Top Challenges of Doing Business in Chile

Top Challenges of Doing Business in Chile

19 February 2018

The Chilean economy is among the most stable, open and competitive in Latin America, however, businesses still struggle to navigate the bureaucratic and regulatory environment, which is why having local help on hand is crucial.

Disclaimer: This article was accurate at the time of publishing. To obtain the most up-to-date information, please get in touch with our local experts.

Chile is the best evaluated economy in Latin America and one of the best evaluated among emerging economies worldwide thanks to sustained economic growth and social progress, coupled with governmental changes designed to attract foreign direct investment (FDI). The country has remarkable fiscal discipline which has underlined GDP growth of 4.8% between 2004 and 2011. This discipline also helped it to weather the economic storm during the financial crisis better than most, with its subsequent recovery one of the fastest among emerging economies.

FDI plays a central role in Chile’s economic growth and development, and there has been a sustained increase in levels of overseas investment in recent years. This has helped to enhance Chile’s competitiveness by contributing not only resources and new markets but also technological development, specialised knowhow and inputs conducive to innovation and entrepreneurship.

For businesses looking to make strides into Chile, having local know-how positioned in the country can be a huge asset and an enabler of the company’s ambitions.

Starting a Business
The World Bank and International Finance Corporation (IFC) rank Chile 32nd in the world for ease of starting a business. There are seven procedures to complete when first starting up and a long line of bureaucratic challenges. That includes notarized articles of incorporation, a registration certificate, a tax registration number and a "patente municipal" working license, as well as registering with the appropriate authorities.

Dealing with Construction Permits
Obtaining construction permits is a lengthy procedure in Chile largely because of the amount of steps it takes to receive them. Businesses must navigate their way through 15 requirements and many stages are carried out by disparate governing bodies and firms. Obtaining indication on water and sewage availability, for example, must be completed with a sanitation company, and checks with the telecom company, the environmental health services, SERVIU and DOM must all be conducted during the process.

Getting Electricity
Businesses will likely engage with La Compañía Chilena de Electricidad (CHILECTRA) when getting electricity, with documentation sent to the firm before an external inspection is carried out and connection is made. Businesses are also required to receive approval of the internal installation works by the "Superintendencia de Electricidad y Combustibles (SEC)" before they receive final connection and a meter.

Registering Property
Registering property is a similarly laborious process, although it takes far less time than elsewhere in Latin America and the Caribbean. Businesses must request copies of property titles for the past 10 years, the ‘Certificado de Vigencia’ and certificate of encumbrance from the registry in order to register a property, and also need to pay land tax, sign the public deed and obtain a Property Certificate and a Mortgages and Ownership Limitations Certificate.

Getting Credit and Protecting Investors
Getting credit is quite difficult in Chile, despite its robust financial sector. Protecting investors is similarly concerning, although it performs far better than its South American and Caribbean counterparts.

Paying Taxes
There are six tax payments to make each year in Chile, but each step can be a painstaking procedure.  Employment taxes, for example, take 124 hours of the company’s time, and value added tax (VAT) takes the same amount.

Trading Across Borders
Cross border trade is a relatively cheap endeavour in Chile, but it can take a long time to complete. There are 15 steps involved in exporting goods and 12 when importing.

Enforcing Contracts
Enforcing contracts takes significantly fewer days than in the rest of Latin America, but takes a similar amount of procedures. The judicial system efficiently processes the claim, but filing and service adds a large amount of time to the overall procedure.

Resolving Insolvency
Resolving insolvency takes an average of 3.2 years in Chile, which is longer than both the OECD average and the Latin America and Caribbean average. The recovery rates are also rather low, dropping under both regional averages.

Establishing trust and connecting as people is fundamental to successful business relationships in Chile, and initial visits should always be used to build a rapport and show who you are. Unlike some nations, the relationship takes precedent over business matters to begin with, and companies should be aware of cultural quirks before leaving for the country.

TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Chile or just want to streamline your Chilean operations, talk to us.

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