Editing Economy of Chile (section)

==Economic policies==
[[File:Chile and Latin America GDP Average.png|thumb|Chilean (blue) and average Latin American (orange) [[GDP per capita]] (1980–2017).]]

According to the [[CIA World Factbook]], Chile's "sound economic policies", maintained consistently since the 1980s, "have contributed to steady economic growth in Chile and have more than halved poverty rates."<ref name="countrystudies"/><ref name="cia.gov"/> The 1973–90 military government sold many state-owned companies, and the three democratic governments since 1990 have implemented export promotion policies<ref>[https://web.archive.org/web/20060929175725/http://pdf.usaid.gov/pdf_docs/PNADF539.pdf] USAID</ref><ref>{{cite web |url=http://www.networkideas.org/networkideas/pdfs/export_dynamism.pdf |title=Archived copy |access-date=4 August 2012 |url-status=dead |archive-url=https://web.archive.org/web/20131221093253/http://www.networkideas.org/networkideas/pdfs/export_dynamism.pdf |archive-date=21 December 2013 }} Export dynamism and growth in Chile since the 1980s</ref> and continued privatization, though at a slower pace. The government's role in the economy is mostly limited to regulation, although the state continues to operate copper giant [[Codelco]] and a few other enterprises such as [[Banco del Estado de Chile|BancoEstado]].

Under the compulsory private pension system, most formal sector employees pay 10% of their salaries into privately managed funds.<ref name="countrystudies"/>

As of 2006, Chile invested 0.6% of its annual GDP in research and development (R&D). Even then, two-thirds of that was government spending. Beyond its general economic and political stability, the government has also encouraged the use of Chile as an "investment platform" for multinational corporations planning to operate in the region.{{Specify|date=February 2011}} Chile's approach to foreign direct investment is codified in the country's Foreign Investment Law, which gives foreign investors the same treatment as Chileans. Registration is reported to be simple and transparent, and foreign investors are guaranteed access to the official [[foreign exchange market]] to repatriate their profits and capital.<ref name="countrystudies"/>

Faced with the [[2008 financial crisis]], the government announced a $4&nbsp;billion economic stimulus plan to spur employment and growth, and despite the [[2008 financial crisis]], aimed for an expansion of between 2% and 3% of GDP for 2009. Nonetheless, economic analysts disagreed with government estimates and predicted economic growth at a median of 1.5 percent.<ref>{{cite news|url=https://www.reuters.com/article/economicNews/idUSN1027661220090110 |title=Chile finmin says no recession seen in 2009-report |work=Reuters |date=10 January 2009 |access-date=17 December 2009}}</ref> According to the CIA World FactBook, the GDP contracted an estimated −1.7% in 2009.<ref>{{cite web|url=https://indigenouschic.com/discover-more/chile/|title=Chile|website=Indigenous Chic|access-date=22 March 2018|archive-url=https://web.archive.org/web/20170920044006/https://indigenouschic.com/discover-more/chile/|archive-date=20 September 2017|url-status=dead}}</ref>

The Chilean Government has formed a Council on Innovation and Competition, which is tasked with identifying new sectors and industries to promote. It is hoped that this, combined with some tax reforms to encourage domestic and foreign investment in [[research and development]], will bring in additional FDI to new parts of the economy.<ref name="countrystudies"/>

According to [[The Heritage Foundation]]'s ''[[Index of Economic Freedom]]'' in 2012, Chile has the strongest private property rights in Latin America, scoring 90 on a scale of 100.

Chile's AA− S&P credit rating is the highest in Latin America, while Fitch Ratings places the country one step below, in A+.<ref>[https://www.bloomberg.com/news/2012-12-26/chile-rating-raised-at-s-p-to-fourth-highest-aa-outlook-stable.html Sebastian Boyd, "Chile Raised to 4th-Highest Rating at Standard & Poor’s"]. Bloomberg News, 26 December 2012.</ref>

There are three main ways for Chilean firms to raise funds abroad: bank loans, issuance of bonds, and the selling of stocks on U.S. markets through American Depository Receipts (ADRs). Nearly all of the funds raised through these means go to finance domestic Chilean investment.  In 2006, the Government of Chile ran a surplus of $11.3 billion, equal to almost 8% of GDP. The Government of Chile continues to pay down its foreign debt, with public debt only 3.9% of GDP at the end of 2006.<ref name="countrystudies"/>

