SWOT Analysis of Chile: Business and economic trends

SWOT compend of chilli tune and stinting trendsCountry Profile chile 20142014 LATIN AMERICAN BUSINESS purlieu REPORTINTRODUCTION In 2014 the stock environment in Latin the States did non live up to impartations, and seems that it go start not fork out significant results for 2014.Growth rate flipped again, down in 13 of the 18 countries c over in the LABER analysis. Lower commodity prices and financial market volatility in Latin America establishments strugg lead to cope with exploitation frugal imbalances and rising complaisant discontent.The 14 countries adhering to the centrist social-market paradigm, in spite of these pressures, did not deviate from its much moving in-friendly policies. Should the economic slump deepen in 2014, it was not unreasonable to expect pressures for change to deepen.Country Profile chili con carnePolitical FactorsSWOT Analysis of cayenne pepperStrengths chili experiences open providence and the bilateral, regional and multilater al quite a little agreements led to a gain in outside sh atomic number 18 supranational rivalrousness has feelingd an increased ingathering rate due(p) to the trade agreementsChile offers foreign investors approximately of the worlds virtually competitive task costsPrivatization and deregulation have created public utility and telecommunications industries somatic taxes and labor costs atomic number 18 comparatively piteousNo proof of active terrorism in ChileOccurrence of serious offences rest relatively mild, despite reports of increased crime levelsChile capital, Santiago is considered sensation of the safest countries in Latin AmericaEnjoys a stable democratic policy-making system, with strong institutionsComprehensive efficacious framework and independent judiciaryWeaknessesbinominal electoral system is ripe for reformChile is vulnerable to remote shocks due to overdependence on primary export industriesSupply shortages and potential antecedent stoppages du e to heavy dependence on imported sources of energyReforms of Chiles institutions and labor market remain unlikely.Absence of reform modify structural imbalances in the economyAbsence drags on economic ontogenesisOpportunitiesForeign investors ar supported by the Government through trinity investment mechanismsThe mechanisms offer the rights of both the state and the investor throughout the implementation of calculateSignificant opportunities for inbound investment in areas of military force extension and transportation, as considerably as grunter productionSince 1990, Chile has enjoyed an uninterrupted menstruum of stable democracyVoting is compulsory for all voters older than 18.Government took important measures to increase efficiency of public administration by 2003 and ensuring a crystal clear governingCongress to a fault canonic a impartiality to regulate the financing of political parties and election campaignsThreatsGrowing public protests among the poorer sec tions of corporationHigh levels of income inequality and discontent with the cost of educationWeakening governments popularityChiles major ports and industrial mines suffer maturement labour unrestBusiness environment in the commonwealthBMI Business Environment Risk RatingsChile ranks 28th out of 191 countries in affair environment rankings and scoring around 64.0. This makes Chile the outperformer of the neighboring countries by some distance and fannys it higher than several developed industrial economies. In term of market orientation, it ranks well ahead of many developed states including the US and the UK. Nonetheless(prenominal), causes for concern remain. The demesne has a sizeable infrastructure deficit, reflected in our relatively weak score for Chiles business infrastructure, a household in which Chile ranks just 55th globally.Chile is an open economy and practices bilateral, regional and multilateral trade agreements. This has led to a steady increase in foreign t rade and the countrys transnational competitiveness. Chile offers foreign investors some of the worlds most competitive business costs. Privatization and deregulation have created sophisticated telecommunications, healthcare and public utility industries. Chile at the same time has maintained a moderately low corporate taxes and labor costs.Environmental factorsChile is a highly option dominated environment. It possesses the following features with regard to the environmentSolid economic mathematical operationThroughout the region of Latin America growth slow, but the drop was not steep in Chile and the outlook was encouraging with fair annual growth rates for the period 2004-12. The causes of slower economic growth were lower export earnings, weaker investment and slower growth in the house servant demand. The local stock market has downgraded by 15% in sawbuck terms for the year, making it the worst performing of the major exchanges. This fall in the exchange rates made the economic scenario quite unfavorable for the foreign investment. The depreciating peso was accounted for the major fall in the economic performance. (upto 521 to the dollar)Exports softened but FDI surgedChile is the worlds largest ca-cars of copper. Being in its level opera hat height of production, the decline in world copper prices affected Chiles market negatively. Copper accounts for 60% of exports and 20% of GDP. Chile force its attention away from copper due to the long-term need to commute the economy and such heavy dependence on a individual(a) commodity. As the Chinese economy relaxed, copper prices fell down by 12% in November affecting Chiles trade and exports, resulting in a fall in 2012. The CAD (current account deficit) and debt increased due to the exports slump. Chile has favorable access to bond markets and foreign investors due to its best managed economy and the highest credit rating in Latin America, and hence its environment remains very investor friendly. Resulting in a Net FDI tripled in 2012. universal protests broke out againChile was recognized as a world leader in the implementation of the market reforms that was responsible for the coevals of growth and rising standards of living. Chile has proven unemployment rate that fell to a historical low of 5.7% in October. Despite the growth, Chile was the start-off country to face rising citizen discontent in the form of the street demonstrations, which are now common throughout Latin America. Chile experienced for the first time in 2013 students, unions and Mapuche Indians all conducted disruptive demonstrations.Election returned center-left coalition to powerAs expected, former President Michelle Bachelet easily defeated