential for renewable energy production
- Numerous free trade agreements.
- Flexible monetary, fiscal, and exchange rate policies
- Member of the OECD, the Pacific Alliance and the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership)
- Strong institutions
- Small and open economy, vulnerable to external shocks due to dependence on copper and Chinese demand
- Exposure to climate and seismic risks.
- Insufficient research and innovation
- Disparity in incomes and wealth, mediocre education and healthcare systems, fostering social discontent
A timid economic recovery
2023 ended with a slight decrease in GDP. The depreciation of the peso and the increase in oil prices in the second half of the year slowed down the disinflationary process, leading to a tightening of monetary policy (Central Bank of Chile's key interest rate still at 9% in October 2023) and a reduction of domestic demand. Unless there are setbacks in the Chinese economy (Chile’s main partner), a stronger impact of El Niño that could affecting agricultural (9% of exports in 2022) and mining (57%) production, or worsening geopolitical tensions, economic activity is expected to return to a slightly positive trajectory in 2024. The decrease in inflation should positively impact real wages and household purchasing power. However, investment growth will be anemic by Chilean standards, showing an annual increase of only 2.5% in 2024. The trend towards decline was already evident in 2023 due to stricter mining regulations (introduction of environmental criteria) and an increase in copper production costs (from 1.59 USD/lb in 2022 to 1.98 USD/lb in the first half of 2023). The implementation of reforms on lithium and copper in 2024 will further contribute to the national loss of attractiveness compared to Peruvian and Canadian competitors. Concerning copper, taxes for major producers (that generate more than 50,000 tonnes of copper per year) will be increased. The tax will consist of a fixed part (annual tax of 1% on sales) and a variable part (between 8 and 26% depending on profits). For the gray metal, the government will compel producers to surrender 51% of their operations to the State. Additionally, in the event of the rejection of the new constitutional proposal in December 2023, uncertainty about government policies (tax reform, retirement) may linger into 2024, further undermining investor confidence. Nevertheless, the mining sector will continue to support economic activity.
Foreign exchange reserves were tapped into, but benign twin deficits persisted
The current account deficit significantly narrowed in 2023. The increase in the trade surplus resulted more from a sharper decline in imports, due to weak domestic demand, than from exports, which faced the slump in copper and lithium prices. Following the same trend, the services deficit lightened, aided by the decrease in maritime and air freight costs, along with a rebound in tourism activity. Additionally, the primary income deficit slightly diminished. The economic slowdown effectively contributed to the reduction in profits repatriated by foreign companies. While net FDI inflows for the first three quarters of 2023 significantly exceeded the current account deficit for the period, the implementation of mining reforms may weaken these flows in 2024. Chilean pension fund investments abroad are more or less offset by foreign portfolio investments in Chile. The central bank’s foreign exchange reserves weakened after it had to use 24% of them to defend the peso in 2022. To address this weakness, the Central Bank of Chile (BCCh) adopted a 10-billion-dollar accumulation programme over 12 months in June 2023. However, the widening interest rate differential with the Fed forced a temporary suspension in October 2023, as pressure mounted for peso depreciation. Despite the IMF granting a 2-year flexible credit line of 18.5 billion dollars in August 2022, the foreign exchange reserves barely covered the 5 months of imports recommended by the IMF in October 2023. Moreover, the Chilean net external position accounted for 18% of GDP in September 2023. As for the country's external debt (76% of GDP at the end of September 2023), it would continue its downward trend in 2024, only for the private sector. 68% of the external debt is owed by the private sector and represents 22% in FDI.
On the budgetary front, the public account returned to a slight deficit in 2023, reverting to its pre-Covid level. Declining mining revenues and tax exemptions aimed at boosting investment and private consumption pulled down public revenues, while expenditures increased, impacted by the recession. However, for 2024, the public deficit is expected to narrow, driven by the collection of new mining taxes (0.45% of GDP when fully implemented). Finally, gross public debt will continue its upward trend in 2024. Its domestic portion (66% of the total, central government only) is equally denominated in pesos and UF (unidad de fomento, a peso indexed to inflation), while its external portion is in dollars (68%) and euros (30%). 98% of the total public debt is held % by private creditors.