===Fiscal policy===

One of Chile's fiscal policy central features has been its counter-cyclical nature. This has been facilitated by the voluntary application since 2001 of a structural balance policy based on the commitment to an announced goal of a medium-term structural balance as a percentage of GDP. The structural balance nets out the effect of the economic cycle (including copper price volatility) on fiscal revenues and constrains expenditures to a correspondingly consistent level. In practice, this means that expenditures rise when activity is low and decrease in booms<ref name="oecd2007">[http://www.oecd.org/chile/43411879.pdf Rodríguez, J., C. Tokman and A. Vega (2007). "Structural balance policy in Chile".] OECD Journal on Budgeting 7(2), pp. 59–92.</ref> The target was of 1% of GDP between 2001 and 2007, it was reduced to 0.5% in 2008 and then to 0% in 2009 in the wake of the [[2008 financial crisis]].<ref name="corbo2005">[http://www.elmercurio.com/blogs/2013/08/25/14699/La-politica-fiscal-chilena.aspx Corbo, Vittorio. La política fiscal chilena.] Blogs from El Mercurio Newspaper. 25 August 2013.</ref> In 2005, key elements of this voluntary policy were incorporated into legislation through the Fiscal Responsibility Law (Law 20,128).<ref name="oecd2007"/>

The Fiscal Responsibility Law also allowed for the creation of two [[sovereign wealth funds]]: the Pension Reserve Fund (PRF), to face increased expected old-age benefits liabilities, and the Economic and Social Stabilization Fund (ESSF), to stabilize fiscal spending by providing funds to finance fiscal deficits and debt amortization.<ref name="oecd2007" /><ref name="swf">{{cite web|url=http://www.hacienda.cl/english/sovereign-wealth-funds/about-the-funds.html|title=About the Funds|author=Ministry of Finance|access-date=11 June 2015|archive-date=13 June 2015|archive-url=https://web.archive.org/web/20150613015855/http://www.hacienda.cl/english/sovereign-wealth-funds/about-the-funds.html|url-status=dead}}</ref> By the end of 2012, they had respective market values of US$5.883&nbsp;million and US$14.998&nbsp;million.<ref name="swf2012">{{cite web|url=http://www.hacienda.cl/fondos-soberanos/informe-anual.html|title=Informe Anual|author=Ministerio de Hacienda|access-date=11 June 2015|archive-date=13 June 2015|archive-url=https://web.archive.org/web/20150613033632/http://www.hacienda.cl/fondos-soberanos/informe-anual.html|url-status=dead}}</ref>

The main taxes in Chile in terms of revenue collection are the value added tax (45.8% of total revenues in 2012) and the income tax (41.8% of total revenues in 2012).<ref>{{cite web|url=http://www.sii.cl/aprenda_sobre_impuestos/estudios/estadistribu/ingresos_tributarios_new.htm|title=Ingresos Tributarios Anuales|access-date=11 June 2015}}</ref> The value added tax is levied on sales of goods and services (including imports) at a rate of 19%, with a few exemptions. The income tax revenue comprises different taxes. While there is a corporate income tax of 20% over profits from companies (called First Category Tax), the system is ultimately designed to tax individuals. Therefore, corporate income taxes paid constitute a credit towards two personal income taxes: the Global Complementary Tax (in the case of residents) or the Additional Tax (in the case of non-residents). The Global Complementary Tax is payable by those that have different sources of income, while those receiving income solely from dependent work are subject to the Second Category Tax. Both taxes are equally progressive in statutory terms, with a top marginal rate of 40%. Income arising from corporate activity under the Global Complementary Tax only becomes payable when effectively distributed to the individual. There are also special sales taxes on alcohol and luxury goods, as well as specific taxes on tobacco and fuel. Other taxes include the inheritance tax and custom duties.<ref>{{cite web|url=http://www.sii.cl/portales/inversionistas/imp_chile/imp_chile_ing.htm|title=Information for Foreign Investors|access-date=11 June 2015|url-status=dead|archive-url=https://web.archive.org/web/20150226180228/http://www.sii.cl/portales/inversionistas/imp_chile/imp_chile_ing.htm|archive-date=26 February 2015}}</ref>

