2021 Index of Economic Freedom

Chile

OVERALL SCORE75.2
WORLD RANK19
Rule of Law

Property Rights70.2

Judicial Effectiveness68.4

Government Integrity74.5

Government Size

Tax Burden72.3

Government Spending80.4

Fiscal Health90.4

Regulatory Efficiency

Business Freedom75.1

Labor Freedom62.5

Monetary Freedom85.5

Open Markets

Trade Freedom83.0

Investment Freedom70.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 19.0 million
  • GDP (PPP):
    • $495.2 billion
    • 1.1% growth
    • 2.1% 5-year compound annual growth
    • $25,155 per capita
  • Unemployment:
    • 7.1%
  • Inflation (CPI):
    • 2.3%
  • FDI Inflow:
    • $11.4 billion

Chile’s economic freedom score is 75.2, making its economy the 19th freest in the 2021 Index. Its overall score has decreased by 1.6 points, primarily because of a decline in investment freedom. Chile is ranked 2nd among 32 countries in the Americas region, and its overall score is above the regional and world averages.

Economic freedom in Chile has generally declined since 2013 when the economy was on the verge of joining the ranks of the free. This year, it is even more firmly planted in the mostly free category. The biggest threats to future economic freedom in Chile could emerge from adoption of a new constitution that could mandate higher taxation, higher government spending, and other laws that would have a negative impact on Index indicators.

IMPACT OF COVID-19: As of December 1, 2020, 15,430 deaths had been attributed to the pandemic in Chile, and the economy was forecast to contract by 6.0 percent for the year.

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Background

Chile is the world’s leading producer of copper, and growth in GDP is driven by exports of minerals, wood, fruit, seafood, and wine. In office since 2017, center-right President Sebastian Piñera faces stiff resistance from the left-leaning parties that control Congress. Five months of violent protests late in 2019 and early in 2020 led to the deaths of more than 30 people. The widespread turmoil, which generated calls for the state to broaden the social safety net, has had a negative impact on economic growth. In an October 2020 referendum, nearly 80 percent of voters approved a proposal to rewrite or abandon Chile’s current constitution.

Rule of LawView Methodology

Property Rights 70.2 Create a Graph using this measurement

Judicial Effectiveness 68.4 Create a Graph using this measurement

Government Integrity 74.5 Create a Graph using this measurement

Secured interests in real property are recognized and generally enforced, and 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 are generally competent in their enforcement of property and contractual rights and free from political interference. Chile remains South America’s second least corrupt country after Uruguay.

Government SizeView Methodology

The top individual income tax rate has been increased to 40 percent, and the top corporate tax rate is 27 percent. The overall tax burden equals 21.1 percent of total domestic income. Government spending has amounted to 25.5 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.2 percent of GDP. Public debt is equivalent to 27.9 percent of GDP.

Regulatory EfficiencyView Methodology

The business regulatory environment remains mostly free, and online registration has eased the business start-up process. The labor force participation rate has increased over the past year. Government-funded subsidies that are routinely provided in Chile’s annual budgets include support for small and medium-size enterprises and housing payments.

Open MarketsView Methodology

Chile has 29 preferential trade agreements in force. The trade-weighted average tariff rate is 6.0 percent, and 106 nontariff measures are in effect. Market-oriented policies, facilitated by a sound and transparent investment framework, have attracted significant foreign investment. The relatively competitive financial sector is open and resilient, offering a wide range of services. The exchange rate has been allowed to adjust flexibly without intervention.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Canada77.9-0.3
2Chile75.2-1.6
3United States74.8-1.8
4Uruguay69.30.2
5Jamaica690.5
6Colombia68.1-1.1
7Peru67.7-0.2
8Saint Lucia67.5-0.7
9Saint Vincent and the Grenadines66.3-0.5
10Panama66.2-1.0
11Mexico65.5-0.5
12Barbados653.6
13The Bahamas64.60.1
14Costa Rica64.2-1.6
15Guatemala640.0
16Paraguay62.6-0.4
17Dominican Republic62.11.2
18El Salvador61-0.6
19Honduras59.8-1.3
20Trinidad and Tobago590.7
21Belize57.50.1
22Guyana57.41.2
23Nicaragua56.3-0.9
24Brazil53.4-0.3
25Dominica53-7.8
26Argentina52.7-0.4
27Ecuador52.41.1
28Haiti50.8-1.5
29Suriname46.4-3.1
30Bolivia42.7-0.1
31Cuba28.11.2
32Venezuela24.7-0.5
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