• The strategy includes six areas of action to boost growth from September of this year. The goal is to increase investment by five percentage points by 2023.

Chile’s government presented this Monday the “Let’s Invest in Chile” plan, a package of measures that aims to increase investment by five percentage points next year. The plan will come into effect from September of this year. It consists of 28 measures divided into six areas of action: providing tax incentives for private investment; improving access to financing; improving public investment; promoting foreign investment; enhancing the effectiveness of regulation and permit procedures; and promoting public-private partnerships for investment.

President Gabriel Boric explained at the launch, “I’m happy to see representatives from the private sphere, from workers’ organizations and from the government working together to move forward with this pro-investment agenda, due to the difficult external and internal conditions that we are experiencing in Chile and throughout the world. We have to proactively take on the task of facing up to and changing them, to turn the forecasts on their heads. For this, we require the collaboration of the public and private sectors.”

Treasury Minister Mario Marcel emphasized that “in order to recover the path of growth and a better quality of life for all Chilean people in a sustainable way, it is fundamental to create the conditions for investment to grow. President Boric has therefore tasked us with pushing forward an ambitious agenda, which would allow us to stimulate investment, generating employment, but which at the same time allows us to speed up the transition to a green economy.”

Economy Minister Nicolás Grau added that both the global and domestic scenarios make it essential to reduce information asymmetries and risk perception among potential foreign investors through more direct dialogue. “We therefore want to strengthen the international presence and capabilities of the InvestChile team, so that they can better develop and promote foreign direct investment,” he stressed.

InvestChile executive director Karla Flores explained that the plan is focused on promoting the arrival of more and better foreign investment to Chile. “The reopening of InvestChile offices in Europe and North America will allow us to boost a market that accounts for 60% of foreign direct investment stock in Chile, so it’s very good news. This, along with the announcement that we will be strengthening the InvestChile team, will undoubtedly lead to an increase in investment, which will boost our economy and generate more and better jobs for the Chilean people,” Ms. Flores said.

Here is a summary of the measures:

Tax incentives for private investment

1. Amendment to the compensation mechanism for deferring income tax payment through companies with passive income.
2. Creation of a tax incentive for projects with a multiplier effect or green projects. A US$500 million tax credit fund for first category tax will be created, to be allocated to investment projects with a high multiplier effect.
3. A temporary semi-instantaneous depreciation mechanism will be applied during 2023. An extraordinary semi-instantaneous depreciation period will be opened for the whole of 2023, similar to the one that was opened during the 2020 tax reform.
4. Changes with respect to the treatment of tax losses will be postponed from coming into force. Losses can thus be allocated for all taxable income until 2024; in 2025, losses worth up to 80% of taxable income may be allocated; in 2026, up to 65%; and from 2027 onwards, the allocation of losses worth up to 50% of taxable income will come into force.
5. The ad valorem rate for new and expanding copper projects will be reduced. New copper mining projects will be exempt from paying ad valorem tax for five years, so margins will not be impacted at the time that investment decisions are being made.
6. The reduction in first category tax for SMEs will be extended for two years. In 2023, a rate of 15% will be maintained, while in 2024 the rate will be 20%.
7. Elimination of the changes in the taxation of leasing contracts. The taxation of leasing contracts will be restored, such that the lessee can continue deducting the fees paid or accrued within the fiscal year as a deductible expense and the lessor will be able to depreciate those goods that are registered as assets.

Improvements in access to financing

1. The State will guarantee financing of 10% of the mortgage deposit for buying a first home. This will allow banks to provide financing for the other 90%, with no additional costs for provisions to cover the credit risk. This will also mean lower savings requirements and greater dynamism in the real estate market.
2. Extension of the financing coverage for the purchase of new homes up to 100%, in case of auction of the property. The beneficiaries of this measure will be debtors who apply the DS01 and DS19 Section 3 subsidies, which correspond to homes worth more than UF 1,600.
3. CORFO second-tier credit program. In 2022, 64 billion Chilean pesos (around US$70 million) will be allocated to refinance loans granted by banks and other non-financial institutions to the projects of small and medium-sized companies. In 2023, an additional 69 billion Chilean pesos (around US$76 million) will be allocated to green hydrogen projects and implementing the Chile Apoya (Chile Supports) Plan.

