The community led constitutional convention which was formed in 2020 was tasked with drafting a new national constitution to replace the existing one which dates to 1980. There will probably be changes to existing business practices as there is intense social pressure to increase the role of the state in key areas. These include the pension system, state owned enterprises (SOE’s), and access to education and health. It is forecast to include provisions relating to sustainability and climate change.
Many analysts however do not believe a new constitution will radically alter Chile’s political and economic structure. The enabling legislation overseeing the process states that the new text must “respect the character of the Republic of the State of Chile, its democratic model, and any international treaties ratified by Chile currently in force.”
Chile’s sovereign wealth funds, created during President Michele Bachelet’s first government in March 2007, have provided essential support during the financial crisis of 2008, the major earthquakes of 2010 and 2014, and now for the COVID-19 pandemic.
The independent Central Bank has, at least until the exceptional circumstances during 2021, kept inflation low at a target level of around 3%, and fiscal deficits were kept to an average of 2.2% between 2014 and 2019. In 2019 public debt stood at 28% of GDP. Chile ranked 59th in the Ease of Doing Business survey carried out by the World Bank in 2020. It was recognised for enforcing contracts, resolving insolvencies, protecting minority investors, and ease of starting a business.
However Chile continues to carry significant economic risks related to:
- Its huge reliance on copper and demand from its dominant market China
- Inadequate research and Innovation
- Permit processes related to mining, energy, and infrastructure projects, which have historically created delays and confusion resulting in cost and time overruns.
- Labour Relations problems which have caused strikes in key areas such as mining production and port closures.
- Climate Change
- Earthquakes and Tsunamis
- Forest Fires
- Regional and ethnic parity
- Poverty and Inequality
- Drug abuse
- Crime and security