Chile a growing country – Offshore

Chile a growing country – Offshore

The Chilean economy is booming.

With forecasts of economic growth of around 5% and a budget surplus of 1.7% of GDP, the figures accompany it. In addition, it is one of the most stable countries in Latin America.

Taxes in Chile are the lowest in the OECD with only 17% of GDP. Low taxes show that your economy can grow, without restrictions. And in such a way the government can maintain low tax rates.

In the midst of all this economic growth, companies need skilled workers, and the local labor market is scarce, so talent must be imported. And this does not prevent the hiring of qualified foreigners, since Chile’s immigration law is simple and there are very few obstacles to obtaining a work permit.

You as an entrepreneur or investor, must attend to the opportunities. Wealth in Chile is increasing and global demand is getting stronger. Google or Coca Cola are making heavy investments in the country, offices and branches of foreign companies are increasing. The access and establishment facilities for foreigners is a complement that allows you to start a business here and hire foreign workers easily.

But the supply of very high quality products and services is very limited. For example, there are difficulties in accessing a high-level private education because the supply is scarce and there is a waiting list and also enrollment rates have skyrocketed.

The attractive luxury market is growing at 30% this year. Ferrari sales have quadrupled in recent years. Premium restaurants receive reservations days in advance.

This is just the tip of the iceberg. There is a much greater growth to come to Chile, and this means that there is still room for foreigners who want to establish themselves, offer their skills and talent, and make a fortune in this booming economy.

What do you need to know about your sovereign wealth funds?

Paradoxes of abundance, many countries in Latin America now have reserves and face the challenge of managing this bonanza of raw materials. Its investments and exports are still very concentrated in these areas of low intensity in value added and employment. Hence, how to make better use of this abundance to make a productive leap and diversify their economies. Sovereign wealth funds can be strategic vehicles for this.

That is something that Chile carried out in a masterly manner. It provided two sovereign funds with strict rules and framed in a strict fiscal responsibility law, which has framed it as a global reference. One of its rules obliges to dump 0.5% of GDP from the surplus of the previous year to the Pension Reserve Fund ; the next 0.5% of the GDP of the surplus to capitalize the central bank, and what is generated from a surplus above that amount goes to the second sovereign fund, the Economic and Social Stabilization Fund .

The Chileans thus provided themselves with very rigorous regulatory and institutional frameworks, but also with adequate human capital. Whether it is the previous government or the current one, we are talking about professionals and economists of great value, doctors in economics, with long and prestigious academic careers, particularly in the United States.

Chilean funds are not strategic funds

They have no vocation to promote business development and diversification. Among the emerging countries, some countries such as the United Arab Emirates, Singapore or Malaysia nevertheless endowed themselves with that vocation. And one can imagine that Chile ends up endowing with a (third) sovereign fund to allocate fiscal surpluses to a strategic fund. This would only be activated if the first destinations are fulfilled, that is, from a significant level of fiscal surplus.

The strategic fund could then operate as a fund of funds, accelerating productive diversification towards technological sectors or even industrial suppliers of the mining industry, for example.

It is, in fact, striking that, in spite of being the first producer and exporter of copper in the world, Chile does not have any global scale multinational as a supplier of vehicles, excavators or explosives for this sector. They are all foreign, generate large-scale employment and have a strong added value.

Since Chile nationalized copper mining, with mining company Codelco, the world’s leading copper producer, the profits and dividends of copper production are destined to benefit the State. Due to the dominant copper position as Chile’s main export product, the country’s economy follows a cycle that varies with the price of copper in the world market.

The good times of a few years ago together with very high copper prices produced large surpluses for the Chilean government. But luckily they wisely saved.

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