Our comprehensive assessment of Chile's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Chile, as well as the latest industry developments that could impact Chile's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Chile before your competitors.

Country Risk

Chile Country Risk

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Core Views

  • The Chilean economy will expand at a sluggish pace in the coming quarters, as weaker growth in China and deteriorating business confidence weigh on fixed investment. In addition, falling consumer confidence indicates tepid household spending is ahead.

  • A weakening economy will hurt the ruling Nueva Mayoría (NM) coalition's popularity, prompting the Chilean government to shelve its social agenda in favour of pro-growth policies. With the NM likely to backtrack on education reform, there is a rising probability that Chile's student protest movement will reignite in the months ahead.

  • Chile's external account rebalancing will continue in the coming years, with a weaker exchange rate bolstering the country's good trade dynamics. This will see the current account deficit shrink to 1.9% of GDP in 2014 and 1.2% in 2015, from 3.4% of GDP...

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Chile Operational Risk Coverage (9)

Chile Operational Risk

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BMI View: Chile presents some of the lowest risks to business operations of any country in Latin America , even though its highly regulated trade environment, low availability of labour, and small market size detract from its overall appeal. However, limited security risks, a transparent market-oriented economy, and limited barriers to entry reduce the overall operational risks of investing in Chile.

Overall, Chile is an attractive economy for investors with limited operational risks. The major risks emerge from the highly regulated labour force and low availability of labour. At present, for example, Chile is experiencing a particularly severe skills shortage in the mining and agriculture sectors. Although some 12% of the labour force are unionised, intermittent strikes since 2011 may deter possible investment. We also highlight the possible risk...

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Chile Crime & Security

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BMI View:   Chile is generally safe for foreign business people and tourists, and foreigners are not at a higher risk of crime than Chilean citizens. In addition, risks posed from international terrorism and interstate violence are low, but domestic extremist groups have on occasion targeted foreign-owned businesses in some areas. Chile scores 72 .1 out of 100 overall in the BMI Security and Crime Index ranking 4th in the region and 36th out of 170 countries worldwide.

Petty crime, muggings, and break-ins are common in major cities. Chile's assault figures are particularly high for the region, which negatively impacts the Criminal Risks Index. However, Chile has the lowest murder...

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Chile Labour Market

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BMI View:   Although Chile is among the regional leaders in terms of Availability of Labour, the poor size of its labour force poses a major risk to the labour market. Economic growth and prosperity have caused a demographic transition in Chile in which birth rates are dropping below mortality levels. The biggest effects of this transition will be realised in the long term as the labour pool may shrink, fewer students will be trained at an earlier age in emerging technologies and it may require retraining the existing labour pool or attracting immigrants to plug the labour gap. Chile is a regional outperformer in our Labour Market Risk Index in first place out of 28 Latin American countries. With an overall score of 64.6 out of 100, Chile is also placed highly on a global scale, in 27th out of 170 countries worldwide.

Most of the population, and...

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Chile Logistics

Chile Trade & Investment

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BMI View : Chile is one of the regional outperformers in the Investment and Trade Risks Index. A score of 60. 1 out of 100   puts Chile in second place just behind the Bahamas, by a margin of less than 1%, and 45th out of 170 countries worldwide. Chile's good standing is boosted by a developed regulatory environment and transparent institutions. However, the score is negatively impacted by the costly bureaucratic process and low government expenditure levels. 

Chile is a relatively open country for economic activity and its commitment to foreign direct investment (FDI) is underlined by its trade friendly policies, import driven economic growth, and the...

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Chile Industry Coverage (22)

Autos

Chile Autos

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Vehicle sales in Chile increased 15.0% year-on-year (y-o-y) in the first eight months of 2013, to 242,257 units. BMI forecasts a 10% increase over the course of the year. We expect sales to moderate somewhat in the latter part of the year, as we believe the country's weak private consumption story and weakness in the mining sector will start to filter through to the market, and higher base effects from strong H212 sales volumes will temper the growth rate.

