2020 Index of Economic Freedom

Chile

OVERALL SCORE76.8
WORLD RANK15
Rule of Law

Property Rights69.9

Judicial Effectiveness61.1

Government Integrity73.4

Government Size

Tax Burden76.4

Government Spending80.8

Fiscal Health90.5

Regulatory Efficiency

Business Freedom75.0

Labor Freedom64.7

Monetary Freedom85.2

Open Markets

Trade Freedom89.0

Investment Freedom85.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 18.5 million
  • GDP (PPP):
    • $481.8 billion
    • 4.0% growth
    • 2.2% 5-year compound annual growth
    • $25,978 per capita
  • Unemployment:
    • 7.2%
  • Inflation (CPI):
    • 2.3%
  • FDI Inflow:
    • $7.2 billion

Chile’s economic freedom score is 76.8, making its economy the 15th freest in the 2020 Index. Its overall score has increased by 1.4 points, led by a significant increase in the score for government integrity. Chile is ranked 2nd among 32 countries in the Americas region, and its overall score is well above the regional and world averages.

Economic freedom in Chile declined from 2013, when its economy was on the verge of joining the ranks of the free, to 2018 but has been on a positive trajectory since then. The recent acceleration of GDP growth most likely reflects that positive trend.

The government’s efforts to seek legislative approval of any further business-friendly tax, pension, and regulatory reforms will be complicated by the social unrest that was triggered in October by a hike in subway fares and then disintegrated into riots that took a dozen lives. The forced cancellation of the previously scheduled APEC summit in Santiago reflected a serious deterioration of the rule of law in Chile that could have a negative impact on its economic freedom in the future.

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Background

Chile is the world’s leading copper producer, and its exports of minerals, wood, fruit, seafood, and wine drive GDP growth. Center-right President Sebastian Piñera, in office since 2017, has been undermined by stiff resistance from left-leaning parties in Congress. A dramatic escalation of violent antigovernment protests in late 2019 caused the highest level of political instability since the restoration of democracy in the 1990s. Although Chile’s solid economic fundamentals had undergirded continued GDP expansion in early 2019, uncertainty caused the economy to contract late in the year. Chile retains the Pacific Alliance’s best investment profile, benefits from many free-trade agreements, and led the 2019 creation of the Forum for the Progress of South America (PROSUR), a free-market-oriented regional economic and social cooperation bloc.

Rule of LawView Methodology

Property Rights 69.9 Create a Graph using this measurement

Judicial Effectiveness 61.1 Create a Graph using this measurement

Government Integrity 73.4 Create a Graph using this measurement

Secured interests in real property are recognized and generally enforced in Chile. Expropriation is rare. There is a recognized and generally reliable system for recording mortgages and other forms of liens. The judiciary is independent, and the courts generally enforce property and contractual rights competently and are generally free from political interference. Chile is the second least corrupt country in South America after Uruguay.

Government SizeView Methodology

The top individual income tax rate is 35 percent, and the top corporate tax rate has increased to 27 percent. The overall tax burden equals 20.2 percent of total domestic income. Government spending has amounted to 25.3 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 2.3 percent of GDP. Public debt is equivalent to 25.6 percent of GDP.

Regulatory EfficiencyView Methodology

Chile recently modernized some aspects of starting a business and enforcing contracts. The process for gaining approval for large projects, however, has become increasingly unpredictable and time-consuming. Labor laws are generally well defined and evenly enforced. Chile is one of the few countries in the world that is not subsidizing the development of its extensive sources of renewable (wind and solar) energy.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 57.5 percent of GDP. The average applied tariff rate is 0.5 percent, and 105 nontariff measures are in force. Market openness to investment and an efficient business environment have provided a solid basis for economic dynamism. The financial system facilitates high levels of bank usage and relatively efficient access to financing.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Canada78.20.5
2Chile76.81.4
3United States76.6-0.2
4Colombia69.21.9
5Uruguay 69.10.5
6Jamaica 68.5-0.1
7Saint Lucia68.2-0.5
8Peru67.90.1
9Panama 67.20.0
10Saint Vincent and the Grenadines66.81.0
11Mexico661.3
12Costa Rica 65.80.5
13The Bahamas64.51.6
14Guatemala 641.4
15Paraguay 631.2
16El Salvador 61.6-0.2
17Barbados61.4-3.3
18Honduras 61.10.9
19Dominican Republic60.9-0.1
20Dominica60.8-2.8
21Trinidad and Tobago58.31.3
22Belize57.42.0
23Nicaragua 57.2-0.5
24Guyana56.2-0.6
25Brazil53.71.8
26Argentina53.10.9
27Haiti52.3-0.4
28Ecuador51.34.4
29Suriname49.51.4
30Bolivia42.80.5
31Cuba26.9-0.9
32Venezuela 25.2-0.7
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