Overview

  • Chile has been one of Latin America’s fastest-growing economies in recent decades thanks to a solid macroeconomic framework, which enabled the country to reduce the population living in poverty (on US$ 5.5 per day) from 30 percent in 2000 to 6.4 percent in 2017.

    Following sluggish growth in 2017 (1.3 percent), the economy rebounded in 2018, growing at a rate of 4 percent. This improvement reflected more private-sector confidence, lower interest rates and higher copper prices, which revitalized mining production. Non-mining activities, particularly wholesale trade, commercial services and manufacturing also progressed.

    The current account deficit increased from 2.2 percent of GDP in 2017 to 3.1 percent in 2018 thanks to growing capital goods imports and net foreign assets. This deficit was mainly financed by increased foreign investment, which enabled international reserves to remain stable.

    The central government debt declined for the first time in six years, from 2.7 percent of GDP in 2017 to 1.7 percent in 2018 due to increased revenue. While spending declined in goods and services, current expenditures remained unchanged as a percentage of GDP as a result of the increase in other expenses, including payroll. This helped contain growth of the public debt, which increased from 24 percent to 26 percent of GDP between 2017 and 2018.

    Despite the advances of recent decades, Chile faces significant challenges and opportunities. The fiscal consolidation expected for the medium term will be crucial for stabilizing the debt and consolidating confidence. Government efforts to rationalize the tax system, facilitate employment mobility, reduce bureaucracy, improve the pension system and strengthen the financial system will also be crucial for maintaining growth and reducing Chile’s vulnerability to external risks.

    Encouraging innovation, improving the linkage between education and the labor market and promoting the participation of women in the labor market are also essential for improving long-term prospects. On the social front, enhancing the quality of health and education services and reducing constraints to access to well-targeted social policies will be key for reducing the remaining poverty and strengthening the middle class.

    Last Updated: Apr 10, 2019

  • World Bank Group support in Chile includes activities of the World Bank, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). The 2017 Systemic Country Diagnostics identified political priorities and areas related to interventions to address the constraints that impede the country from achieving solid, equitable and sustainable growth, improving both equity and productivity.  Fostering innovation, improving the linkage between education and the labor market and promoting the participation of women in the labor force are essential for achieving long-term prospects. On the social front, improving the quality of health and education services and reducing barriers to access to well-targeted social policies is key for reducing the remaining poverty and expanding the middle class.

    The World Bank implements a technical and financial assistance program in areas with a strong impact on development. The technical assistance agreement with Chile is based on reimbursable advisory services. In the past four years alone, the World Bank has completed over 30 studies in the areas of higher education, health, the social protection system, institutional development, water, concessions, innovation and land development. Financial assistance is currently limited to a USD 50 million project to strengthen Chile's public universities. Additionally, the World Bank is supporting the Pacific Alliance in the development of financial protection instruments for natural disasters, initially with a catastrophe bond that covers earthquake risks, providing USD 500 million in coverage to Chile. Finally, the World Bank supports the country’s climate change agenda in areas such as forests and energy by channeling USD 19.6 million in donor funds.

    The IFC continues to administer a project portfolio of over USD 1 billion with the private sector. For these projects, the IFC uses its own funds and mobilizes other financial resources, mainly in the financial and renewable energy sectors. In December 2017, MIGA issued its first guarantee in Chile for USD 1.5 billion to promote credit and other financial instruments associated with projects that have an impact on the climate change agenda.

    In December 2017, the World Bank Group reiterated its support for Chile by opening its first office in Santiago. The office houses the Research and Development Center, jointly established with the Government of Chile. The Center’s main activities include the preparation of the internationally-renowned reports  Doing BusinessEnterprise SurveysWomen, Business and the Law and Enabling the Business of Agriculture. It also conducts research on other issues of regional and global importance, including the development of the financing sector, which has regional and global relevance. The WBG office in Chile is located at Av. Apoquindo 2929, piso 13, oficina 1300-A, Las Condes, Santiago.

    Last Updated: Apr 10, 2019

  • Between Fiscal Year 2011 and Fiscal Year 2018, the World Bank Group contributed to achieving the following results in Chile:

    • Chile has utilized results-based financing in the education sector aimed at improving the quality and performance of higher education through performance agreements with institutions. Currently, more than 50 percent of students in technical and professional degrees benefit from a redesigned curriculum; retention rates have increased: 74 percent of first-year undergraduate students attend the institution in the second year; and the number of full-time faculty members who hold PhDs has increased from 5,109 in 2011 to 7,883 in March 2016. Additionally, studies by World Bank experts provided input for key changes in legislation to improve the accreditation quality assurance system and the accountability of institutions, based on experiences in OECD countries.
    • At the government’s request, the World Bank conducted an assessment of the distributional effects of the 2014 tax reform on the economy, particularly on income inequality, by quantifying the potential effects of the reform on the country’s income distribution profile The report revealed that for the wealthiest one percent of the population, the tax reform led to an increase in taxes paid from 2.4 percent to 3.5 percent.
    • World Bank financing supported the implementation of a financial management system and improved the quality of 100 municipalities around the country. That project also financed the implementation of a new public financial management system (SIGFE II) in 86 central government agencies.
    • Another Bank-funded project supported the design of over 45 regional plans, 250 infrastructure projects (roads, water and sanitation, energy and ICT) and 27 productive activities in different regions of the country. Approximately 320,000 people benefited from improved infrastructure, land planning and implementation of inclusive development programs.
    • The government transformed the Planning Ministry into the Ministry of Social Development and enhanced the Social Protection Index to improve coverage of social security programs, including the flagship program Chile Crece Contigo. This national program monitors the development of children up to 7 years old and provides services to their families. The Bank also supported the design of the psychosocial support and employment counseling provided by the Family Ethical Income program and offered ongoing support to improve the Intersectoral System for Social Protection.  
    • The knowledge program informed key institutional changes and policymaking processes in the areas of public works, transport, urban mobility and innovation in Santiago and Concepcion; sustainable, efficient management of natural resources; and the institutional plan and strategy for the Water Reform led by the Water Directorate.
    • The Bank also contributed to Chile’s efforts to mitigate global climate change through certified carbon emission reductions linked to hydropower projects (Chile Quilleco Hydropower Project – Chacabuquito Hydropower ProjectChile Hornitas Project (Chacabuquito II), and through several grants to design and implement instruments for carbon pricing and green growth. The Bank is also supporting the Ministry of Energy to prepare its Market Readiness Proposal, a national forestry and climate change strategy. 
    • In 2018, the World Bank conducted two studies in the framework of the Shared Study Program with the Ministry of Finance: i) Challenges and Opportunities for Ageing in Chile, which seeks to contribute to the country’s demographic projections and to support discussions on public policy focusing on the demographic changes the country has experienced; and, ii) Study on Hospital Concessions, which assesses the current concession system in health and explores international experiences that can serve as an example for Chile to generate changes that have a positive impact on reforms, taking into account other realities that contribute to the continuous improvement of the Chilean model.
    • International Finance Corporation interventions in the country focus on activities with a strong potential for development results with small and medium-sized enterprises, mainly in infrastructure, energy, the financial sector, education and agribusiness.

     

    Last Updated: Apr 10, 2019

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LENDING

Chile: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


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Additional Resources

Country Office Contacts

CHILE +562 239 82400
Apoquindo 2929, 1300-A, Las Condes, Santiago
jcasapiaboero@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433
jcasapiaboero@worldbank.org