We believe that the Chilean consumer is entering a period of slower growth over the medium term, which has partly informed our forecast of a 9% increase in 2014, a slight slowdown from 2013 levels, and our expectation for fairly tepid growth over the remainder of our 2017 forecast period. We forecast sustained positive growth in the market, but that this will be moderated by the country's relatively subdued consumer story. Indeed, we believe that much of this growth...

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Commercial Banking

Chile Commercial Banking

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...
Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Chile Consumer Electronics

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BMI View:   T he consumer electronics market in Chile is   one of the most lucrative in Latin America in per capita terms due to high incomes and developed retail and distribution networks. Since 2012 tablets and smartphones have been the main growth drivers , with lower cost Android devices extending market reach . However, this growth has had casualties, including notebook and digital camera sales. Meanwhile the economic environment remains supportive with b anks willing to extend credit and th...

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Defence & Security

Chile Defence & Security

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Over 2012 and 2013, the threats to Chile's security have transformed into internal ones, moving away from external threats. The country continues to witness widespread sporadic protests against the government, which also continued through 2012. 2013 was also witness to several protests against lax environmental regulation and rising unemployment. These protests saw the government mobilising police forces armed with teargas and water cannons to disperse demonstrators. While security threats to Chile from international sources such as its on-going territorial dispute with Bolivia, and international terrorist groups remains dormant and benign, the country faces the risks of internal dissonance between the government and those sections of the society demanding economic and social improvement.

Though the incidents of civil unrest were primarily targeted at the policies of Sebastián Piñera's rightwing administration, the...

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Food & Drink

Chile Food & Drink

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The growth of the Chilean food and drink industry will continue to decelerate in 2014, affected by weak demand for the country's exports in the Asian markets. Recent increases in consumer prices, combined with stagnant wage growth, are set to weigh on consumer spending. This is reflected in our outlook for private consumption, which is forecast to grow at 3.5% in 2014 compared with 6.1% and 5.5% in 2012 and 2013 respectively. That said, we expect expansionary monetary policy and increased government spending to support economic activity and prevent a sharper decline in consumption.

Headline Industry Forecasts (local currency terms)

  • Total food consumption (local currency) growth year-on-year (y-o-y) in 2014: +6.5%; compound annual growth rate (CAGR) to 2018: +6.6%

  • Per capita food consumption (local currency) growth y-o-y in 2014: +5.6% ; CAGR to 2018...

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Freight Transport

Chile Freight Transport

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BMI View:   We retain our cautious outlook on Chile's freight transport sector and the economy as a whole, largely on the back of the slowdown in Chinese growth and its demand for copper. We believe that weaker fixed investment in Chile amid mounting external headwinds such as cooli ng external demand for copper will affect real GDP growth in Chile in 2014. In addition, de teriorating investor sentiment and an ongoing slowdown in private consumption will drive growth even lower in Chile in 2014. Economic growth will accelerate moderately in 2015 on the back of stronger government consumption, an improved net exports position and a slight rebound in fixed investment.

Considerable...

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Information Technology

Chile Information Technology

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BMI View:   O ur bullish outlook for the continued development of Chile's IT market over the medium term remains in place, however we expect growth to be held back slightly in 2015 by the depreciation of the peso against the US dollar. Looking at the medium term, we believe h igh levels of spending per capita and the highest PC penetration rate in the region, bodes well for growth of software and IT services in the market - an important sign of market maturity. Nevertheless, there is still significa n t growth from hardware sales, with new form factors...

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Infrastructure

Chile Infrastructure

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BMI View: We have downgraded our construction industry forecast for Chile in 2014 from 3.6 % to 2.1% real growth. This is on the back of lower than expected industry growth in Q114 and weakening GDP growth expectations as the economy starts to suffer the effects of falling copper prices - the country's primary export. That said, we maintain a positive stance over the medium term on Chile's construction industry , supported by a strong project pipeline , political stability and an investor-friendly business environment.

Key Trends And Developments

  • Chile's unique geography raises...

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Insurance

Chile Insurance

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BMI View:   As we had expected, premiums have been rising slowly in both the major segments of Chile ' s sophisticated and strong insurance sector. We see no reason why this should change over the next year or so - but remain reasonably confident that the pace of increase can accelerate later in the forecast period. Recent deal making highlights how various protagonists see health insurance as an area of opportunity.

