2013 Index of Economic Freedom

Chile

overall score79.0
world rank7
Rule of Law

Property Rights90.0

Freedom From Corruption72.0

Limited Government

Government Spending83.7

Fiscal Freedom77.6

Regulatory Efficiency

Business Freedom70.5

Labor Freedom74.2

Monetary Freedom84.6

Open Markets

Trade Freedom82.0

Investment Freedom85.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 17.4 million
  • GDP (PPP):
    • $299.6 billion
    • 5.9% growth
    • 3.9% 5-year compound annual growth
    • $17,222 per capita
  • Unemployment:
    • 6.1%
  • Inflation (CPI):
    • 3.3%
  • FDI Inflow:
    • $17.3 billion
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Chile’s economic freedom score is 79, making its economy the 7th freest in the 2013 Index. Its overall score is 0.7 point better than last year, mainly due to improved scores in investment and business freedoms. Continuing to be 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.

Chile continues to be a global leader in economic freedom. With the rule of law strongly maintained by an independent and efficient judicial system, prudent public finance management has kept public debt and recent budget deficits under control.

Flexibility and openness have equipped Chile’s small economy with an impressive capacity to adjust to external shocks, and its active participation in the Trans-Pacific Partnership negotiations reflects its strong commitment to trade liberalization. Facilitating entrepreneurial activity, sound policy choices grounded in a strong commitment to economic freedom have ensured economic dynamism. The investment code is conducive to long-term growth, and the financial sector remains competitive.

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Background

From 1990 to 2009, left-of-center governments did little to deepen reforms but largely maintained the market-based institutions and economic policies established under the 17-year rule of General Augusto Pinochet. Now, to the disappointment of many market liberals, President Sebastian Piñera and his center-right Alianza coalition, in power since 2010, have raised taxes and intervened to stop the construction of a coal-fired electric plant that had already cleared all regulatory hurdles. Chile has the strongest sovereign bond rating in South America and is the first country from that continent to join the Organisation for Economic Co-operation and Development. It is the world’s leading producer of copper. An innovative, countercyclical fiscal policy accumulates surpluses when copper prices are high and operates in deficit only when prices and economic activity are low. This has helped to maintain fiscal balance. 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 72.0 Create a Graph using this measurement

Contractual agreements in Chile are the most secure in Latin America. Courts are transparent and efficient. Property rights are strongly respected, and expropriation is rare. Lingering intellectual property rights concerns involve protection of patents and copyrights, although the government has amended its copyright law, ratified the Trademark Law Treaty, and approved the International Convention for the Protection of New Varieties of Plants.

Limited GovernmentView Methodology

The top income tax rate is 40 percent. The corporate tax rate increase instituted in 2010 was temporarily lifted during the first half of 2012. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden equals 17.3 percent of GDP. Government spending is 23.3 percent of total domestic output. Public debt is about 10 percent of GDP.

Regulatory EfficiencyView Methodology

Chile has made progress in eliminating regulatory bottlenecks. It takes eight days and seven procedures to start a business, with no minimum capital required. Bankruptcy procedures remain cumbersome. Minimum wage increases have exceeded overall productivity growth in recent years, but labor laws generally facilitate efficient hiring and dismissal procedures. Inflation has risen slightly in the wake of continuing strong domestic demand.

Open MarketsView Methodology

The trade-weighted average tariff rate is 4 percent, and non-tariff barriers are relatively low. Chile has actively pursued free trade deals with many countries. Guided by a transparent and efficient investment regime, foreign and domestic investors generally receive equal treatment. With the well-capitalized and stable banking sector offering a wider range of services, the financial system remains one of the region’s most stable and developed.

Country's Score Over Time

Bar Graph of Chile Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Chile to other economic country groups

Regional Ranking

rank country overall change
1Chile790.7
2Saint Lucia70.4-0.9
3The Bahamas70.12.1
4Uruguay 69.7-0.2
5Colombia69.61.6
6Barbados69.30.3
7Peru68.2-0.5
8Costa Rica 67-1.0
9Jamaica 66.81.7
10El Salvador 66.7-2.0
11Saint Vincent and the Grenadines66.70.2
12Dominica63.92.3
13Panama 62.5-2.7
14Trinidad and Tobago62.3-2.1
15Paraguay 61.1-0.7
16Guatemala 60-0.9
17Dominican Republic59.7-0.5
18Honduras 58.4-0.4
19Brazil57.7-0.2
20Belize57.3-4.6
21Nicaragua 56.6-1.3
22Guyana53.82.5
23Suriname52-0.6
24Haiti48.1-2.6
25Bolivia47.9-2.3
26Ecuador46.9-1.4
27Argentina46.7-1.3
28Venezuela 36.1-2.0
29Cuba28.50.2
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