Starting a Business in Chile:

What You Should Know First

• Located in South America

• Occupies 299k sq. miles• 2,700 miles of Coastline• 80% mountainous

terrain• 150 miles wide at most

• Home to 17.8m people• 50.5% women• 49.5% men• 22.1% younger than 15• 68.6% between 15 & 65• 9.3% older than 65

Chile: Geography and Demographics

Chile: Geography and Demographics

• 86% of the population resides in urban areas

• Santiago Metropolis is the most densely populated area with 6.7m people (37.6% of

the countries population)

• Multiethnic Society• 66% Mestizo (mixed Native American

and European• 25% Europeans/Caucasian• 7% Native Americans

• Predominantly Catholic• 76% Roman Catholic• 13.1% Protestant• 4.2% Other Religions

• Official language is Spanish

Chile: The Culture

Chile: The Culture

POWER DISTANCE● High Power Distance Rating● Managers do not interact or

socialize with workers● Managers display authority● Important work is not passed down

to workers

INDIVIDUALISM•Highly Collective Culture –

large emphasis on working in a group

•Chile is 23/100 versus the US, which is 91/100

Chile: The Culture

MASCULINITY•Chile is a feminine culture•Society is caring for others and

quality of life•The US is a masculine culture•Driven by competition and

success

Chile: The Culture

UNCERTAINTY AVOIDANCE● Chile scores high on the

“Uncertainty Avoidance” index● Indicates a strong need for rules

and structure of life● By comparison, the US scores 46 on

the index

Chile: The Culture

LONG TERM AVOIDANCE●Chile scores high on the “Uncertainty

Avoidance” index○ Indicates a strong need for rules and

structure of life○ Risk Averse

●By comparison, the US scores 46 on the index

Chile: The Culture

Chile: The Culture

INDULGENCE FACTOR● Chile’s Indulgence measure is

even with the US● Willingness to realize their

impulses and desires with regard to enjoying life and having fun

● Enjoy leisure time and spending money

Chile: The CultureBusiness Etiquette

• Monochromic Time System• Expect others to make appointments• Punctuality respected – Start and End on time• Use light conversation before a meeting

• Good Topics: family, children, history or Easter Island

• Bad Topics: politics, human rights or the 1988 grape export scare

• Handshakes are customary during introductions, but hugs and cheek kisses are traditional if

you know the person• Titles are important – address others with their titles (Doctor, Professor, Senor or Senora)

Chile: The CultureBusiness Etiquette

• Business cards should be printed double-sided – one Spanish side and one English side

• Business entertaining is done in Hotels or Restaurants• Table manners are very important

• Never serve wine with your left hand• Always use utensils – even with French fries!• Keep your hands above the table at all times

• Holding you palm upward and spreading your fingers is code for telling someone they are stupid

• Gestures to watch for:• Do not raise your right fist to

head level – it is a Communist sign

• Slapping your right fist into your left open palm is obscene

Chile: The CultureBusiness Etiquette

• Men should dress in dark blue or gray business suits• Bright colors are not appropriate• Close proximity comfort distance• Maintain good eye contact

• Women should wear a suit and heels

• Men should rise when a woman enters the room

• Women are climbing in the business world, however a machismo mentality still exists

Chile: Social Environment• One of the most prosperous countries in Latin

America• Struggle among the class systems• 6th highest GDP in Latin America (Argentina &

Brazil lead)• Highest GDP Per Capita

in Latin America

• Wealth Gap is one of thelargest in the world❑Highly Stratified

Society❑Social Classes do not

intermingle❑Wealthy live

separately from poor

Chile: Social EnvironmentUpper Class• Old Aristocrats• Industrialists• Merchants• Politicians• Military Men

Lower Class•Farm Laborers•Factory Workers•Miners•Crafts Workers

Middle Class•Professionals•Teachers/Professors•Investors•Merchants

Chile: The Legal Structure

• Ruled by the Constitution of 1980 (approved by voters) – reformed in 1989 and 2005

• Separation of functions between President of the Republic, Congress, a judiciary and a Constitutional Court

• Free Enterprise recognized• Property protection enforced

Chile: The Legal Structure

• For Foreign Companies:• Requires authorization of a representative

by legalized power of attorney• Can organize as:

❑Stock Corporation (most favored)❑Limited Liability Corporation❑General Partnership❑Limited Partnership❑Silent Partnership

• Must be entered into the LocalCommercial Register, including powers and limitations