A weak political base hindering government reforms
The popularity of President Gabriel Boric from the left-wing Apruebo Dignidad party and his government weakened in 2023. Despite some initial success with the population, such as an increase in the minimum wage, a reduction in the maximum weekly working hours to 40, and mining royalties, the government has faced major political and legislative setbacks since September 2022. The rejection of the initial constitutional proposal and the tax reform, deemed too left-leaning by a majority of the Chilean electorate and center-left parties in Congress, has led to ongoing challenges. These challenges are likely to continue into 2024, given the controversial nature of Boric's political agenda. The government has negotiated with the opposition to revise its tax proposal, which was rejected in March 2023. The updated fiscal pact would include measures from the previous reform, while omitting the most contentious points, such as the wealth tax and undistributed profits. The pension reform is also scaled back, with the reduction of private pension funds (AFP) to a simple mutual fund facing direct competition with the state-managed alternative and being replaced by a new public agency called the Administrador Provisional Autonomo. This revision may not garner majority support. However, the extension of coverage for the Pension Garantizada Universal (PGU), aimed at supporting low-income retirees, has a good chance of being adopted. The fate of these reforms is tied to the constitutional reform, subject to a referendum in December 2023, which could again be postponed, this time viewed as too conservative by voters. While the 2019 uprisings demanded progressive changes, the constitutional drafting council, responsible for the second proposal, was mostly dominated by opposition parties (66% of seats held by the right, including 44% by the far-right Partido Republicano). In this scenario, the fragmentation of the Chilean political landscape would make it difficult to implement Boric's reforms until the new general elections in 2025.
On the foreign front, Chile intends to strengthen ties with the EU and maintain relations with the United States. Boric's environmental and progressive agenda aligns with the European focus on promoting investments and trade relations with democratic countries. Chile's abundant reserves of lithium and copper and its renewable resources, conducive to green hydrogen, are particularly attractive within the framework of the European Green Deal. In December 2023, both parties decided to update their Free Trade Agreement (FTA) to include environmental clauses and encourage the EU to invest more in Chilean renewable energies. The agreement is expected to be ratified by the end of 2023, provided there is no opposition from the European agricultural sector. Chile will also uphold its FTA with the United States, ensuring its alignment with the Inflation Reduction Act (IRA) through tax credits for electric vehicle manufacturers and metal producers (copper, lithium)
Last updated: November 2023
Promissory notes, cheques and bills of exchange are frequently used for commercial transactions in Chile. In an event of default, it offers creditors some safeguards, including access to the summary proceeding (Juicio Ejecutivo). Under a juicio ejecutivo, based on his appraisal of the documents submitted, a first instance judge (Juzgado Civil) may order a debtor to pay at the moment of the notification – if the debtor fails to do so, his property will be seized. These documents may need to be validated by court before becoming legally enforceable.
Bills of exchange that are guaranteed by a bank are widely accepted, though somewhat difficult to obtain. They limit the risk of payment default by offering creditor additional recourse to the endorser of the bill.
Cheques, which are used more often than bills of exchange or promissory notes, offer similar legal safeguards under Juicio Ejecutivo in the event of unpaid for a cause (protesto), uncovered cheques, or closed accounts. Checks and the other mentioned documents, if not paid on time, can be reported to a Credit Report Company called Boletin Comercial.
The same is true of the promissory note (pagaré), which − like bills of exchange and cheques – is an instrument enforceable by law and, when unpaid, may also be recorded at Boletín Comercial (see below). The promissory note needs to be validated (protestada) by a public notary or in a judicial trial.
The Boletín Comercial is a company dedicated to conducting financial risk analysis. It provides to other information companies (such as Dicom, SIISA) information about the debts registered at national level for all kind of debtors. Boletín Comercial is the official and most important company, on this matter, at national level under the authority of the Santiago Chamber of Commerce (Cámara de Comercio de Santiago). Both, Companies and individuals, can be registered as debtors in the Boletin Comercial. The register provides key financial information that can be consulted by anyone who is interested in obtaining a picture of the financial behaviour of a Company or individual.
