Chile is rich in copper, a highly sought-after commodity and the main driver of export growth in the country. Its political system is stable and democratic, with strong institutions. This is reflected in its comprehensive legal framework and independent judiciary. Chile’s prudent fiscal and monetary policy execution in recent years, based upon cooperation with international financial institutions, has contributed greatly to macroeconomic stability.
We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective in Chile. Clients also benefit from in-depth analysis on 22 of the country’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Chile.
Chile Country Risk
Economic growth in Chile will stagnate in 2016 as lower average copper prices undermine exports and force a paring back of government spending. Private consumption and investment will pick up, as manufacturing gradually strengthens.
Chile's ongoing external account rebalancing will continue in the coming years, as a weaker average peso bolsters the economic competitiveness of manufactured goods exports, offsetting weakness in mining exports. Moreover, structurally lower oil prices will reduce Chile's import bill, contributing to a widening of the goods trade surplus.
The Chilean peso will remain under broad downside pressure from falling copper prices and a bull run on the US dollar over the coming quarters. However, structurally lower oil prices will bolster the country's terms of trade, helping the unit...
Chile Operational Risk Coverage (9)
Chile Operational Risk
Chile Operational Risk
BMI View: Chile's logistical connectivity, financial access and investment attraction boost its domestic capabilities and make it one of the fastest-developing nations in the region. It outstrips the majority of its peers in a wide range of indicators, such as military capability, life expectancy, transport quality, and telecommunications and water, demonstrating a variety of attractive conditions for investors. Overall, Chile is ranked first in the Latin America region in BMI's Operational Risk Index with a score of 67.6 out of 100.
Chile's well-developed police force and reasonably strong state apparatus mean it is a relatively safe operating environment in terms of...
Chile Crime & Security
Chile Crime & Security
BMI View: Chile offers one of the most secure operating environments in Latin America, boosting its already considerable appeal as an investment destination. Many of the debilitating security threats which plague other states in the region, such as powerful drug cartels and communist insurgencies, have not surfaced in Chile. This is partly due to the country's developed institutions and capable law enforcement agencies, which have been proactive in creating legislation and have also reacted well to security threats. Consequently, the country benefits from limited terrorism risks, low crime rates, and a relatively low impact from financial and cybercrime. While some security gaps do exist, particularly in terms of financial regulations and cybersecurity, these do not pose a major threat to businesses. Chile is therefore a regional outperformer in the...
Chile Labour Market
Chile Labour Market
BMI View: Chile's labour market offers considerable attractions for employers, including a large, urbanised and well educated workforce as well as minimal additional employment costs such as labour taxes. However, there remain key risks to businesses looking to hire staff, mostly posed by the inherent inequality of the education system, the prevalence of trade unions and the difficulty of employing foreign workers. Nevertheless, Chile remains the outperformer in Latin America in the overall BMI Labour Market Risk Index, ranked first with a score of 67.4 out of 100, indicating the lower level of employment risks that businesses will face in the country c...
Chile Trade & Investment
Chile Trade & Investment
BMI View: Chile's stable and pro-business government, open markets, developing financial industry and transparent regulatory system result in one of the most attractive investment profiles in Latin America. Foreign direct investment (FDI) is welcomed into many sectors of the economy, and there is little bias in favour of domestic sources of capital. While the country's attractiveness to investors will be undermined by falling demand for one its major export commodities, copper, the strength of the country's institutions and a favourable investment climate will ensure it remains a popular location for FDI in Latin America. Consequently, Chile is a regional outperformer in BMI 's Trade and Investment Risk Index, placed third out of 42 states, with a score of 66.3 out of 100.
|Attractive Investment Destination In...|
Chile Industry Coverage (31)
BMI View : A strengthening domestic economy, bolstered by rising investment into consumer sectors over the coming five years, leads BMI to adopt a cautiously optimistic stance towards new vehicle sales in Chile over the 2016-19 period. For 2016, we are forecasting a 5% increase in sales, to just under the 300,000 unit mark.
|Passenger Car and Light Commercial Vehicle Sales|
|f = BMI forecast. Source: ANAC, BMI|
Chile Commercial Banking
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Chile Consumer Electronics
BMI View: Chile's consumer electronics devices market has a bright medium-term outlook through a continued expansion of the middle class, which will deepen the market and should ease the constraint of price sensitivity on vendor returns. However, the outlook does continue to include challenges. For instance we forecast growth of just 0.2% in 2016 as the peso depreciates further, eroding household purchasing power for imported devices. This performance also captures the downside risk facing Chile from the commodities slump and potential hard landing in China. However, in our core scenario the peso will appreciate, driving greater device spending, with a bump in demand in 2017 as deferred purchases from 2015 and 2016 are unlocked,...
Defence & Security
Chile Defence & Security
BMI View: Chile's domestic defence sector remains small in a global context. Local defence companies are capable of manufacturing a range of equipment - including small arms and ammunitions, electronics, radars and armoured vehicles - though their ability to develop more technologically advanced items remains limited at present. As such, the country continues to rely on foreign suppliers to meet the requirements of its armed forces. Over our forecast period to 2019, we expect security threats associated with conflicts involving...