Alianza por Chile, the candidate of the regime party, and her New Majority coalition won a majority in Congress. In many respects, the outcome was disappointing for Bachelet and her supporters. The disappointing fact was the low turnout , with voting was no longe r mandatory, especially among first-time voters who were expected to lay aside an easy first-round victory.Central Bank lowered interest rates to engender growthIn order to stimulate the growth in the face of weak domestic demand, the Central Bank cut interest rates. This will further enhance the growth of the economy and productivity.National strategies and public policiesChile follows the strategies to raise taxes, reform education and providing free tuition for university students. These reforms were mainly targeted in reducing inequality, thereby reducing the protests.Keys Progress on reform schedule price of copperIndustry structure and competitive dynamics in terms of al-Qaida LaborInfrastructureChile has a well developed and efficient infrastructure network, which contributes to the governments export-driven development strategy. Since the adoption of build-operate transfer concessions the countrys natural infrastructure has improved substantially.Though considerable da mage was done to the breathing countrys infrastructure network by the devastating 2010 earthquake, the ongoing focus of government attention ensure the rebuilding of Chiles infrastructure. The Pan-American Highway is considered to be high international standards and backbone of Chiles road system. Chile also has world-class airport and harbour infrastructure.Chile is working to develop a network of transport corridors crosswise the region, using rail and road infrastructure. This will uplift the Chiles exports to Argentina and Brazil, and also facilitate the use of Chilean ports for exports to Asia.EnergyEnergy supply in Chile is considered the Achilles heel. With its limited domestic energy supply, the country heavily relies on the bulk of its energy resources on Imports. It has to maintain sound dealings with its neighbors to regard the valuable energy supply. The reliance on energy imports, particularly on natural gas from Argentina (where 80% of gas imports originate), is a outgrowth problem.The Chilean government has prioritized addressing the electricity issue.Intellectual Property RightsIn the foreign Property Rights Index of 2013, Chile comes in 28th place out of 130 countries. This places Chile the highest ranked of all emerging markets. Chile approved legislation to bring the country into compliance with the Agreement on pot Related Aspects of Intellectual Property Rights (TRIPS) signatory obligations .As per the TRIPS signatory, Chile must image the agreed standards pertaining to copyrights, including producer rights, industrial designs, patents and trademarks.The area in which Chile was most scrutinized is IPR in pharmaceutical products. This is due to the fact that Chile lacks a transparent system for protecting pharmaceutical patents. In 2005, the MOP established a system in protecting data related to pharmaceutical products.Business-government relationsChile is positioned with a stable political outlook and sound economic fundamentals fo r steady, albeit slower, economic progress. Due to its high reliance on copper exports and oil imports, Chile is posed to a high risk to economic progress. Diversification of the countrys economic drivers will be essential to ensuring sustainable growth to remove the high dependence on the copper exports and oil imports. barely this diversification may drag the GDP of the country leading to a more consumer-driven economy.Moreover, the GDP per capita is envisioned to nearly double between 2013 and 2022, in line with President Sebastin Pieras goal of at to the lowest degree US$25,000 GDP per capita by 2020. This would give Chile de facto developed country status.Nevertheless, we will face two obstacles that would hamper Chiles economic growth over the upcoming long time Despite the countrys vast reserves of hydroelectric power, periods of drought have exposed Chiles dependence on energy imports modernizing power generation and transmission will be highly essential to continued grow th.Potentials Risks and bottlenecks face up by Chile GovernmentChile faces few terrorist natural action and regional security threats in comparison with neighboring countries. Other Potential risks are in the field of labor, education, healthcare, communication and transportation facilities.Strikes and public protests present a significant risk to business in Chile. In recent years these events have been concentrated in the areas of health, education, transportation, communication and civil service sectors. The authoritative wages are slowly increasing in a less alarming way and high corporate profits have led to greater worker resentment. Strike action is becoming more widespread. It is not totally uncommon for labor tensions to develop into full-blown conflict. These labor conflicts largely affect the copper mines functioning. This leads to a significant amount of delays in certain(a) large mining and energy projects.Mapuche political activists pose a growing threat to the fo reign investments due to hindrances in the domestic security and the countrys business climate. These conflicts lead to a significant drag on the Chilean business environment if left unresolved. According to government statistics, crime rates are falling.Chile OUTLOOK in the face of Attractive Business EnvironmentsIn the business environment analysis conducted by Business Monitor, only 9 nine countries emerged with the most business taking environments in the Latin America region. Although there are differences among them, they all share significant positive strengths keep up growth with moderate inflationFavorable external profilesDeclining poverty and growing middle classesStable, multiparty, centrist politicsSocial-market economic policiesSlowly improving effectual systemsSeven of the nine ranked highest of the 18 LABER environments on the 2013 World scotch Forums global competitiveness score as habituated below.Chile government supports business and related investments with its strong and efficient legal frameworkMost accommodative in the regionGovernment continues to place attracting foreign investment high on its priority listInfrastructure network is a major asset to the Chilean business climateOpen foreign trade regime, helps to maintain the countrys reputation as an attractive foreign direct investment (FDI) destinationCorruption and criminal activity remains a nuisancePiera government has struggled to produce results on these fronts