Electronic transfers via the SWIFT network, widely used by Chilean banks, are a quick, fairly reliable, and cheap instrument.
Collection begins with an amicable collection process where parties can agree on a payment settlement or other payment plan. The length of this amicable phase depends on the predefined term of the documents supporting the debt (cheque, invoice, promissory note, bill of exchange). A formal notice is sent by a recorded delivery letter inviting the debtor to pay.
If the parties did not include any specific clauses in the commercial contract, the applicable rate for delays on the payment is the conventional interest rate as defined by the central bank of Chile on a periodical basis.
When a settlement agreement cannot be reached with the debtor, the creditor will initiate a legal collection process ruled by local civil procedure.
Aside from the Juicio Ejecutivo creditors who are unable to settle with their debtors out of court may enforce their right to payment through the corresponding legal action ruled by the civil procedure. According to the local procedural laws, there are two kinds of judicial collection procedures; i), ordinary proceedings (Juicio Ordinario); ii) and abbreviated proceeding (Juicio Sumario) depending on the value of the sued amount and the type of documents that support the debt.
The claimant needs to explain the basis for their legal action and enclose all supporting documents (original copies) and evidence. After the first presentation in court, the judge will decide whether the legal action has basis or not. If the judge considers there are enough arguments and evidence, he will give course to the process.
All judicial action needs the presence of a barrister or solicitor (lawyer), whether taking place in front of a minor court (Juzgados – primera instancia) or superior court (Corte Apelaciones o Suprema − segunda instancia).
Debtors can dispute ruling with motivated arguments that law contains at the Código de Procedimiento Civil (Civil Procedure Code, defences) such as payment of debt, prescription, compensation, etc. Judges will consider these arguments and will accept or reject the defence. It is important to note that, while the defences of the debtor are discussed by the parties in the trial, the steps relating to seizure of assets are not stayed. The idea of this is that the debtor cannot delay the procedure unnecessarily.
Trials can last from six months up to two years, depending on the document, the debtor’s defence, and if an appeal is filed following the initial judgement.
Enforcement of a Legal Decision
Domestic judgments are enforceable when all appeals have been exhausted. If the debtor fails to comply with the decision, the court can order an auction of the debtor’s assets. Collection from a third party owing to the debtor is not possible.
Foreign judgments may be enforced if the Supreme Court validates these through an exequatur proceeding. Chilean law only recognises foreign judgements on a reciprocity basis: the issuing country must have an agreement with Chile regarding recognition and enforcement of legal decisions. Proceedings can last from between one to two years and the amounts to recover decrease because it is not possible to request the restitution of taxes paid to the treasury, which national companies can require.
Out-of court proceedings
The 2014 bankruptcy law recognizes agreements between creditors and debtors that are reached outside of a bankruptcy proceeding, whereby a court approves the agreement that was developed outside of the bankruptcy court. In order to be approved, two or more creditors whose claims represent at least 75% of the total claims corresponding to their respective group must accept the plan.
Chilean law distinguishes different categories of creditors during a bankruptcy process, e.g. employees owned money, creditors that have a mortgage (usually banks), etc. Creditors in these categories have preference for payment over others. If creditors do not meet the criteria to be part of these categories, they do not receive have any kind of preference for payment.
While considering the approval of said plan, the court stays the procedure and the legal actions against the debtor. However, during this time also, the debtor is prohibited from disposing of any of its assets. After approval, the plan has the same effect as a judicial reorganization.
Restructuring processes carried out without a formal bankruptcy process are also carried out through a court trial at the request of the creditor(s). In the event that the debtor is not able to reorganize his debt through any agreement or negotiation, creditors may request the liquidation of the company.
These agreements are more formal than extra-judicial agreements, and can only be filed by debtors, as they have to declare their insolvency to the court. The proceedings apply to both secured and unsecured creditors. Once debtors enter the judicial reorganization process, they must subsequently propose a reorganization plan, which requires the approval of at least two thirds of the total number of creditors.
Liquidation is organized through a single procedure initiated upon demand of the debtor or creditors. The latter can file for bankruptcy when a debtor defaults without appointing an administrator for its business. Once bankruptcy is declared, a trustee is given responsibility for the debtors’ business and assets.