Starting a Business in Chile: What You Should Know First
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Starting a Business in Chile: What You Should Know First Chile: Geography and Demographics • 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 • 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) Chile: The Culture • 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 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 Chile: The Culture 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 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 Culture Business 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 Culture Business 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 • 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 • Holding you palm upward and spreading your fingers is code for telling someone they are stupid Chile: The Culture Business 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 the largest in the world ❑Highly Stratified Society ❑Social Classes do not intermingle ❑Wealthy live separately from poor Chile: Social Environment Upper Class • • • • • Lower Class •Farm Laborers •Factory Workers •Miners •Crafts Workers Old Aristocrats Industrialists Merchants Politicians Military Men 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 Local Commercial 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 Chile: Accounting and Taxes 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) 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%) 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 reelection 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 CHILE Co-operation and Development” (a global organization to promote trade) 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 Copper is used around the world for: ❑Electrical Production ❑Building/Construction ❑Industrial Machinery ❑Transportation Equipment ❑Consumer & General Products 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/
