Foreign direct investment in Chile reached US $17.1 billion in 2022. The Minister of Economy, Nicolás Grau, indicated that this figure is a “good sign for the Chilean economy.” He stated, “It speaks of investor confidence in the country and contributes to the generation of more and better jobs for the country’s citizens.”
On February 5, 2023, the Central Bank reported that the flow of foreign direct investment in Chile (FDI) received between January and December 2022 reached a total of US$17.1 billion. According to the analysis carried out by InvestChile, this amount is 12% higher than that accumulated during the same period in 2021. Additionally, it is 36% higher than the average of the last five-year period (US$ 12.6 billion) and 23% higher than the average for the years 2003-2022 (US$13.9 billion).
The most important component of the FDI flow was participation in capital investment, which accumulated an amount of US$9.1 billion in the period. The reinvestment of profits reached an amount of US$6.7 billion, while the debt instruments accumulated an amount of US$1.3 billion.
The figures in early February correspond to a preliminary assessment. Thus, they may undergo adjustments in the next review that the Central Bank will make on March 18.
A good year for foreign direct investment in Chile
The Minister of Economy, Nicolás Grau, pointed out that the figures are a “good sign for the Chilean economy” since “a higher level of foreign direct investment, in addition to meaning an injection of liquidity for the economy, contributes to the development of the country through the installation of sustainable projects, the arrival of new technologies and the generation of quality jobs for Chilean men and women.”
“The figures published by the Central Bank show that the Chilean economy is resilient. When choosing where to install their projects, global companies focus on long-term results, which is a good sign that foreign direct investment in Chile continues to grow. This speaks of confidence in our economy and its future development. As a government, we will continue working to attract sustainable and quality investment to Chile since its contribution to the recovery of the economy is fundamental”, said Minister Grau.
The director of InvestChile, Karla Flores, highlighted that last year’s investment level was the highest since 2015 and one of the highest figures in the historical series (20023-2022). The numbers exclude the Chilean mining boom (2010-2015). In addition, she pointed out, they reaffirm the willingness of investors not only to maintain their positions in the country but also to increase existing operations. “We are facing an injection of capital and long-term resources since 92% of all the capital flow that entered the country corresponded to new projects or expansion of existing operations, and only 8% consisted of loans to subsidiaries from the parent company”, explained Flores.
InvestChile ‘s 2023 planning will focus its work on attracting quality foreign direct investment in Chile in markets classified as strategic. This effort will be complemented by the work of the new Investment Attachés in the United States, Germany, France, Italy, and Canada, which are added to the already existing Attaché Office of Japan.
“2023 will undoubtedly be challenging for foreign direct investment, but we have reasons to be optimistic: Chile has established itself as a preferred investment destination within Latin America, especially in terms of technological infrastructure and clean energy. These are two sectors that we believe will continue to develop this year. All companies that want to contribute to the sustainable development of our country are welcome to participate in foreign direct investment in Chile,” said Flores.
Free zones are open to foreign direct investment in Chile
In Chile, the free zones are located in the two most extreme regions of the country. They are in the Region of Tarapacá in the city of Iquique, and in the Region of Magallanes, in the city of Punta Arenas. Both of these special economic areas receive government support to promote their economic development. In Iquique, the free zone is better known as ZOFRI; in Punta Arenas, it is known as PARENAZON. Both areas have tax benefits that make them attractive for doing business.
In the free zones, you can find shopping malls, automotive industries, and department stores with all kinds of wares. The free zones are called free ports because the free port was formerly a zone where commercial exchanges were carried out without having to pay customs fees or any type of tariff. Free ports were part of these extreme zones in the Chilean economy for many years until they were decreed as free zones.
In the free zones, new materials can be traded, and imported used goods following the Internal Operational Regulations of the zone can be exchanged. The merchandise that can be seen most frequently in the trade of these areas are clothing, perfumes, food, machines, vehicles, spare parts, supplies, etc. In Iquique, many buy vehicles free of tariffs and customs taxes.
The function of free zones in Chile
Free zones have the main function of:
- Streamlining foreign trade operations related to imports.
- Lower the costs of foreign products in Chilean national territory.
- Promoting the development and quality of life in the most extreme regions of the country. Preferential fiscal treatment of commerce compensates for the high logistics and transportation costs to and from the zones, directly impacting citizens’ cost of living.
- Being a merchandise warehouse, they will be in place awaiting their final destination.
- Transforming, manufacturing, and marketing goods without any type of restriction.
- Simplifying everything that has to do with the most common customs procedures, as well as allowing the payment of customs and commercial taxes to be deferred when necessary or simply waiving taxes.
From the customs point of view, free zones in Chile are considered to be foreign territory, so while merchandise is in the free zone, it is considered as being in its country of origin.
Foreign direct investment in Chile is an attractive option in its free zones and throughout the country. This is so because the country offers a stable and predictable investment environment, a strategic location with easy access to other markets in the region, abundant natural resources, a skilled workforce, and investment incentives that make it an attractive option for foreign investors looking to expand their operations in South America.
For further information on foreign direct investment in Chile, contact LATAM FDI.