Changes

Chile's independent Central Bank pursues an inflation target of between 2% and 4%. Inflation has not exceeded 5% since 1998. Chile registered an inflation rate of 3.2% in 2006. 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. Under the compulsory private pension system, most formal sector employees pay 10% of their salaries into privately managed funds.  

Chile's independent Central Bank pursues an inflation target of between 2% and 4%. Inflation has not exceeded 5% since 1998. Chile registered an inflation rate of 3.2% in 2006. 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. Under the compulsory private pension system, most formal sector employees pay 10% of their salaries into privately managed funds.  

Total foreign direct investment (FDI) was only $3.4 billion in 2006, up 52% from a poor performance in 2005. However, 80% of FDI continues to go to only four sectors: electricity, gas, water and mining. Much of the jump in FDI in 2006 was also the result of acquisitions and mergers and has done little to create new employment in Chile. 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 and to new parts of the economy. As of 2006, Chile invested only 0.6% of its annual GDP in research and development (R&D). Even then, two-thirds of that was government spending. The fact that domestic and foreign companies spend almost nothing on R&D does not bode well for the Government of Chile's efforts to develop innovative, knowledge-based sectors. Additionally, on January 8, 2007, Chile was placed on the U.S. Trade Representative's Priority Watch List due to its poor record on protecting intellectual property rights. Chile is only the second U.S. FTA partner ever to be placed on the Priority Watch List. Chile has a poor and deteriorating record of protecting copyrighted music, films, and software. Combined with this is its institutional structure allowing local companies to produce and market pharmaceutical generics that violate existing patents. Beyond its general economic and political stability, the government also has encouraged the use of Chile as an "investment platform" for multinational corporations planning to operate in the region, but this will have limited value given the developing business climate in Chile itself. 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 simple and transparent, and foreign investors are guaranteed access to the official foreign exchange market to repatriate their profits and capital. While Chile and the EU have signed a double taxation treaty, no such agreement exists between the U.S. and Chile.  

Total foreign direct investment (FDI) was only $3.4 billion in 2006, up 52% from a poor performance in 2005. However, 80% of FDI continues to go to only four sectors: electricity, gas, water and mining. Much of the jump in FDI in 2006 was also the result of acquisitions and mergers and has done little to create new employment in Chile. 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 and to new parts of the economy. As of 2006, Chile invested only 0.6% of its annual GDP in research and development (R&D). Even then, two-thirds of that was government spending. The fact that domestic and foreign companies spend almost nothing on R&D does not bode well for the Government of Chile's efforts to develop innovative, knowledge-based sectors. Additionally, on January 8, 2007, Chile was placed on the U.S. Trade Representative's Priority Watch List due to its poor record on protecting intellectual property rights. Chile is only the second U.S. FTA partner ever to be placed on the Priority Watch List. Chile has a poor and deteriorating record of protecting copyrighted music, films, and software. Combined with this is its institutional structure allowing local companies to produce and market pharmaceutical generics that violate existing patents. Beyond its general economic and political stability, the government also has encouraged the use of Chile as an "investment platform" for multinational corporations planning to operate in the region, but this will have limited value given the developing business climate in Chile itself. 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 simple and transparent, and foreign investors are guaranteed access to the official foreign exchange market to repatriate their profits and capital. While Chile and the EU have signed a double taxation treaty, no such agreement exists between the U.S. and Chile.