Food & Drink
Chile Food & Drink
BMI View: We continue to hold a positive consumer outlook for Chile, which bodes well for the food and drink industry. Employment gains in the services industry will lead to rising wages and strong private consumption growth. Consumer spending has been the Chilean economy's best performer. Our Country Risk team believes that retail and consumer-focused industries will outperform the broader economy.
|Food & Drink Spending|
|e/f = BMI estimate/forecast. Source: BMI, national...|
Chile Freight Transport
BMI View : There are signs of growth within the freight industry in Chile and, in particular, in the air and rail sectors, as investment in infrastructure makes way for an increase in demand for the transport of raw materials and agricultural produce. Through the slowdown in China, Chile's biggest export country has taken its toll, the economy is beginning to diversify in order to reduce its reliance on the Asian country and GDP looks set to rise as economic recovery takes shape.
Despite the falling demand for copper, Chile's leading export, the country's GDP is set to grow over the short to medium term as investment in economic recovery takes shape. This will place the country in a strong position in the region to take advantage of...
Chile Freight Transport
BMI View: We are positive with regards the Chilean freight transport sector, predicting positive growth of between 2.0% and 7.0% across the country's freight transport modes and at its maritime facilities. The growth will be driven by both imports, as the consumer expands, and also by a burgeoning manufacturing base which will support an increase in exports. This is positive for the sector, as freight transport infrastructure will increasingly be used in both directions.
We forecast that Chile will endure a real decline in total trade in 2016 and 2017, following robust growth in 2015 - although in nominal terms the year will bring a return to growth, following a substantial decline in 2015. Weak copper production will weigh on freight transport volumes, although the launch of the TPP could open up new avenues for trade....
Chile Information Technology
BMI View: The decline in global commodities prices resulted in peso depreciation, and so lower purchasing power for Chilean households and enterprises in global markets in 2015, which resulted in slower IT market growth through deferred purchases. This drag will continue into 2016, but to a lesser extent. The medium-term outlook is much stronger, however, with IT spending expected to grow at a CAGR of 7.2% 2016-2020 to CLP2.78trn in 2020. This will reinforce Chile's position as the most lucrative IT market in Latin America in per capita terms. In terms of IT market segments, IT services are expected to grow the most...
BMI View: We maintain our positive outlook for Chile's construction sector in 2016 as oil prices remain low and the country's macroeconomics strengthen. Growth in the industry will be driven primarily by ...
BMI View: Chile's insurance market is well developed and home to leading domestic, regional and global insurance providers which boast high levels of capitalisation and extensive marketplace expertise. Demand for both life and non-life insurance is growing, benefiting from wider economic growth in the country as well as cultural shifts which have improved the knowledge and understanding of the potential benefits of insurance cover. We expect to see healthy growth in premiums throughout our forecast period through to 2019 which, along with an increasingly robust regulatory environment, make Chile's insurance market highly attractive to potential investors.
Chile Medical Devices
BMI Industry View: The medical device market is small but per capita expenditure ranks highest in Latin America. We forecast a high single-digit 2014-2019 CAGR in US dollar terms, fuelled by public hospital modernisation. The market will remain reliant on imports as production is limited. Chile has generally...
BMI View: Tin prices will be capped by US dollar strength in 2016, leading us to trim our price forecast to USD14,500/tonne. Beyond 2016, prices will recover gradually as the global tin market posts sustained market deficits and inventories dwindle.
BMI view: We have revised our aluminium price forecast from USD1,575/tonne to USD1,600/tonne in 2016, as the tightening market provided an earlier than expected floor in Q116. Aluminium prices will gradually edge higher as the global market moves into a deficit by 2018.
BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.
BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.
BMI View: Gold prices will prove resilient in 2016 due to a dovish shift in global monetary policy and elevated systemic financial sector risks. However, we do not foresee a sustained multi-year recovery and the mining sector will thus remain under significant stress. We forecast slowing mine production growth and increasing consolidation.
BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.
BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.
BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.
BMI View: Chile's mining sector will experience limited growth, as copper and gold prices remain weak over our forecast period to 2020.The country will remain the top global copper producer, although rising production costs and falling ore grades will curb output growth.
Oil & Gas
Chile Oil & Gas
BMI View: With a lack of below-ground rewards, Chile will suffer from a continued deficit of hydrocarbon supplies and a high dependence on imported energy feedstock. Chile's most immediate opportunities lie in the expansion of their LNG import facilities as a means to meet growing domestic demand. On a longer-term basis, Chile is exploring the possibility of tapping its unconventional resources in the Magallanes...
The Chilean petrochemicals industry will remain a marginal, local player that will struggle to compete on the domestic market. In spite of renewed gas supply deals for the country's methanol sector, feedstock restraints will undermine production and investment and the Chilean market will be import-dependent over the medium-term.
In 2015, a second methanol plant was moved from Chile to the US as Methanex responded to the cuts in gas supply from Argentina. Existing production is being served from local gas fields, but is still subject to seasonal shutdowns during winter as gas is redirected to domestic heating. A gas supply deal was reached in September to ensure feedstock to the methanol industry until April 2006 at least.
