Chile attracts more FDI relative to the size of its economy than any other Latin American country, and its government is making a big push to promote investment in two sectors – infrastructure and energy – that are vital to the economy.

Only two countries in the region – Brazil and Mexico – secured more FDI than Chile in 2014, and Mexico's figures were only fractionally higher. Chile – with a GDP of $250bn according to the International Monetary Fund – attracted $20.2bn in 2014, while Brazil (with a $1900bn economy) brought in $57.4bn and Mexico (with a GDP of $1230bn) secured $20.9bn.


Between 2009 and 2013, Chile attracted a total of $101bn in FDI, according to the country’s central bank. Some 44.9% of this was ploughed into the mining sector, while 17.6% went to the services sector, 10.2% to the electricity, gas and water sectors, and 4.7% to industry.

Mining hotspot

Mining will always attract a high level of FDI in Chile, as the country is an important exporter of natural resources (some $70bn is expected to be invested in mining projects during the next decade) but the government is eager to promote foreign investment in energy and infrastructure, among other sectors.

The country has some of the highest utility bills in the world (electricity costs climbed an average of 11% a year between 2000 and 2013) and according to the Chilean Chamber of Commerce (CCC), $24.3bn must be invested in the country's energy sector between 2014 and 2023, with an additional $11.7bn required in hydroelectric power. The CCC also estimates that $32.3bn must also be invested in the upgrade of urban transport links and roads during the same period, with a further $25.8bn needed for the improvement of intercity roads and transport links.

Chile's mining industry will almost double its electricity consumption between 2015 and 2025, and needs an estimated 18,000 gigawatts of additional electricity supply, according to the state copper commission Cochilco.

“There are huge opportunities for investors in the [Chilean] mining and infrastructure sectors,” says Kathleen Barclay, president of the American Chamber of Commerce in Chile. “The country imports 90% of its energy and wants to change its energy matrix, with much more emphasis on renewables. Efficient energy use is becoming much more important and there are big opportunities for investors in intelligent metering systems.”

Making progress

In April, the Chilean government took a major step in reducing energy costs in the country when it awarded GDF Suez, the French electricity company, the contract to connect the two main sections of Chile’s electricity grid, SIC – which serves Santiago and the central heartland – and SING – which supplies the north. It involves a total investment of $800m in a new connecting transmission line and should be completed by 2017.

The new link will mean that any fresh supplies of energy – for example, from solar power in the Atacama desert, one of places with the highest solar radiation in the world and located in northern Chile – can be transmitted to the main urban centres and spread around the country.

SunEdison, a Missouri-headquartered renewable energy company, has had a presence in Chile since 2011 and already produces 220 megawatts of power from solar energy at sites in Atacama and Antofagasta in northern Chile. In December 2014, Chile's National Energy Commission awarded 15-year power supply contracts to SunEdison for additional solar projects totalling 350 megawatts, and the company and its partners will invest about $700m in their development.

"Chile has a very limited supply of fossil fuels and as a result they are quite expensive," says Alfredo Solar, chief executive of SunEdison in Chile. “Solar energy is able to compete very well with coal and even hydroelectric power. We receive no subsidies but we are still able to compete.”

An innovative approach

Innovation – whether it is in energy or technology – is something that the Chilean government is pushing, in an attempt to diversify an economy still highly dependent on minerals (copper accounts for 20% of the country’s GDP).

Start-Up Chile is a seed accelerator agency created by the Chilean government in 2010 and provides equity-free investment for qualified start-ups. It is managed by Corfo, the Chilean economic development agency. Initially it provides $20,000 to the start-up and after three months evaluates the project’s progress to see if it warrants an additional $20,000. A project can receive up to an additional $120,000 if it demonstrates that it has made reasonable sales or received private investment.

“Start-Up Chile is now being copied around the world,” says Tadashi Takaoka, an early financing director at the agency. “It has been a way to bring entrepreneurs from around the world to the country. It has helped to make Chile a great place in which to begin a start-up and that helps to spread knowledge locally.”

Pfizer, the giant US pharmaceutical company, says that the Chilean government’s promotion of innovation is highlighted by the $7m grant it has received from Corfo to develop a centre of excellence in precision medicine in the Macual district in the central-eastern part of Santiago.

“This was a very smart initiative on the part of the government to attract the latest research to Santiago,” says Carlos Murillo, general manager of Pfizer in Chile. “The country also has a tax law that incentivises R&D: the amount invested in R&D can be deducted from taxes and we will be able to deduct an additional $5m for the new centre in that way.”

Mr Murillo says that one of the advantages of Santiago in attracting multinational companies is the high quality of life for foreign executives. “It’s one of the safest capital cities in Latin America and that is a consideration,” he adds.

Mr Murillo also says that Pfizer has a good relationship with the Chilean government despite proposed new laws to make it harder for pharmaceutical companies to undertake clinical trials in the country. “These will just make it more expensive for us,” he says. “We will take the trials to other countries and Chile will miss out.”

Chile’s strong rule of law has made the country one of the most important destinations for foreign investment in Latin America. However, the country suffers from highly uncompetitive energy prices and the road network needs a major upgrade if the country is to become a developed state. But the government is targeting investment in energy and infrastructure, and with that Chile will be more than well enough equipped to maintain its impressive FDI performance.