As of late 2014, the news flow from Chile's insurance sector confirms our view that growth in premiums - in both of the major segments - will be slow in 2014 and in 2015. In the non-life segment, the main problem has been the general sluggishness of the economy. We also suspect that prices will have been under downwards pressure in some lines, but stress that discipline in underwriting is one of the many...

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Medical Devices

Chile Medical Devices

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Espicom Industry View:   The Chile an medical device market is small but per capita expenditure , valued at US$49 in 2013, ranks first in Latin America. Espicom forecas ts a low double-digit 2013-2018 CAGR in US dollar terms, fuelled by planned public hospital modernisation , ta king the market to US$1.4 bn. Medical device imports are extremely h igh, as production is limited. Chile has generally avoided...

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Mining

Chile Mining

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BMI View: Chile's mining sector will see modest growth of 1.2% on average per annum in 2014-2018. M ajor miners will continue to develop several large projects, encouraged both by the country's stable political and business environments , and significant mineral reserves. Yet elevated operational costs, lagging productivity, regulatory changes, and subdued copper and precious metal prices will limit sector growth and miners' expansion plans...

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Oil & Gas

Chile Oil & Gas

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BMI View:   With relatively small below-ground potential, Chile suffers from a severe deficit of hydrocarbon supplies vs domestic dem and and a high dependence on imported energy feedstock. However, the country's leadership   recogni s es   the unlikelihood of a trend reversal, implementing a new national energy strategy to spur greater development of the sector where possible. The new Bachelet administration has continue d Chile's tradition s of a liberal economy, regulatory ...

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Petrochemicals

Chile Petrochemicals

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The Chilean petrochemicals industry will remain a marginal, local player that will struggle to compete on the domestic market, according to BMI's Chile Petrochemicals Report. With feedstock restraints undermining production and investment, the Chilean market will be import-dependent over the medium-term although growth will be unimpressive.

The shortfall in gas feedstock has been particularly problematic for the petrochemicals industry at times of high energy demand during the winter months. In 2012, methanol output was just 313,000 tonnes, down from 554,000 tonnes in 2011, due to insufficient natural gas feedstock to operate Methanex's complex following the curtailment of supply from Argentina and reliance on Chile's relatively small amount of gas supply. This is a fraction of the country's total methanol capacity. Although investment has been made in accelerating the exploration and development of natural gas in...

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Pharmaceuticals & Healthcare

Chile Pharmaceuticals & Healthcare

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BMI View: Improving standards of intellectual property protection will provide incentives for both local and foreign pharmaceutical companies to have long-term strategies in Chile. In addition, Chile's open economy, relatively efficient legal framework, business-friendly environment and local drugmakers' strong Latin American presence will continue to attract multinational investment in the country.

Headline Expenditure Projections

  • Pharmaceuticals: CLP1,724bn (USD3.5bn) in 2013 to CLP1,849bn (USD3.29bn) in 2014; +7.3% in local currency terms and -5.4% in US dollar terms.  

  • Healthcare: CLP10,237bn (USD20.66bn) in 2013 to CLP11,161bn (USD19.86bn) in 2014; +9.0% in local currency terms and -3.9% in US dollar terms.

...

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Power

Chile Power

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BMI View:   Chile is one of the most attractive   markets in Latin America, with political stability, abundant   natural resources and a healthy economic growth outlook all adding to its appeal. In terms of energy, however, Chile's unique geography, particularly the considerable distances between urban areas and potential sources of power, creates challenges in the electricity market. Moreover, h ydroelectricity accounts for about one- third of production, and is a sector shrouded in regulatory uncertainty and weighed down by lengthy appeals processes. While rumours of new hydro projects abound, there is no guarantee these proposals will...

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Real Estate

Chile Real Estate

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BMI View: We are optimistic on the outlook for the Chilean commercial real estate market. Although the short-term economic outlook may mean a slowdown in the sector's growth, we see significant opportunities in the longer term, particularly in the retail and industrial sub-sectors and outside the capital city. Growth will be buoyed by rising consumption and investment, while downside risks stem from oversupply in some sub-sectors and notably in Santiago.

