2018 Index of Economic Freedom

Chile

overall score75.2
world rank20
Rule of Law

Property Rights67.9

Government Integrity61.2

Judicial Effectiveness63.4

Government Size

Government Spending81.3

Tax Burden78.0

Fiscal Health91.7

Regulatory Efficiency

Business Freedom72.4

Labor Freedom60.4

Monetary Freedom82.4

Open Markets

Trade Freedom88.7

Investment Freedom85.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 18.2 million
  • GDP (PPP):
    • $438.8 billion
    • 2.1% growth
    • 3.0% 5-year compound annual growth
    • $24,113 per capita
  • Unemployment:
    • 6.6%
  • Inflation (CPI):
    • 3.8%
  • FDI Inflow:
    • $11.3 billion
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Chile’s economic freedom score is 75.2, making its economy the 20th freest in the 2018 Index. Its overall score has decreased by 1.3 points, with lower scores for government integrity, fiscal health, and labor freedom overwhelming an improvement in trade freedom. Chile is ranked 3rd among 32 countries in the Americas region, and its overall score is above the regional and world averages.

The Chilean government has generally followed a countercyclical fiscal policy, accumulating surpluses in sovereign wealth funds during periods of high copper prices and economic growth and generally allowing deficit spending only during periods of low copper prices and growth. In November 2016, those sovereign wealth funds, mostly outside of the country and separate from central bank reserves, amounted to more than $23.5 billion. Chile’s openness to global trade and investment, transparent regulatory environment, and strong rule of law continue to provide a solid basis for economic dynamism.

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Background

Chile is the world’s leading copper producer, and exports of minerals, wood, fruit, seafood, and wine drive GDP growth. Socialist President Michelle Bachelet abandoned the more moderate policies of her first term when she largely supported Chile’s successful free-market institutions. Her public approval ratings dropped precipitously, and former President Sebastian Piñera was elected to succeed her in December 2017. Solid economic fundamentals support medium-term growth prospects, but Chile’s dependence on imported oil and its open economy make it vulnerable to volatility in global commodities markets. Nonetheless, Chile retains the Pacific Alliance’s best investment profile and benefits from many free-trade agreements.

Rule of LawView Methodology

Property Rights 67.9 Create a Graph using this measurement

Government Integrity 61.2 Create a Graph using this measurement

Judicial Effectiveness 63.4 Create a Graph using this measurement

The government may legally expropriate property, including property of foreign investors, for public or national interests, but property rights and contracts are strongly respected, and expropriation is rare. The judiciary is independent, and the courts are generally competent and free from political interference. Although Chile remains among South America’s least corrupt countries, political-financing scandals have shaken public confidence.

Government SizeView Methodology

The top individual income tax rate has been cut to 35 percent, but the top corporate tax rate has increased to 25 percent. The overall tax burden equals 18.8 percent of total domestic income. Over the past three years, government spending has amounted to 25.0 percent of total output (GDP), and budget deficits have averaged 2.1 percent of GDP. Public debt is equivalent to 21.2 percent of GDP.

Regulatory EfficiencyView Methodology

Most legal, regulatory, and accounting systems are transparent and encourage competition and a level playing field for businesses. Chile has laws and regulations that are usually enforced in accordance with internationally recognized labor rights. A new, nonsubsidized solar power plant that is being constructed will reduce the already low cost of electricity in Chile.

Open MarketsView Methodology

Trade is significant for Chile’s economy; the combined value of exports and imports equals 56 percent of GDP. The average applied tariff rate is 0.6 percent. Nontariff barriers impede some trade. In general, government policies do not significantly deter foreign investment. The financial system facilitates relatively efficient access to financing. Reforms to improve access to financial services for small companies have progressed gradually.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada77.7-0.8
2United States75.70.6
3Chile75.2-1.3
4Uruguay 69.2-0.5
5Jamaica 69.1-0.4
6Colombia68.9-0.8
7Peru68.7-0.2
8Saint Vincent and the Grenadines67.72.5
9Saint Lucia67.62.6
10Panama 670.7
11Costa Rica 65.60.6
12Mexico64.81.2
13Dominica64.50.8
14Guatemala 63.40.4
15The Bahamas63.32.2
16El Salvador 63.2-0.9
17Paraguay 62.1-0.3
18Dominican Republic61.6-1.3
19Honduras 60.61.8
20Nicaragua 58.9-0.3
21Guyana58.70.2
22Trinidad and Tobago57.7-3.5
23Belize57.1-1.5
24Barbados572.5
25Haiti55.86.2
26Argentina52.31.9
27Brazil51.4-1.5
28Ecuador48.5-0.8
29Suriname48.10.1
30Bolivia44.1-3.6
31Cuba31.9-2.0
32Venezuela 25.2-1.8
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