Chile has the best business environment in the region and ranks 17th in the world

10.05.2010 By: Transfer Consultancy based on Invest in Chile

Chile's business environment occupies first place in Latin America and is well situated in the global ranking, according to The Economist Intelligence Unit (EIU). The country scored 7.43 points out of a maximum of 10, and sits in 17th place in the world for the five-year period from 2005 to 2009. This puts Chile ahead of its closest competitor in the region, Mexico, which ranked 36th in the world, and Brazil, in 40th place.

The "Economist Intelligence Unit's business environment ranking seeks to measure the quality or attractiveness of the business environment in 82 of the world's largest economies. It compares countries on the bass of the main criteria used by companies to prepare their global business strategies and make investment and site selection decisions", says the report by way of describing its significance.

Robert Wood, EIU senior analyst for Latin America, stated that Chile's ranking in the region - which has remained stable for several years in a row - is based on the fact that "it was one of the first countries to consolidate its macroeconomic stability and move ahead with structural reforms". He added that "Chile also has greater political stability and effectiveness, as well as a solid institutional framework".
Wood explained that even though Chile's economy is small, its economic reforms have resulted in a high-quality business environment and ease of doing business that make the country deserving of first place.

Aside from its favorable ranking in the region in the past period, further improvement in Chile's business environment is forecast by the year 2014. The EIU estimates that the country will climb two spots to number 15 in the world, with 7.94 points. According to the report, "Chile will continue to progress and rise in the world standing. Its ranking is based on the historical commitment to economic liberalization, which is unlikely to change".

The problem faced by the country, said Wood, is "its small economy", although "its free trade agreements and exports mitigate this factor to some extent".

Chile is a direct competitor of world powers such as Germany (14th place) and the United States (13th place). The overall ranking was led in both periods by Singapore and Switzerland.

Chile's significant advantage over its peers will endure over time. In 2014, its closest competitors will continue to be Mexico, in 35th place, and Brazil, which will also climb by one place. The EIU analyst explained that although these two large Latin American economies "have improved in terms of macroeconomic stability, there have been fewer advances on other fronts such as competition, regulation and labor market, which is still rigid and lacking in skills".

Analysis by Area
The EIU takes into account 10 variables in its assessment of the 82 nations included in the ranking. The ranking is part of a more detailed study that generates five-year forecasts for each country.

Chile obtained 9.6 points in the foreign investment policy variable for the 2005-2009 and 2010-2014 rankings. It scored 9.1 points in trade.

According to the study released this month by the EIU, Chile has improved in terms of policy effectiveness, market opportunities, labor market and infrastructure. In contrast, other areas such as political stability (which measures the relationship between the government and the opposition, among other indicators) and trade received a lower score. The political environment, economic stability and tax regime were some of the areas that remained stable over the two periods analyzed.

A hub for Foreign Investment
In addition to its business environment, Chile is one of the favorite countries for foreign investors. A ranking by the consulting firm A.T. Kearney situates the country in 22nd place this year, a jump of 16 places since 2007. Brazil and Mexico are in 4th and 8th place in the ranking, respectively, while China, the United States and India occupy the top three spots.

Chile was included in a list of 80 countries sent by A.T. Kearney to 2,000 executives from all over the world. They were asked to indicate where they plan to invest in the next three years, and to comment on their outlook for the country. This is the third time that Chile is found among the top 25 countries for foreign investment. According to Johan Gott, director of the study, the country appeared twice in 1998; once in 20th spot on June 20 and again in 24th spot in December of that year.

Transfer Consultancy assists companies with their entrance on the Chilean market by offering market research, legal advice and export promotion. Interested to get involved with the business opportunities Chile offers? Do not hesitate to contact us!