The coronavirus pandemic hit the country at a time when it was still struggling with a protracted social crisis from the fall of 2019, which had a major negative impact on economic performance, as well as business and investment prospects. Chile still enjoys the benefits of a structurally sound economy with good macroeconomic policies, savings in sovereign funds, low levels of public debt and good access to international financial markets, making it substantially more resilient to economic shocks, but it still did not avoid a recession last year.
This year, despite the ongoing anti-pandemic restrictions, the economy is expected to grow by around 5.7%.
The government is trying to limit the economic impact of the crisis through a series of fiscal measures aimed at strengthening the economy’s resilience, e.g. in the form of support for employment or the liquidity of businesses. In the second half of 2020, double withdrawal of savings from the so-called AFP pension funds was made possible. This year, it is expected that either the third withdrawal from the AFP or the government-preferred withdrawal from unemployment insurance, the so-called AFC, will be allowed.
The year 2021 will be both an election year and a year of discussions on the wording of the new constitution. However, Moody’s still assesses the risks of possible changes as only low to medium, especially given the fact that there is a broad consensus in Chilean society for the preservation of key economic elements such as free trade, private ownership and the independence of the central bank.
Post-covid-19 opportunities for foreign exporters
For success in Chile, in any field, the high professionalism of potential suppliers, a competitive pricing policy, investment in quality communication in Spanish and the provision of at least a formal legal identity of the company, thanks to which it is possible to obtain a RUT tax identification number, without which it is impossible to participate in tenders, are absolutely necessary.
Mining, mining and oil industry
According to allcountrylist, the mining industry is the backbone of the Chilean economy and accounts for almost 60% of Chilean exports. The main industry is copper mining. Lithium, molybdenum, gold and many other raw materials are also mined. The mining industry needs a very wide range of equipment, machinery and technology.
Chilean mining companies are trying to become the main promoters of so-called green mining. Chile is looking to innovative technologies to modernize productivity and mining in its mines, a trend accelerated by the covid-19 pandemic. Investments in the mining industry in the amount of USD 5 billion are expected this year.
In Chile, there have been significant developments in automation and remote operations. The strategies of potential Czech suppliers should take into account both the needs of large state-owned enterprises and small and medium-sized private companies, which seem to be more compatible with the real possibilities of Czech exporters. The trend of recent years confirms that the Chilean mining industry will gradually transition from surface mining to deep mining.
This development will offer new chances to Czech companies, the vast majority of which are focused on deep mining. Rather than the supply of heavy machinery, from the point of view of Czech companies, the supply of modern technologies and expert solutions aimed at greening mining and smart mining could be promising.
The main goal of Chile’s energy plan is to achieve complete carbon neutrality by 2050. Thanks to good natural conditions, the country has a huge potential for the development of energy from renewable sources, mainly geothermal, solar and wind. The modernized legislation also supports investments in the production of energy from these sources. In 2035, 60% of the energy produced in Chile should come from renewable sources, and in 2050 even 70% is expected.
Due to the high seismic activity, nuclear power plants cannot be built in the place, but the main supporting branch of the Chilean economy, the mining industry, is very energy demanding. The price and availability of electricity are therefore absolutely key. Energy development has been a national priority in the last decade, and energy projects enjoy universal support.
A more active role of the state in energy planning helped, among other things, to develop projects in the field of electricity transmission. The boom in the field of energy is also reflected in the project of so-called smart cities, the aim of which is to improve the quality of life of its inhabitants through more affordable access to energy, the construction of environmentally friendly smart houses with an emphasis on the use of sustainable energy.
In addition to renewable sources, the country is preparing both the modernization and construction of new thermal power plants, which offer opportunities for the employment of traditional Czech suppliers. So-called “green hydrogen” will also be a key energy field in the coming years.
This is an area that the local government is trying to open to foreign investors as much as possible. There are therefore a number of opportunities in Chile for companies focused on renewable sources, battery storage, transmission systems and smart energy solutions.
Internet penetration in Chile is 11Internet connections for every 100 inhabitants. 84.4% of connections are via mobile phones. In the form of e-government, the state offers more than 500 types of different services and administrative actions. ICT contributes increasingly significantly to GDP growth.
E-commerce grew by more than 25% in 2019 to over $6 billion. In connection with the covid-19 pandemic and the associated restrictions on traditional business channels, e-commerce in Chile is experiencing an unprecedented boom. Already in March 2020, this was a 300% year-on-year increase. The volume of e-commerce subsequently broke records for the rest of the year.
One of the main problems of not only Chilean, but the entire Latin American logistics is its final link, i.e. the delivery of the shipment to the final recipient. In Chile, it is therefore crucial to acquire the know-how for a more economical and practical organization of individual logistics operations.
It is in this area that a number of opportunities are opening up, especially for foreign companies with experience in more developed markets. There is also a growing demand for ICT sub-sectors such as SW development, cyber security, computer service provision, etc. There is also interest in fields related to artificial intelligence.
Water management and waste industry
This is a very promising industry. Chile has been dealing with drought and water supply problems for a long time in most regions. The development of sectors dealing with issues of flood and drought prevention is therefore key in this industry. Attention is mainly focused on increasing flood risks, inefficient use of water in urban and rural areas, leakages and unauthorized consumption of water, insufficient data collection, streamlining of administrative procedures, etc.
The most water in Chile is consumed in agriculture, then in industry, mining and processing of mineral resources or in the healthcare sector. About 1.17 billion liters of drinking water are consumed annually and the consumption is still rising. Water resources in Chile are in private hands.
On a Latin American scale, the availability of drinking water is the best of all countries (urban agglomerations up to 99%). Private companies estimate investments in this sector at USD 1.17 billion by 2025. Very important projects are also being created in the areas of waste management or wastewater treatment.
Chile is the leader in South America in waste production. Annually, 7.4 million tons of waste are produced in the country, while only 15% of the waste is recycled. The government is trying to promote recycling programs and is considering the construction of the first “Waste to Energy” incinerator for Santiago de Chile (the project is currently in the study phase).
In recent years, the amount of electricity produced from agricultural and other waste has been increasing. Supplies of wastewater treatment plants, mobile water treatment plants, desalination plants, pumps, emergency drinking water generators or municipal waste sorting plants have great potential.
Healthcare and pharmaceutical industry
Healthcare was one of the priorities of the Chilean government even before the pandemic. The government is continuing the “Health Investment Programme”, which was not fully completed under previous governments. Chile is currently investing in the construction of 57 new hospitals and health centers to be completed by 2026.
The main purpose of this program is to modernize the state health system. 32 of these projects are from previous governments, 25 of them will be completed and inaugurated under the current government. The construction of another 25 projects will start by 2022. A total of 12,400 beds are expected. 120 basic health care centers will also be completed by 2022, 40 centers will be in the construction phase and another 40 in the bidding phase. This is a historic investment worth USD 10 billion.
The modernization plan envisages focusing on new technologies, introducing more competition in laboratories, in the pharmaceutical industry and promoting the use of bio-equivalent medicines. There is a lot of foreign competition in the healthcare sector, and Spain in particular has a very strong position in Chile.