Download 76.5 CHILE - The Heritage Foundation

WORLD RANK:
10
REGIONAL RANK:
2
ECONOMIC FREEDOM STATUS:
MOSTLY FREE
CHILE
C
hile’s openness to global trade and investment provides a
solid basis for economic dynamism. A transparent regulatory environment buttressed by well-secured property rights
provides commercial security for the resilient private sector. The
independent judicial system continues to sustain the rule of law.
However, several recent policy shifts have put Chile’s economic
freedom on a downward trend. The size and scope of government have expanded, substantially undercutting adherence to
the principle of limited government. Along with the introduction of redistributive tax measures, the corporate tax rate has
been raised and is slated to rise further. Labor reforms have
focused on increasing the minimum wage and strengthening
union bargaining.
ECONOMIC FREEDOM SCORE
76.5

( ▼ DOWN 1.2 POINTS )
0
50
60
70
80
60.0
60.9
REGIONAL AVERAGE
WORLD AVERAGE
(AMERICAS REGION)
NOTABLE SUCCESSES:
Trade Freedom and
Investment Freedom
100
CONCERNS:
Judicial Effectiveness, Labor
Freedom, and Property Rights
OVERALL SCORE CHANGE
SINCE 2013:
–2.5
QUICK FACTS
FREEDOM TREND
90
80
70
60
POPULATION:
18.0 million
UNEMPLOYMENT:
6.4%
GDP (PPP):
$422.4 billion
2.1% growth in 2015
5-year compound
annual growth 3.9%
$23,460 per capita
INFLATION (CPI):
4.3%
FDI INFLOW:
$20.2 billion
PUBLIC DEBT: 17.1%
of GDP
50
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
2015 data unless otherwise noted. Data compiled as of September 2016
BACKGROUND: Socialist President Michelle Bachelet, who began her second nonconsecutive four-year
term in 2014, has strayed from the policies of her first term, which largely supported Chile’s successful
free-market institutions. She has pushed through major and sometimes flawed tax, labor, education, and
other constitutional reforms, and the public perception that she turned a blind eye to her son’s alleged
wrongdoing in an ongoing corruption case has undermined her reputation for trustworthiness and moral
probity. Nonetheless, Chile retains the region’s best investment profile and benefits from its membership
in the Pacific Alliance and a vast network of free-trade agreements. Chile is the world’s leading producer
of copper.
50
2017 Index of Economic Freedom
KEY:
WORLD AVERAGE
12 ECONOMIC FREEDOMS | CHILE
40th
GOVERNMENT SIZE
36th
22nd
100
100
80
80
70
70
60
60
50
50
0
68.2
63.7
70.5
Property
Rights
Judicial
Effectiveness
Government
Integrity
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 one of South America’s least corrupt
countries, several scandals (including one involving the
president’s son) continue to shake public confidence.
Corruption was the top political concern of more than
one-third of Chileans in 2016.
69th
0
100
80
80
70
70
60
60
50
50
64.3
82.2
Business
Freedom
Labor
Freedom
Monetary
Freedom
The overall regulatory framework facilitates entrepreneurial activity and productivity growth. However,
barriers to market entry remain, and bankruptcy
procedures are cumbersome and costly. Increases in
the minimum wage have exceeded overall productivity growth in recent years. Rapid expansion of the
privately owned power generation sector without
government subsidies has included the development
of renewable energy sources.
28th
77.6
82.2
96.1
Tax
Burden
Government
Spending
Fiscal
Health
Rank
OPEN MARKETS
53rd
72.3
40th
The top individual income tax rate has been cut
to 35 percent, but the top corporate tax rate has
increased to 25 percent. Other taxes include a value-added tax. The overall tax burden equals 19.8 percent of total domestic income. Government spending
has amounted to 24.3 percent of total output (GDP)
over the past three years, and budget deficits have
averaged 1.4 percent of GDP. Public debt is equivalent
to 17.1 percent of GDP.
100
0
100th
0

REGULATORY EFFICIENCY
56th
CHILE
RULE OF LAW
47th
9th
17th
86.4
85.0
70.0
Trade
Freedom
Investment
Freedom
Financial
Freedom
Rank
Trade is important to Chile’s economy; the value of
exports and imports taken together equals 60 percent
of GDP. The average applied tariff rate is 1.8 percent.
The investment climate is generally open, but numerous state-owned enterprises distort the economy. The
financial system remains one of the region’s most
stable and developed, and foreign and domestic banks
compete on an equal footing.
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