Chile: The Legal Structure

▪ Strong legal system, however:❑Slow process (3x the length it takes in the US to make

decisions❑Corruption exists ❑Expediting legal proceedings is possible by obtaining

the right advocate (or in all likelihood by bribing certain government officials)

Chile: Accounting and Taxes

Taxes:• Similar taxes compare to the US

• Sales Tax• Income Tax• Capital Gain Taxes

• Average Corporate Income tax rate is 20% (US is 15% - 39%)

Accounting:• IFRS (International Finance Reporting

Standards) have been phasing in since 2004

• Except for authorized exceptions, all accounting records must be kept in Chilean Pesos

• Open Corporations (500 stockholders or more) are required to file with the Superintendency of Securities and Insurance ( or the SVS – the equivalent of the SEC)

Chile: Political Environment

• Operates under a Democratic Republic– President– Chamber of Deputies (120 Seats)– Chamber of Senate (38 Seats)

• Chile became a Democratic Nation in 1990

• Chile was highly unstable prior to becoming a Democratic Nation

• Chile’s President is not Commander in Chief

Chile: Political Environment• Current President Michelle Bachelet (2014-2018)

•President is elected for 4 years - with immediate re-election prohibited

• President Bachelet’s Political Agenda:•Reform Taxes•Reform Educations•Reform Constitution

• Chile is an active member of the UN

• Chile currently has strong Diplomatic Relations with most countries

Chile: Economic Environment• Free economic system

• Ranked 7th in the world (78.5 score )in how free their economy is✓1st in Latin America to reach the top 10

• First Latin American country to join the “Organisation for Economic

Co-operation and Development” (a global organization to promote trade)

CHILE

Chile: Economic Environment• GDP is 333.4 billion

• GDP growth is about 4%• Unemployment is relatively low at 6.2% (Jan 2015)• Chile’s economy is based mainly on the export of minerals,

which account for 50% of their exports• Maintains an absolute advantage in Copper

• Chile is the leading producer of Copper – its most valuable natural resource

• Most of the copper exports are

consumed by China• Other sectors include:

Timber, Iron, Fishing, Wine

and Oil

Chile: Economic Environment

❑Electrical Production

❑Building/Construction

❑Industrial Machinery❑Transportation

Equipment❑Consumer & General

Products

Copper is used around the world for:

Chile: Monetary Environment

•Chilean Peso (CLD) is the currency•A recent exchange rate showed:

•1 CLD = .0016 USD•641.30 CLP = 1 USD

Chile: Monetary Environment

•Central Bank of Chile is the monetary institute•Chilean Peso foreign exchange is led by a floating exchange rate – however, the bank reserves the right to intervene

• Bank has intervened 4 times since 1999

•Central Bank guided by an Inflation Targeting Regime

• Pursues an Inflation target of 3%

Chile: Trade Environment•Free Trade structure•Since 2003, Chile has actively been modernizing

customs and facilitating trade•The openness has lead to economic growth and

poverty reduction

• Current notable Trade Agreements include:

❑ European Free Trade Agreement

❑ Hong Kong❑ United States❑ Central America❑ Japan

❑ Australia❑ Canada❑ European Union❑ Mercosur

Chile: Trade Environment• Trade Surplus of 748 million as of

February 2015• Surpluses have been recorded since

1999, mostly due to the rise of the use of Copper

Chile: Start-Up Chile• Provides free investment for Start-up

Companies• Launched in 2010 which created 22 startups

from 14 different countries – 800 startups by the end of 2014

• Managed by the Chilean Economic Development Agency - CEDA

• Provides $40,000 and a 1 year visa

Starting a Business in Chile:Resources• http://www.geographia.com/chile/

• http://www.britannica.com/EBchecked/topic/111326/Chile• http://countryeconomy.com/demography/population/chile• http://www.nationsencyclopedia.com/economies/Americas/Chile.html• http://worldfacts.us/Chile.htm• http://www.everyculture.com/multi/Bu-Dr/Chilean-Americans.html• http://www.grs-relocation.com/country/chile• http://www.pwc.com/es_CL/cl/publicaciones/assets/doingbusiness.pdf• http://www.nyulawglobal.org/globalex/chile1.htm• http://www.doingbusiness.org/data/exploreeconomies/chile• http://www.voyagesphotosmanu.com/social_structure_chile.html• http://atlas.media.mit.edu/profile/country/chl/http://atlas.media.mit.edu/profile/country/chl/• http://www.startupchile.org/