In 2012, general government expenditure reached 21.5% of GDP, while revenues were equivalent to 22% of GDP.<ref name="survey">[http://dx.doi.prg/10.1787/eco_surveys-chl-2013-en OECD (2013), OECD Economic Surveys: Chile 2013.]{{dead link|date=September 2017 |bot=InternetArchiveBot |fix-attempted=yes }} OECD Publishing.</ref> Gross financial debt amounted to 12.2% of GDP, while in net terms it was −6.9% of GDP, both well below OECD averages.<ref name="survey" />

===Monetary policy===

Chile's monetary authority is the [[Central Bank of Chile]] (CBoC). The CBoC pursues an inflation target of 3%, with a tolerance range of 1% (below or above).<ref name="cb07">[http://www.bcentral.cl/eng/publications/policies/polit07.htm "Central Bank of Chile: Monetary Policy in an Inflation Targeting Framework".] {{webarchive|url=https://web.archive.org/web/20131221030312/http://www.bcentral.cl/eng/publications/policies/polit07.htm |date=21 December 2013 }} Central Bank of Chile, January 2007.</ref> Inflation has followed a relatively stable trajectory since the year 2000, remaining under 10%, despite the temporary surge of some inflationary pressures in the year 2008. The Chilean peso's rapid appreciation against the U.S. dollar in recent years has helped dampen inflation. Most wage settlements and loans are indexed, reducing inflation's volatility.

The CBoC is granted autonomous status by Chile's National Constitution, providing credibility and stability beyond the political cycle.<ref name="cb07" /><ref name="functions">{{cite web|url=http://www.bcentral.cl/eng/about/functions/index.htm|title=Central Bank of Chile website, About, Functions|website=bcentral.cl|access-date=22 March 2018|url-status=dead|archive-url=https://web.archive.org/web/20131129215208/http://www.bcentral.cl/eng/about/functions/index.htm|archive-date=29 November 2013}}</ref> According to the Basic Constitutional Act of the Central Bank of Chile (Law 18,840), its main objectives are to safeguard "the stability of the currency and the normal functioning of internal and external payments".<ref name="organic law">[http://www.bcentral.cl/eng/about/basic-constitutional-act/index.htm  Law 18,840, Basic Constitutional Act of the Central Bank of Chile] {{webarchive|url=https://web.archive.org/web/20130120072448/http://www.bcentral.cl/eng/about/basic-constitutional-act/index.htm |date=20 January 2013 }}, Title I, Section 3.</ref> To meet these objectives, the CBoC is enabled to use monetary and foreign exchange policy instruments, along with some discretion on financial regulation. In practice, the CBoC monetary policy is guided by an inflation targeting regime, while the foreign exchange policy is led by a floating exchange rate and, although unusual, the bank reserves the right to intervene in the foreign exchange markets.<ref name="cb07" />

===Trade policy===

Chile is strongly committed to free trade and has welcomed large amounts of foreign investment. Chile has signed free trade agreements (FTAs) with a network of countries, including an FTA with the United States that was signed in 2003 and implemented in January 2004.<ref>{{cite web|url=http://www.ustr.gov/Trade_Agreements/Bilateral/Chile_FTA/Final_Texts/Section_Index.html |title=MAX - Unsupported Browser Warning |access-date=13 July 2013 |url-status=dead |archive-url=https://web.archive.org/web/20160328045456/https://ustr.gov/trade_agreements/bilateral/chile_fta/final_texts/section_index.html |archive-date=28 March 2016 }} USA–Chile FTA Final Text</ref>

Chile unilaterally lowered its across-the-board import tariff for all countries with which it does not have a trade agreement to 6% in 2003. Higher effective tariffs are charged only on imports of wheat, wheat flour, and sugar as a result of a system of import price bands. The price bands were ruled inconsistent with Chile's [[World Trade Organization]] (WTO) obligations in 2002, and the government has introduced legislation to modify them. Under the terms of the U.S.–Chile FTA, the price bands will be completely phased out for U.S. imports of wheat, wheat flour, and sugar within 12 years.<ref name="countrystudies"/>

