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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/