2019 Index of Economic Freedom

Chile

overall score75.4
world rank18
Rule of Law

Property Rights68.7

Government Integrity62.3

Judicial Effectiveness56.3

Government Size

Government Spending81.0

Tax Burden77.3

Fiscal Health89.0

Regulatory Efficiency

Business Freedom76.6

Labor Freedom65.0

Monetary Freedom84.5

Open Markets

Trade Freedom88.8

Investment Freedom85.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 18.4 million
  • GDP (PPP):
    • $451.1 billion
    • 1.5% growth
    • 2.2% 5-year compound annual growth
    • $24,537 per capita
  • Unemployment:
    • 7.0%
  • Inflation (CPI):
    • 2.2%
  • FDI Inflow:
    • $6.7 billion

Chile’s economic freedom score is 75.4, making its economy the 18th freest in the 2019 Index. Its overall score has increased by 0.2 point, with increases in labor freedom, business freedom, and monetary freedom offsetting a steep decline in judicial effectiveness. Chile is ranked 3rd among 32 countries in the Americas region, and its overall score is above the regional and world averages.

Expectations of more business-friendly policies and maintenance of Chile’s long record of broadly sound macroeconomic policymaking by the Piñera government helped to boost confidence in 2018 and brought about a recovery in investment after four years of contraction. The government introduced tax reform measures and proposals to incentivize accelerated depreciation of capital investment in addition to new incentives for entrepreneurship and innovation. Chile’s openness to global trade and investment and its 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 its exports of minerals, wood, fruit, seafood, and wine drive GDP growth. Center-right President Sebastian Piñera’s efforts to repeal the socialist policies of his predecessor, Michelle Bachelet, have been slowed by his party’s lack of a congressional majority. He also has had to deal with persistent student demonstrations demanding free education (a significant drain on the budget) and politically powerful trade unions’ opposition to labor market reforms. Although its dependence on imported oil makes Chile vulnerable to volatility in global commodities markets, solid economic fundamentals undergirded an economic rebound in 2018. Chile retains the Pacific Alliance’s best investment profile and benefits from many free-trade agreements.

Rule of LawView Methodology

Property Rights 68.7 Create a Graph using this measurement

Government Integrity 62.3 Create a Graph using this measurement

Judicial Effectiveness 56.3 Create a Graph using this measurement

Real and intellectual property rights and contracts are strongly respected, and expropriation is rare. The judiciary is independent, and the courts generally enforce property and contractual rights competently and are free from political interference. Although Chile remains among the least corrupt countries in South America, a series of high-level scandals in 2016–2017 damaged former President Bachelet’s credibility.

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 20.4 percent of total domestic income. Over the past three years, government spending has amounted to 25.2 percent of the country’s output (GDP), and budget deficits have averaged 2.5 percent of GDP. Public debt is equivalent to 23.6 percent of GDP.

Regulatory EfficiencyView Methodology

The overall regulatory framework facilitates entrepreneurial activity and productivity growth. Chile has made resolving insolvency easier by clarifying and simplifying provisions on liquidation and reorganization. Increases in the minimum wage have exceeded overall productivity growth in recent years. The government controls electricity and water prices, and a controversial system of price bands applies to sugar, wheat, gasoline, and automobile use.

Open MarketsView Methodology

The combined value of exports and imports is equal to 55.7 percent of GDP. The average applied tariff rate is 0.6 percent. As of June 30, 2018, according to the WTO, Chile had 107 nontariff measures in force. Chile has a successful record of attracting FDI, supported by its market-oriented policies. The financial system is sound and competitive, and credit is allocated on market terms. Nonperforming loans have decreased steadily.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada77.70.0
2United States76.81.1
3Chile75.40.2
4Saint Lucia68.71.1
5Jamaica 68.6-0.5
6Uruguay 68.6-0.6
7Peru67.8-0.9
8Colombia67.3-1.6
9Panama 67.20.2
10Saint Vincent and the Grenadines65.8-1.9
11Costa Rica 65.3-0.3
12Mexico64.7-0.1
13Barbados64.77.7
14Dominica63.6-0.9
15The Bahamas62.9-0.4
16Guatemala 62.6-0.8
17El Salvador 61.8-1.4
18Paraguay 61.8-0.3
19Dominican Republic61-0.6
20Honduras 60.2-0.4
21Nicaragua 57.7-1.2
22Trinidad and Tobago57-0.7
23Guyana56.8-1.9
24Belize55.4-1.7
25Haiti52.7-3.1
26Argentina52.2-0.1
27Brazil51.90.5
28Suriname48.10.0
29Ecuador46.9-1.6
30Bolivia42.3-1.8
31Cuba27.8-4.1
32Venezuela 25.90.7
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