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 cushion the effects of a volatile international context and reduce the population living in poverty (on US$ 5.5 per day) from 30% in 2000 to 6.4% in 2017.

    After growing at a rate of 4% in 2018, the GDP fell to 1.8% in the first half of 2019 due to a challenging external context, adverse climatic conditions and the delay in some Government reforms.

    The current account deficit increased from 0.9% of GDP in the first semester of 2018 to 1.3% in the same period of 2019. The international reserves, however, remained stable since the current account deficit was financed by external debt (public and private) and, to a lesser extent by foreign investment.

    The twelve-month rolling central government deficit remained at around 1.7% of GDP in the first half of 2019 as lower copper revenues were offset by the slowdown in current expenditures and the contraction of capital transfers.

    However, given the recent slowdown, the authorities have changed the macroeconomic policy stance to foster growth throughout greater public investment and lower monetary policy interest rate.

    The authorities are also seeking consensus on a reform agenda to tackle some medium-term challenges. 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 to promote growth.

    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: Oct 14, 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 priorities 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. In the sustainability area is imperative to mitigate the impact of natural disasters and meteorological events, to address the climate crisis and to protect fauna and biodiversity.

    The World Bank implements a reimbursable technical and financial assistance program with a strong impact on development. 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 focused to a US$ 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 US$ 500 million in coverage to Chile. Currently, a second Bond to cover risks caused by hydro-meteorological events is being shaped. Finally, the World Bank supports the country’s climate change agenda in areas such as forests, sustainable land management and geothermic energy by channeling US$ 19.6 million in donor funds.

    IFC administer a project portfolio of US$660 million with its own funds in Chile and an additional US$160 million in mobilization. Most of the committed portfolio (own-account) is in the financial sector (62%) and renewable energy (32%), with additional projects in agribusiness and services (5%). In short-term finance, IFC has commitments for US$2 million.

    In December 2017, the World Bank Group reiterated its support for Chile by opening its first office in Santiago, from which dialogue with the country has been strengthened also through partnerships to hold international events to share successful public polices’ experiences.

    The World Bank is supporting APEC19 and the high level Seminar on Disaster Risk Finance carried out within the 2019 APEC Finance Ministers Meeting; the Investors Forum, that will put the country at the core of the conversation on sustainable investments between the world's largest business and banking leaders; the Pacific Alliance supporting SMEs, climate finances and infrastructure initiatives; and COP25, which will kick off the 2020 Presidency of Chile leading the climate agenda, which has been permanently supported by the World Bank in several aspects.

    Last Updated: Oct 16, 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: Oct 14, 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