Chile Pestle

Introduction
Chile stretches along the western coast of South America from Peru in the subtropical north to
the southern tip of the continent in the sub-Antarctic region. With boundaries defined by the
Pacific Ocean and the Andes on both sides, the country’s width is only 200km wide but the coast
is 4,000km long. A defining period in the country’s history was the 17-year dictatorship of
Augusto Pinochet, which lasted from 1973 until 1990. The Concertación is a center-left coalition
that was in power from 1990 to 2010. In January 2010, Sebastian Piñera won the presidential
election, ending 20 years of rule by the left-wing coalition. However, in the 2013 general
elections the center-left coalition led by Michelle Bachelet came to power again. The falling
popularity of the president was a major concern for the government at the start of 2016, and
former President Piñera was re-elected in 2017 (Chile: In-depth PESTLE Insights).
Chile’s economy has seen strong economic growth over the last two decades with an
average GDP growth rate of more than 5% over a 20 year period. However, in 2014, GDP
growth was at 1.9% which was the lowest rate in 5 years. This decline can be attributed to a
contraction in industrial production, low commodity prices, and stagnation in the Chinese
economy (Chile: In-depth PESTLE Insights). Their economy is dependent on natural resource
exports and presents a concern for their stability and future growth. Chile has high levels of
property rights, investment, monetary, and trade freedoms. It is ranked as one of the most open
economies, and it is attractive for foreign investment.
Technological (82, 48, 87, 107)

A nation’s competitiveness depends on the capacity of its industry to innovate and
upgrade. Being one of the most advanced economies in Latin America, Chile’s information and
communications technology (ICT) sector is well developed. The shifting focus towards new
technologies makes it cheaper and easier for consumers to access information, and connectivity
is a major driver of purchasing power. Businesses in Chile using the internet expanded from
59.8% in 2012 to 79.7% in 2017, as more corporations recognized the benefits of its usage
(Business Dynamics). According to Business in Emerging Latin America, new media penetration
has been growing steadily and surpassing some of the more traditional media outlets. For
example, in 2012 the Internet had already reached more than 64% of Chilean households, which
was the highest penetration in the region. In addition, telecommunications is a high growth sector
and wireless devices have experienced a boom in Latin America in recent years. Greater
smartphone penetration and investment in wireless networks in Chile has resulted in progress in
the ICT sector. However, inadequate broadband infrastructure in the country’s southern areas
could hinder future development. Despite being one of Latin America’s most developed
countries, Chile’s research and development expenditure only equaled 0.4% of GDP in 2017.
Although this was the fifth highest in the region that year, it points to limited innovation
capacity. In order to spur R&D spending, the state offers tax relief for qualifying activities
(Business Dynamics). While Chile is one of the more developed nations in Latin America, the
country still lacks in some infrastructural areas. A mid-2018 report by the Chilean Construction
Chamber stated that the country requires investment of around $175 billion across various
sectors including transport, telecommunications, and utilities in order to raise living standards
(Households – Chile).
Legal
The Chilean legal system, as with most Latin American countries, is derived from the French and
Spanish legal tradition, known worldwide as the Civil Legal System. This means that the law is
compiled in codes, and the judges' main role is to apply the law to particular cases as it was
intended by the legislation. President Sebastián Piñera took office in 2018 and will likely review
former president Michelle Bachelet's tax and labor reform, but only minor changes such as a
simplification of the tax regime are likely to occur (Country Report: Chile). Chile steadily
increased its corporate tax rate from 20.0% in 2014 to 27.0% in 2018, increasing the tax burden
on companies. President Sebastian Piñera and the new Chilean government have pledged to
reduce the corporate tax rate (Business Dynamics: Chile). Legal reforms throughout Latin
America have increased the transparency of the criminal justice process and improved
defendants' rights. Reforms improve good governance and economic development. However,
lack of meaningful reforms in Chile over the last few years have posed some issues for the
country. Since 2017, the country has experienced more challenging government finances and
lower freedom in the labor market. Despite this, in the World Bank’s Ease of Doing Business
2018 report, Chile achieved the second best ranking in Latin America due to its business-friendly
environment (Business Dynamics: Chile). The government has done a lot to promote its business
environment including strong property rights, investments, trade freedoms, and allowing the
economy to be very open. These characteristics make establishing a foreign business in Chile
very promising. Legislation concerning foreign investment is transparent and clearly defined in
Chile. Foreign investors experience the same rights as nationals and are able to operate in most
areas. However, court proceedings can be subject to long delays and high costs remain a barrier
to pursuing legal action. There is broad political consensus to maintain a legal framework that
favors the private sector. Chile’s government policy of transparency and fighting corruption has
contributed to their stability and strong performance as a country (Country Report: Chile).
Environmental
The country stretches along the western coast of South America, isolated by the Andes, the
Pacific Ocean, the Atacama Desert, and the polar region. Chile’s unique geographical position is
home to a variety of ecological regions that range from subtropical to sub-Antarctic. Currently, a
very low percentage of energy is produced from renewable resources in the country. Chile is
vastly dependent on imported fossil fuels. The country must diversify its energy sources to
reduce emissions of air pollutants. The government needs to invest in renewable technologies,
such as wind, geothermal, solar power, and wave energy. The government has recently expanded
its renewable energy initiatives with government support. One bill requires utilities to generate
20% of their power from renewables (Chile: In-depth PESTLE Insights). In addition, the
government introduced a new taxation policy on certain sources of pollution in 2017. It will
comprise of a carbon tax and a tax on local pollutants. These efforts attempt to diversify Chile’s
sources of energy and reduce their dependency on fossil fuels. One difficulty that the Chilean
government may encounter will be finding a balance between economic development and
environmental protection. Chile’s economic growth, widespread deforestation, and a rapid
growth in mining all threaten the country’s natural resources. threaten Chile’s natural resources.
While economic and technological developments have positively influenced the environment,
overwhelmingly the effects are detrimental (Chile: In-depth PESTLE Insights).

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Introduction

economies, and it is attractive for foreign investment.

Technological (82, 48, 87, 107)

environmental protection. Chile’s economic growth, widespread deforestation, and a rapid

overwhelmingly the effects are detrimental (Chile: In-depth PESTLE Insights).

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