Chile's economic growth is set to slow in 2014, on the back of declining demand for a key export commodity, copper, in China. Chile will be affected by rising unemployment and falling consumption and investment. However, over the longer term the economy should benefit from a growing export base, with increased investment into manufacturing, as well as the increasing spending power and...

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Renewables

Chile Renewables

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BMI View: We have long held an optimistic outlook towards the Chilean renewable energy industry. A number of key fundamentals support this buoyant view, including strong government conviction towards power mix diversification, a mostly stable business environment and geographically advantageous conditions for renewable electricity generation. This - coupled with the fact that electricity prices in Chile are already relatively elevated - has meant that projects - specifically solar developments - are increasingly cost competitive with other energy sources.

Chile's geographical characteristics mean that it has considerable potential for the development of renewable energy projects, including extensive coastline, mountains and deserts. Furthermore, the country's relatively stable operating environment and political stability make it an attractive market for international...

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Retail

Chile Retail

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BMI View: The Chilean retail market has significant long-term potential, with an increasingly affluent middle class fuelling demand for non-essential items and driving up consumer spending. Despite the ongoing slowdown in private consumption, an increasing number of global retailers are targeting the country, keen to take advantage of expected high levels of growth across all retail sub-sectors .

BMI's Chile retail report provides an extensive and comprehensive forecast of various retail indicators, including household spending, headline total spending across each retail sub-sector, household income and employment forecasts, demographic forecasts and a detailed breakdown of household and per capita spending across a large number of retail areas, including food & drink, healthcare & insurance, consumer electronics, toys, pets, garden...

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Shipping

Chile Shipping

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BMI View: Considerable investment in the expansion of Chile's ports confirms our positive outlook for its ports infrastructure and the wider construction industry. In the immediate term, we expect the port of San Antonio, now the country's largest port, to continue to outperform the port of Valparaíso. The former is expected to continue its solid pace of growth witnessed recently, registering growth in container throughput of almost 10% over our medium-term forecast period to 2018. There is downside risk to our forecasts from the 'Short Law' on ports, currently in parliament, which is widely expected to lower Chilean ports' productivity over the medium term.

We also maintain our positive outlook for Chile's construction industry on the back of an investor-friendly business environment, political stability and a strong pipeline of projects....

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Telecommunications

Chile Telecommunications

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BMI View:  Chile is a highly saturated mobile market and one of the most developed in Latin America and offers little scope in terms of organic growth. Number porting and reduction in mobile termination fees has made it easier for customers to switch networks, which has lead to increased competition. BMI believes that additional revenue opportunities will come primarily from added data services in the short to medium term as the regulator reports healthy growth in mobile data usage.

Key Data

  • Data from mobile operators show the Chilean mobile market has not rebounded from its subscription loss in Q413, as first two quarters as operators reported total loss of 525,000 subscribers. Total mobile subscriber base was at a similar level as last seen in Q212.

  • Chile ended Q214 with 7.6mn...

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Tourism

Chile Tourism

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The Chile tourism report examines the strong long-term potential currently being offered by the local tourism industry, bolstered by continuing strong levels of government support. BMI cautions that growth in tourist arrivals may moderate slightly from 2014 onwards as tourists to Latin America might choose to travel to Brazil instead, given that it is hosting the football World Cup in 2014 and then the Olympic Games in Rio de Janeiro in 2016.

The report also analyses the growth and risk management strategies being employed by some of the leading players in the Chilean accommodation sector as they seek to maximise the tremendous growth opportunities being offered by the local market at the present time.

According to Chile's National Statistics Board (Sernatur) arrivals to Chile totalled 1.7mn in the first five months of the year, representing a 0.5% increase year-on-year (y-o-y). This slow rate...

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Water

Chile Water

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BMI View:   Water qual ity and water scarcity remain the two main issues that this water stressed country is facing. The problem is magnified by the fact that the country's two biggest industr ies are agriculture and mining, which are the two largest water consuming sectors. Furthermore , both of these   industries contribute heavily to the pollution of the already scarce natural resource . However , change is in the air with a...

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