Improving public investment: Infrastructure for development

1. Increase in public investment in 2023 and improvement in administrative processes. Basic public investment spending will grow 10% in 2023 compared to 2022. The Temporary Emergency Fund (FET) will also be replaced by a US$1.84 billion Infrastructure for Development Program. Total public investment will thus be 30% more in 2023 than in 2021.
2. The Public Investment Rules, Instructions and Procedures (NIP) will be updated in order to simplify the procedures for less complex works. This measure will be implemented in November 2022, and the delay in smaller projects is expected to drop by half.
3. Update of circular 33 in order to simplify the process for authorizing conservations. Conservations are investment projects that involve an amount of up to 30% of the cost of the total work. The Social Development Ministry will be in charge of the measure, and it will be implemented from January 2023.
4. Recovery of unfinished public works. A redesign of the process whereby a company stops work on a project in order to cut the time for resuming work and reduce the impact on its progress.
5. Extension of the polynomial readjustment coverage. In August, the Public Works Ministry began to extend polynomial readjustment coverage for public infrastructure contracts. This is an adjustment in payments that reflects the variation experienced in the cost of materials in works tendered by the ministry. Implementation will start with the tenders for new contracts from September 2022.
6. The regional investment portfolio will be coordinated with regional governments. A joint work agreement will be signed between regional and central authorities to plan how public investments are carried out each year.Portfolio of investments with integrated production chains – a monitoring committee will be set up to the public investment used for other productive investment projects.
7. BancoEstado Confirming: Banco Estado will introduce a confirming tool which makes it possible to bring forward the payment of invoices to suppliers, through simple and fast operations. The Public Works Ministry will implement the use of this tool among 663 contractors from September 2022.
8. Acceleration of the construction of high-standard bike lanes. High-standard projects will be developed to install 190 km of bike routes in cities with atmospheric decontamination plans.
9. Technical cooperation between the Development Bank of Latin America (CAF) and regional governments. Technical collaboration will be set up from the last quarter of 2022 that will aim to evaluate the management capacity of regional government, identify technical shortfalls for carrying out investment and implement capacity building among teams.

Promoting foreign investment

1. Investment attaché offices will be reopened abroad. Investment attaché offices will reopen in Europe and North America during the fourth quarter of 2022. These markets account for 60% of foreign direct investment (FDI) stock in Chile. It is hoped that this measure will allow projects worth more than US1.5 billion to be undertaken in 2023.
2. The investment promotion team will be strengthened. The institutional structure and main functions of the agency will be ready during September 2022. It is expected that the number of investment projects will be significantly increased and that the projects already under evaluation will be made more viable. Additional investment of more than US$2 billion is estimated for 2023.

Improvements to the effectiveness of regulation and permit procedures

1. The Economy Ministry’s Large-Scale Projects Office will be strengthened. Greater resources will be provided for the digitalization of processes, with emphasis on strategic projects for the decarbonization of the energy matrix and the fair socio-ecological transition.
2. Fund for strengthening critical services in the processing of projects. A special fund will be created in the 2023 budget to speed up the processing of the permits required for undertaking investments.
3. A coordinating agency will be created to implement a single point of contact for sectoral permits from 2023. A committee of experts will be entrusted with the design of a new institutional framework that effectively coordinates the granting of sectoral permits by the State.

Public-private partnerships for investment

1. Public-private work for promoting investment. Four public-private working groups will be convened in sectors such as construction, energy, transport and mining to create a set of measures that will reduce the number of stalled construction projects and create more favorable conditions for forthcoming projects.
2. Regional public investment operating committee under the coordination of the Economy Ministry. A permanent working group will be set up between the Energy, Mining and Economy Ministries, InvestChile and the development and investment divisions of each regional government to periodically monitor the progress of projects in each region.
3. Public security in productive work. A working group for collaboration and coordination between the agencies responsible for public order and productive organizations will be convened. This proposal is aligned with different trade associations, such as the trade association of electricity generators (Generadoras de Chile), the Federation of Chilean Industry (SOFOFA), and the Confederation of Production and Commerce (CPC).