Chile at a glance

Capital: Santiago
Population: 16,454,143 (July 2008 est.)
Government Type: Republic

GDP: $231.1 billion
Imports: $43.99 billion f.o.b.
Exports: $67.64 billion f.o.b.

About 85% of Chile’s population lives in urban areas, with 40% living in greater Santiago. Most have Spanish ancestry. A small yet influential number of Irish and English immigrants came to Chile during the colonial period. German immigration began in 1848 and lasted for 90 years; the southern provinces of Valdivia, Llanquihue, and Osorno show a strong German influence. Other significant immigrant groups are the Italian, Croatian, Basque, and Palestinian. About 800,000 Native Americans, mostly of the Mapuche tribe, reside in the south-central area. The Aymara and Diaguita groups can be found mainly in Chile’s northern desert valleys.

Chile’s president serves a term of 4 years. President Michelle Bachelet and the new members of Congress took office in  2006. Chile has a bicameral Congress, which meets in the port city of Valparaiso, about 84 miles west of the capital. Deputies are elected every 4 years, and senators serve 8 year terms. The judiciary is independent and includes a court of appeal, a system of military courts, a constitutional tribunal, and a supreme court.

The northern Chilean desert contains great mineral wealth, principally copper. The relatively small central area dominates the country in terms of population and agricultural resources. This area also is the cultural and political center from which Chile expanded in the late 19th century, when it incorporated its northern and southern regions. Southern Chile is rich in forests and grazing lands and features a string of volcanoes and lakes. The Andes Mountains are located on the eastern border.

U.S. - Chile Relations

Relations between the United States and Chile are better now than at  any other time in history. The U.S. Government applauded the rebirth of democratic practices in Chile in the late 1980s and early 1990s and sees the maintenance of a vibrant democracy and a healthy and sustainable economy as among  the most important U.S. interests in Chile. Besides the landmark 2003 U.S.-Chile FTA, the two governments consult frequently on issues of mutual concern, including the areas of multilateral diplomacy, security, culture, and science.

Economy

Chile has pursued generally sound economic policies for nearly 30 years. The government’s role in the economy is mostly limited to regulation, although the state continues to operate copper giant CODELCO and a few other enterprises (there is one state-run bank). The country is strongly committed to free trade and has welcomed large amounts of foreign investment. Chile has signed free trade agreements (FTAs) with a whole network of countries. Over the last several years, Chile has signed FTAs with Brunei, China, the European Union, Japan, New Zealand, Singapore, and South Korea.

Unemployment in Chile dipped to 7.8% at the end of 2007, due largely to the fact that fewer Chileans were entering the workforce rather than to a substantial and sustained creation of new jobs. The decrease in unemployment can also be attributed to a limited increase in jobs caused by foreign direct investment. Most international observers place some of the blame for Chile’s consistently high unemployment rate on complicated and restrictive labor laws. Wages have risen faster than inflation as a result of higher productivity, boosting national living standards. Chile’s independent Central Bank pursues an inflation target of between 2% and 4%. In 2007, however, inflation inched towards 8%. The Chilean peso’s rapid appreciation against the U.S. dollar in recent years has helped dampen inflation. Most wage settlements and loans are indexed, reducing inflation’s volatility.

After a decade of impressive growth rates, Chile began to experience a moderate economic downturn in 1999. The economy remained sluggish until 2003, when it began to show clear signs of recovery, achieving 3.3% real GDP growth. The Chilean economy finished 2004 with growth of 6.1%. Real GDP growth reached 6.3% in 2005, decreased to 4.0% in 2006, and rose once again to 5.2% in 2007. Higher energy prices as well as lagging consumer demand were drags on the economy in 2006. Greater government spending and favorable external conditions (including record copper prices for much of 2006) were not enough to offset these drags.

Best Export Opportunities

The U.S.-Chile FTA and a more competitive U.S. dollar offer advantages for U.S. exporters. Among the agricultural products in demand are corn, wheat, pet food, soy, pork products, and snack foods. As Chile is in the Southern Hemisphere, off-season produce shipments are an option. The country’s market for computers has shown positive growth for the last 3 years, with opportunities in both hardware and software. From medical and mining equipment to pollution control and food processing equipment, the Chilean market has much to offer U.S. exporters. For more details on exporting prospects, check the Country Trade Sourcebook article on Chile.

Foreign Investment

Total foreign direct investment (FDI) was only $3.4 billion in 2006, up 52% from a poor performance in 2005. However, 80% of FDI continues to go to only four sectors: electricity, gas, water, and mining. Much of the jump in FDI in 2006 resulted from acquisitions and mergers, and it did little to create new employment in Chile. The Chilean government has formed a Council on Innovation and Competition, which is tasked with identifying new sectors and industries to promote. It is hoped that this effort, combined with some tax reforms to encourage domestic and foreign investment in research and development, will bring in additional FDI to new parts of the economy. As of 2006, Chile invested only 0.6% of its annual GDP in research and development (R&D). Even then, two-thirds of that was government spending. The fact that domestic and foreign companies spend almost nothing on R&D does not bode well for the government’s efforts to develop innovative, knowledge-based sectors. More information on conditions in Chile can be found in the investment section of the Chile country profile.

Transportation

Chile is well connected via air service to the United States and countries throughout Latin America. American Airlines has non-stop service between Santiago and both Miami and Dallas, and Delta Airlines has non-stop service to Atlanta. Chile’s main airline, LAN, partners with American Airlines in the OneWorld Alliance and offers non-stop service to Miami and direct service to Los Angeles via Lima, Peru. The primary point of entry is the Santiago International Airport. Domestic air service is well developed. Flights between Santiago and most cities in Chile are fairly frequent.

The train system is less developed, but there is a good central train line that runs between Santiago and Temuco. Primary roads in Chile are good. The main highways are concessioned toll roads and are in good condition. Secondary roads, especially outside of Santiago, are sometimesin lesser repair. Gravel and dirt roads are common in rural areas.

Map of Chile