The seven key ways foreign direct investment impacts the Chilean economy

There are 64,680 foreign companies in Chile, which account for only 9.6% of the total number of companies in the country. Although this percentage may seem small, these companies have significantly benefited the Chilean economy.

This can be seen in the report prepared by InvestChile, the agency that promotes foreign investment in Chile, entitled “Caracterización y efectos en la Economía de la Inversión Extranjera en Chile” (The Nature and Impact of Foreign Direct Investment in Chile). The report outlines seven key ways in which foreign investment has impacted the growth of Chile’s economy:

1. Tax contribution

The tax contribution of foreign companies is key. Foreign companies pay 51.4% of the total tax collected in Chile, despite representing only 10% of taxpaying entities in the country.

2. Promoting investment

Foreign companies represent 40% of annual production investment in Chile. On average, 71% of international investments is allocated to production investment.

3. Jobs and income

Foreign companies are responsible for more than 1.3 million formal jobs, which represents 30% of the workforce. They also report an average taxable income of CLP$ 1,044,259, which is almost CLP$ 300,000 more than the average for domestic companies.

4. Production capacity-building

Around 54% of the large foreign capital companies in Chile have entered the country by creating projects from scratch (i.e., greenfield investments).

5. Boosting international trade

Foreign investment companies account for 65% of the total exports of Chilean goods and 85% of services.

6. Promoting R&D investment

Foreign companies greatly exceed domestic companies in R&D activities (35.5% foreign companies vs. 27.1% domestic). Additionally, about 57% of the companies indicate that there is an explicit transfer of R&D from the parent company to its Chilean subsidiary.

7. More training

Large international companies allocate an average of 10.4% of their investments to worker training.

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