Country risk in Chile is low and is better than its Southern American neighbours. Chile’s risk ratings indicate a relatively low likelihood that it will be unable and/or unwilling to meet its external debt obligations. Though individual debtors and sub-sovereign entities can and do default. Balanced fiscal policy and steady growth should support Chile’s country rating. However, Chile’s reliance on commodities poses risks to the ratings. In 2018, Moody’s credit agency downgraded Chile’s credit rating from AA- to A+, citing an over-reliance on commodities.
The World Bank’s ease of doing business gauge—which measures regulation and red tape relevant to a domestic small to mid-sized firm—ranks Chile 56 out of 190 economies, well above the Latin America and the Caribbean average of 112. Chile ranks above most of its regional peers on all of the ease of doing business categories.
Chile scores in the top quartile in almost all areas of the World Bank’s governance indicators. But violent demonstrations and petty theft could explain the relatively weaker political stability and absence of violence scores. Nevertheless, Chile remains amongst the best governed countries in Latin America. The re-election of former President Sebastian Piñera by a large margin signals a return to less interventionist policies and greater private sector involvement in the economy. Further, expected reforms in streamlining the tax system and cutting corporate income-tax should improve both Chile’s business environment and investor confidence.
The risk of expropriation in Chile is low, and its political risk is low to moderate. However, President Piñera’s planned fiscal austerity measures and social reforms are likely to be unpopular with the electorate, and may cause protests and civil unrest. Piñera’s minority government could face difficulties getting proposed reforms through parliament.