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, unequal education system , 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 unionised and relatively regulated labour force. 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, frequent strikes may deter possible investment. We also...

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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 fourth out of 28 countries   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...

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Chile Labour Market

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BMI View:   Chile's labour market offers considerable attractions for employers, including a large, urbanised and well-educated workforce as well as minimal additional employment costs such as labour taxes. However, there remain key risks to businesses looking to hire staff, mostly posed by the inherent inequality of the education system, the prevalence of trade unions and the difficulty of employing foreign workers . Nevertheless, Chile remains the outperformer in Latin America   in the overall BMI Labour Market Risk Index, ranked first with a score of 66.1 out of 100, Indicating the lower level of employment risks that businesses will face in the country c ompared to its regional peers...

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Chile Logistics

Chile Trade & Investment

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BMI View : Chile is one of the regional outperformers in the Trade and Investment Risks Index. A score of 60.1 out of 100 puts Chile in second place, just behind the Bahamas, 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 organisation of its market-oriented economy. In addition, a relatively transparent regulatory environment, established banking sector, and political stability encourage foreign investment in the local...

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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:   In the Chilean consumer electronics market ,   tablets and smartphones have been the main growth drivers since 2012 , when the wide availability of lower cost Android devices extend ed market reach . However, this growth has had casualties, including notebook and digital camera sales. In 2015 peso depreciation will be drag on market value growth, but over the medium term we expect the   economic environment to remain...

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Defence & Security

Chile Defence & Security

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BMI View: Domestic security threats continue and have become more violent over 2014. T he spate of bombings in a terror campaign has seen military personnel called into action. Chile's reduction of overseas troops indicates the need to focus on domestic security issues that has been recognised by President Michelle Bachelet. However, there are further measures to be acted upon in her progressive outline for the Chilean armed forces. The bombings on the Santiago subway have rocked the nation into acting against those cell s that perpetrated the attack .

While the number of violent domestic incidents has decreased,...

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Food & Drink

Chile Food & Drink

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We maintain a positive outlook for Chile's food and drink industry as its food consumption is expected to expand by 6.5% in 2014 and maintain a slightly higher pace till the end of our forecast period in 2018. Consumption will be driven by the gradually increasing purchasing power, as income levels catch up with those in more developed markets.

Headline Industry Forecasts (local currency)

  • Total food consumption growth (y-o-y) in 2014: +6.5%; compound annual growth rate (CAGR) 2013-2018: +6.6%

  • Per capita food consumption growth (y-o-y) in 2014: +5.6% ; CAGR 2013-2018: +5.8%

  • Total soft drinks value sales growth (y-o-y) in 2014: +7.1%; CAGR 2013-2018 +7.2%

  • Alcoholic drinks value sales growth (y-o-y) in 2014: +5.5%; CAGR 2013-2018 +5.8%

  • Total mass...

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Freight Transport

Chile Freight Transport

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BMI View: For 2015, BMI maintains it s 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 cooling external demand for copper , will affect real GDP growth in Chile in 2015. In addition, deteriorating investor sentiment and an ongoing slowdown in private consumption will drive growth even lower in Chile in 2015. 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 investment in the expansion of Chile'...

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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 forecast modest growth of 2.6% for Chile's construction industry in 2015 on the back of falling fixed investment and weakening copper prices - the country's primary export . Despite offering one of the most attractive business environments in the region , we highlight that recent tender delays and contract cancellations will have a detrimental impact on investor sentiment towards the Chilean market.

Key Trends And Developments

  • Chile's unique geography raises particular challenges for transport infrastructure. However, the attractive investment environment means that the sector will maintain solid growth in the medium term. Road building remains the primary...

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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 subdued average annual growth of 1.2% in 201 5 -2018. T he country's stable political and business environments ,   and significant mineral reserves , will encourage continued sector investment .   Yet elevated operational costs, lagging productivity, regulatory changes, and subdued copper and precious metal prices will limit sector growth and...

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Oil & Gas

Chile Oil & Gas

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BMI View:   Given a lack of below-ground potential, Chile suffers from a severe deficit of hydrocarbon supplies 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 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 will remain one of the most attractive power markets in Latin America over the next 10 years, due to its strong electricity consumption figures, driven by the country's expanding consumer base and energy-intensive mining industry. Moreover, a solid business environment and liberalised electricity sector continue to contribute to our positive outlook for the country. While hydropower expansion will be reined in by regulatory and environmental hurdles, renewables and natural gas-fired power generation will experience considerable growth and create significant investment opportunities over our 10-year forecast period.

Although Chile's economic growth in 2014 and 2015 will be lower than previously expected (1.95% and 2.55% respectively, compared to 2.5% and 3.2%), we forecast real GDP to pick up over the medium term, increasing by an annual average rate of 4.19% between 2016 and...

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Real Estate

Chile Real Estate

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BMI View:   Chile's economic stability is now under threat from weakening demand for copper, the country's most valuable export. As such, we are anticipating a potential slowdown in the commercial real estate market growth as we enter 2015. There remains room for optimism, however, with strong fundamentals cultivating a relatively resilient leasing market. Longer-term opportunities are significant, particularly in the retail and industrial sub-sectors and outside the capital city, Santiago.

The final quarter of 2014 presented Chile with a tough reality. Following decades of economic stability, with an average growth rate of more than 5% in recent years, growth finally began to stall. Declining Chinese demand for Chile's key export commodity, copper, is now increasing unemployment and impacting the levels of both consumption and investment. Despite this potential...

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Renewables

Chile Renewables

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BMI View:   Strong government commitment to power mix diversification, a mostly stable business environment and advantageous natural conditions for solar, wind and geothermal have led us to identify Chile as a global hotspot for renewable energy. The project pipeline remains extremely robust and investor interest is high, supporting our constructive 10-year renewables capacity and generation forecasts.

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 investors. Private investor interest has been high, with a number of European and US utilities and manufacturers seeking out opportunities within the sector...

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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 near- 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 strong growth in container throughput over our medium-term forecast period. There is downside risk to our forecasts from the 'Short Law' on ports, currently in parliament, which is widely expected to lower Chilean port s' productivity over the medium- term.

A stable political outlook and sound economic fundamentals...

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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: This quarter , we have substantially revised and expanded our water forecasts for Chile. We now include wastewater collection and treatment forecasts, an d Extraction forecasts. Overall, we view Chile as one of the most attractive markets in the region both for water infrastructure companies and, following the announcement of the potential sale of a key water utility, for water service companies also. However, we highlight that risks remain for industrial consumers, who will continue to face high costs for the construction of water s upply and treatment facilities.

Despite a recent slowdown, Chile's water sector continues to report solid growth, driven by strong investment and good government support. A healthy business environment also help Chile outperform in terms...

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