Chile is a strong proponent of pressing ahead on negotiations for a [[Free Trade Area of the Americas]] (FTAA) and is active in the WTO's [[Doha Development Round|Doha round of negotiations]], principally through its membership in the [[G20 developing nations|G-20]] and [[Cairns Group]].<ref name="countrystudies"/>

Most imports are not subject to the full statutory tariff, due to the extensive preferences negotiated outside the multilateral system through Regional Trade Agreements (RTAs). By the last version of the World Trade Organization's Trade Policy Review (October 2009), Chile had signed 21 RTAs with 57 countries and the number has continued to rise in recent years<ref name="tpr">[http://www.wto.org/english/tratop_e/tpr_e/tp320_e.htm Trade Policy Review Chile], 2009, World Trade Organization.</ref>

More recently, Chile has also been an active participant of deeper plurilateral trade agreement negotiations. Notably, Chile is currently in talks with eleven other economies in the [[Trans-Pacific Partnership]] (TPP), a proposed agreement that would stem from the existing P-4 Agreement between Brunei, Chile, New Zealand and Singapore. Chile has signed some form of bilateral or plurilateral agreement with each of the parties at TPP, although with different degrees of integration.<ref>[http://www.direcon.gob.cl/acuerdos-comerciales/ Directorate of International Economic Relations website], Trade Agreements (in Spanish).</ref>

Chile is also a party in conversations to establish the [[Pacific Alliance]] along with Peru, Mexico and Colombia.<ref>[https://www.economist.com/blogs/americasview/2013/04/growing-pacific-alliance "The growing Pacific Alliance, Join the club" ''The Economist'', April 29, 2013].</ref>

====Foreign trade====
[[File:Antiguas reservas wine.jpg|thumb|Chile is the world's fifth largest [[Wine#Exporting countries|exporter of wine]] and the [[Wine#Production|eighth largest producer]].<ref>{{cite web|url=http://en.mercopress.com/2010/06/25/chile-ranks-fifth-globally-in-wine-exports-and-eighth-in-production|title=Chile ranks fifth globally in wine exports and eighth in production|work=[[Santiago Times]]}}</ref>]]
2006 was a record year for Chilean trade. Total trade registered a 31% increase over 2005. During 2006, exports of goods and services totaled US$58&nbsp;billion, an increase of 41%. This figure was somewhat distorted by the skyrocketing price of copper. In 2006, copper exports reached a historical high of US$33.3&nbsp;billion. Imports totaled US$35&nbsp;billion, an increase of 17% compared to the previous year. Chile thus recorded a positive trade balance of US$2.3&nbsp;billion in 2006.<ref name="countrystudies"/>

The main destinations for Chilean exports were the Americas (US$39&nbsp;billion), Asia (US$27.8&nbsp;billion) and Europe (US$22.2&nbsp;billion). Seen as shares of Chile's export markets, 42% of exports went to the Americas, 30% to Asia and 24% to Europe. Within Chile's diversified network of trade relationships, its most important partner remained the United States. Total trade with the U.S. was US$14.8&nbsp;billion in 2006. Since the U.S.–Chile Free Trade Agreement went into effect on 1 January 2004, U.S.–Chilean trade has increased by 154%. Internal Government of Chile figures show that even when factoring out inflation and the recent high price of copper, bilateral trade between the U.S. and Chile has grown over 60% since then.<ref name="countrystudies"/>

Total trade with Europe also grew in 2006, expanding by 42%. The Netherlands and Italy were Chile's main European trading partners. Total trade with Asia also grew significantly at nearly 31%. Trade with Korea and Japan grew significantly, but China remained Chile's most important trading partner in Asia. Chile's total trade with China reached U.S. $8.8&nbsp;billion in 2006, representing nearly 66% of the value of its trade relationship with Asia.<ref name="countrystudies"/>=

The growth of exports in 2006 was mainly caused by a strong increase in sales to the United States, the Netherlands, and Japan. These three markets alone accounted for an additional US$5.5&nbsp;billion worth of Chilean exports. Chilean exports to the United States totaled US$9.3&nbsp;billion, representing a 37.7% increase compared to 2005 (US$6.7&nbsp;billion). Exports to the European Union were US$15.4&nbsp;billion, a 63.7% increase compared to 2005 (US$9.4&nbsp;billion). Exports to Asia increased from US$15.2&nbsp;billion in 2005 to US$19.7&nbsp;billion in 2006, a 29.9% increase.<ref name="countrystudies"/>