Polymer production has never been sufficient to satisfy local demand and this pattern will continue over the forecast period, with imports increasingly important on the Chilean market. Other...
Pharmaceuticals & Healthcare
Chile Pharmaceuticals & Healthcare
BMI View : Healthcare service provision in Chile will continue to improve steadily. However, development in the public sector will be held up by limited funding, leaving the private sector to continue to dominate the market over the next decade.
Headline Expenditure Projections
Pharmaceuticals: From CLP1,947bn (USD4.0bn) in 2014 to CLP2,103bn (USD3.2bn) in 2015; +8% in local currency terms and -20% in US dollar terms. US dollar forecast revised down due to currency effects.
Healthcare: From CLP11,380bn (USD19.9bn) in 2014 to CLP12,321bn (USD18.7bn) in 2015; +8.3% in local currency terms and -6.4% in US dollar terms. US dollar forecast revised down due to currency effects.
BMI View: Chile will be one of the most attractive power markets in Latin America over the coming decade, owing to its stable business environment and investor-friendly regulations, an upbeat macroeconomic outlook and strong growth in power consumption. The government's use of energy auctions for the regulated market, coupled with energy demand from miners located far from the main power network, will create long-term business opportunities for power developers. Meanwhile, the need to strengthen...
Chile Real Estate
BMI View : The commercial real estate sector in Chile is set to benefit from steady economic growth over the medium term. We expect rents to rise in the retail sector, buoyed by rising private consumption, while the office market is likely to remain stable, but at risk of over-supply given the amount of new construction taking place. The industrial real estate market will be affected by slower growth in trade in the short term, but the growth of e-commerce and the broadening of the industrial base over time should have positive impacts.
Chile's economic growth bottomed out in 2014 and is expected to continue to accelerate on the back of strong investment over coming years. Investment into retail and manufacturing is expected to support the country's real GDP growth through to 2020 as the economy diversifies away from dependence on...
BMI View: Chile will be a global hot-spot for non-hydro renewables investment over the coming years, due to the country's supportive regulations, high electricity prices, favourable natural conditions and stable business environment. Investor interest in the market remains strong, boosted by Chile's abundance of contract opportunities for power developers.
BMI View: The rising affluence of the Chilean population, combined with the country's open and transparent business environment, will continue to attract retailers to invest in the country. As incomes rise, spending on essentials as a proportion of the total will fall, while non-essential and aspirational spending will increase.
Global economic fluctuations will continue to affect Chile's economy in the near to short-term, while the weak peso will constrain imports. Sustained price reductions in commodities brought about by consumption slowdowns and market volatility in the world's largest markets will see reduced revenues from exports such as copper. However, this is encouraging the Chilean government to rebalance the economy away from the mining sector.
The longer-term economic outlook for Chile remains favourable....
BMI View: The healthy growth registered across Chile's main ports in 2015 is a trend that is set to continue as we head into 2016, as we once again cite the triumvirate of an improving domestic picture, robust macroeconomic fundamentals and various trade agreements as key factors that will boost growth in the shipping industry. The outperforming port in terms of total throughput is set to be San Antonio once more, with the facility penciled in to register 6.9% y-o-y tonnage throughput gains and 5.3% y-o-y box throughput growth.
However, growth is held back by the fact that falling copper prices will lead to tepid Chilean export growth through 2017, as investment into manufacturing output will take years to offset falling commodity export values. That said, imports will slowly grow as capital goods imports increase on the back of investment...
Latest Updates & Industry Developments
Chile's mobile market lost an estimated 719,000 subscribers in 2015 and we attribute this largely due to the discounting of inactive sim cards. The prime focus of the three large operators is now on migrating prepaid customers to value added data packs. 3G and 4G services will be the primary drivers of growth with 3G and 4G connections now expected to surpass 14mn by the end of our newly extended forecast period in 2020.
Broadband internet subscriptions will surpass 4.5mn by the end of 2020, up 3.83mn at the end of 2015 and equivalent to a penetration rate of almost 24%. Encouraging signs for fixed broadband show that fibre-optic connections are beginning to play an important role in the market. The ...
BMI View: Chile is set for a year of strong arrivals growth in 2016, at 7% making it one of the fastest growing markets in the region. This is particularly notable in a year when many potential visitors may have instead chosen to visit the Olympic Games in Rio, and we believe that Chile's ongoing expansion as a market reflects its positive fundamentals.
BMI View: This quarter, we have substantially revised and expanded our water forecasts for Chile. We now include wastewater collection and treatment forecasts, and Extraction forecasts. Overall, we view Chile as one of the most attractive markets in the region both for water infrastructure companies and, following the announcement of the potential sale of a key water utility, for water service companies also. However, we highlight that risks remain for industrial consumers, who will continue to face high costs for the construction of water supply and treatment facilities.
Despite a recent slowdown, Chile's water sector continues to report solid growth, driven by strong investment and good government support. A healthy business environment also help Chile outperform in terms of...