2015 Index of Economic Freedom

Chile

overall score78.5
world rank7
Rule of Law

Property Rights90.0

Freedom From Corruption71.0

Limited Government

Government Spending83.3

Fiscal Freedom76.5

Regulatory Efficiency

Business Freedom69.3

Labor Freedom67.0

Monetary Freedom85.6

Open Markets

Trade Freedom82.0

Investment Freedom90.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 17.6 million
  • GDP (PPP):
    • $334.8 billion
    • 4.2% growth
    • 4.0% 5-year compound annual growth
    • $19,067 per capita
  • Unemployment:
    • 5.9%
  • Inflation (CPI):
    • 1.8%
  • FDI Inflow:
    • $20.3 billion
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Chile’s economic freedom score is 78.5, making its economy the 7th freest in the 2015 Index. Its overall score is 0.2 point lower than last year, with an improvement in monetary freedom outweighed by declines in labor freedom, freedom from corruption, and the control of government spending. Still one of the 10 freest economies in the Index, Chile enjoys the highest degree of economic freedom in the South and Central America/Caribbean region.

Over the past five years, Chile’s economic freedom has advanced by 1.1 points, securing Chile’s place as the first South and Central American country to reach the top 10 in the rankings. Improvements in five of the 10 economic freedoms have been led by sizeable gains in property rights, price stability, and the investment climate.

Despite recent declines, Chile remains a global leader in economic freedom and an example for other Latin American countries. Aided by prudent public financial management and successful countercyclical fiscal policy, it has kept public debt low and budget deficits under control. Chile is second in the world in protecting property rights and has been renewing its commitment to open trade and investment by participating in the Trans-Pacific Partnership talks.

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Background

Socialist President Michelle Bachelet began her second (non-consecutive) four-year term in 2014, succeeding Sebastian Piñera, and immediately proposed tax increases to fund higher government spending on education and other services while discounting concerns that this would dampen future growth. Even if Bachelet largely maintains market-based institutions and economic policies, her campaign promises to reform Chile’s constitution could have significant undesirable effects, and Chile’s commitment to the Pacific Alliance could weaken. Nonetheless, Chile retains the region’s best reputation among foreign investors. It was the first South American country to join the Organisation for Economic Co-operation and Development and is the world’s leading producer of copper. The economy is very open to imports but is also an export powerhouse in minerals, wood, fruit, seafood, and wine.

Rule of LawView Methodology

Property Rights 90.0 Create a Graph using this measurement

Freedom From Corruption 71.0 Create a Graph using this measurement

Chile is among South America’s least corrupt countries. Courts are generally free from political interference. Although President Bachelet campaigned in 2013 on a promise to reform the constitution, adopted in 1980 during the return to democratic self-government, Chile most likely will retain its independent and competent judiciary. Property rights and contracts are strongly respected, and expropriation is rare.

Limited GovernmentView Methodology

The top individual income tax rate remains 40 percent, and the top corporate tax rate is 20 percent. Other taxes include a value-added tax and a property tax. The total tax burden is equivalent to 18.8 percent of domestic income. Government expenditures equal 23.6 percent of total domestic output, and public debt amounts to less than 15 percent of gross domestic product.

Regulatory EfficiencyView Methodology

The regulatory regime sustains business formation and operation. Starting a business takes seven procedures and six days on average and costs less than 1 percent of the level of average annual income. Labor regulations are rigid, with broad wage settlements and high unionization. Government price supports for agriculture are less than 5 percent of total farm receipts, one of the lowest rates among OECD countries.

Open MarketsView Methodology

Chile has a 4.0 percent average tariff rate. Most imports enter duty-free, and tariffs have been reduced through the Pacific Alliance. Chile is very open to foreign investment. A well-capitalized and dynamic banking sector provides a wide range of services, and the financial system remains one of the region’s most advanced. Credit is issued on market terms, and domestic and foreign financial firms receive equal treatment.

Country's Score Over Time

Bar Graph of Chile Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Chile78.5-0.2
2Colombia71.71.0
3Saint Lucia70.2-0.5
4The Bahamas68.7-1.1
5Uruguay 68.6-0.7
6Saint Vincent and the Grenadines681.0
7Barbados67.9-0.4
8Peru67.70.3
9Jamaica 67.71.0
10Costa Rica 67.20.3
11Dominica66.10.9
12El Salvador 65.7-0.5
13Trinidad and Tobago64.11.4
14Panama 64.10.7
15Paraguay 61.1-0.9
16Dominican Republic61-0.3
17Guatemala 60.4-0.8
18Nicaragua 57.6-0.8
19Honduras 57.40.3
20Belize56.80.1
21Brazil56.6-0.3
22Guyana55.5-0.2
23Suriname54.20.0
24Haiti51.32.4
25Ecuador49.21.2
26Bolivia46.8-1.6
27Argentina44.1-0.5
28Venezuela 34.3-2.0
29Cuba29.60.9
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