During 2006, Chile imported US$26&nbsp;billion from the Americas, representing 54% of total imports, followed by Asia at 22%, and Europe at 16%. Mercosur members were the main suppliers of imports to Chile at US$9.1&nbsp;billion, followed by the United States with US$5.5&nbsp;billion and the European Union with US$5.2&nbsp;billion. From Asia, China was the most important exporter to Chile, with goods valued at US$3.6&nbsp;billion. Year-on-year growth in imports was especially strong from a number of countries – Ecuador (123.9%), Thailand (72.1%), Korea (52.6%), and China (36.9%).<ref name="countrystudies"/>

Chile's overall trade profile has traditionally been dependent upon copper exports. The state-owned firm CODELCO is the world's largest copper-producing company, with recorded copper reserves of 200 years. Chile has made an effort to expand nontraditional exports. The most important non-mineral exports are forestry and wood products, fresh fruit and processed food, fishmeal and seafood, and [[Chilean wine|wine]].<ref name="countrystudies"/>

====Trade agreements====
[[File:Chile FTA.png|thumb|Nations that have an FTA with Chile appear in dark blue, those that have not ratified a negotiated FTA in light blue, and those in FTA negotiations in purple. Chile is in red.]]
Over the last several years, Chile has signed FTAs with the European Union, South Korea, New Zealand, Singapore, Brunei, China, and Japan. It reached a partial trade agreement with India in 2005 and began negotiations for a full-fledged FTA with India in 2006. Chile conducted trade negotiations in 2007 with Australia, Malaysia, and Thailand, as well as with China to expand an existing agreement beyond just trade in goods. Chile concluded FTA negotiations with Australia and an expanded agreement with China in 2008. The members of the P4 (Chile, Singapore, New Zealand, and Brunei) also plan to conclude a chapter on finance and investment in 2008.<ref name="countrystudies"/>

Successive Chilean governments have actively pursued trade-liberalizing agreements. During the 1990s, Chile signed [[free trade agreement]]s (FTA) with Canada, Mexico, and Central America. Chile also concluded preferential trade agreements with Venezuela, Colombia, and Ecuador. An association agreement with Mercosur-Argentina, Brazil, Paraguay, and Uruguay-went into effect in October 1996. Continuing its export-oriented development strategy, Chile completed landmark free trade agreements in 2002 with the European Union and South Korea. Chile, as a member of the Asia-Pacific Economic Cooperation (APEC) organization, is seeking to boost commercial ties to Asian markets. To that end, it has signed trade agreements in recent years with New Zealand, Singapore, Brunei, India, China, and most recently Japan. In 2007, Chile held trade negotiations with Australia, Thailand, Malaysia, and China. In 2008, Chile hopes to conclude an FTA with Australia, and finalize an expanded agreement (covering trade in services and investment) with China. The P4 (Chile, Singapore, New Zealand, and Brunei) also plan to expand ties through adding a finance and investment chapter to the existing P4 agreement. Chile's trade talks with Malaysia and Thailand are also scheduled to continue in 2008.<ref name="countrystudies"/>

After two years of negotiations, the United States and Chile signed an agreement in June 2003 that will lead to completely duty-free bilateral trade within 12 years. The U.S.-Chile FTA entered into force 1 January 2004, following approval by the U.S. and Chilean congresses. The FTA has greatly expanded U.S.-Chilean trade ties, with total bilateral trade jumping by 154% during the FTA's first three years.<ref name="countrystudies"/> On 1 January 2014, Chile-Vietnam Free Trade Agreement officially took effect.<ref>{{cite web|url=http://wtocenter.vn/other-agreement/vietnam-chile-free-trade-agreement-vcfta|title=Vietnam-Chile Free Trade Agreement (VCFTA) – WTO and International trade Policies|website=wtocenter.vn|access-date=22 March 2018|archive-url=https://web.archive.org/web/20170920043903/http://wtocenter.vn/other-agreement/vietnam-chile-free-trade-agreement-vcfta|archive-date=20 September 2017|url-status=dead}}</ref>