Evolution of FDI in Chile: Trends, challenges and opportunities for 2024-2025
Over the last few decades, which have been marked by structural reforms, trade liberalization and macroeconomic policies favourable to foreign investors, Chile has established itself as one of the most attractive economies in Latin America for Foreign Direct Investment (FDI). From the very beginning of its economic liberalization, which followed the military coup of 1973, to the energy transition in recent years, Chile has demonstrated remarkable resilience in attracting FDI, even in the face of financial crises, domestic problems or global shocks like the COVID-19 pandemic. After carrying out the following in-depth analysis of this evolution, certain caveats will emerge, regarding certain internal challenges, such as its complex fiscal position, its shortage of high-skilled labour and external macroeconomic and geopolitical uncertainties that could limit its appeal. This article offers not only a descriptive evolution of Chile’s FDI, but also an assessment of the most significant existing challenges and opportunities. Beyond this, it will critically reflect on the policies implemented in the country’s strategic sectors and recipients of the majority of FDI. Lastly, recommendations will be presented to ensure that the historical trend of increasing FDI to Chile continues.
Historical context and developments until now
FDI in Chile has been on the rise for the last decades. After the military coup of 1973, a process of economic and financial liberalisation commenced. During these last decades of the 20th century, Chile focused on the implementation of macroeconomic stabilization measures that ensured a positive economic backdrop for foreign investors, in order to control the debt crisis, keep inflation rates low and maintain high GDP growth (Ramirez, 2006). This was accompanied by fiscal and other structural reforms, including mass privatisation, the liberalisation of FDI legislation, more free trade agreements, and the deregulation of key domestic sectors (World Bank, 2021).
This focus on investor-friendly policies indeed had noticeable results. While between 1990 and 1994 Chile received an average of $1.2 million in FDI inflows, during the period of 1995-1999, this figure was multiplied almost by five, to $5.4 million (UNECLAC, 2002). These inflows were targeted at strategic Chilean sectors, such as mining and agriculture, as well as for generic development in the service sector and financial services. These intense reforms and commitment to outward-facing policies transformed it into arguably the most attractive country for FDI in Latin America, given that it came behind Brazil and Argentina only, and these economies were significantly larger.
The commodities boom before the financial crisis, including the rise in the price of copper, also led to a period of growth in FDI, given that it attracted investors to Chile’s mining sector (UNECLAC, 2021).
The period of 2010 to 2019, involved a restructuring, which was a result of the energy transition. This attracted FDI to a wider variety of sectors, apart from mining and was part of a strategy of the Chilean government to achieve greater economic resilience in the face of this growth. FDI flowed increasingly into renewable energies, technology and digitalisation and agriculture. In addition, this diversification of sectors receiving FDI was also accompanied by a larger span of countries from which this FDI was originating (OCDE, 2021).
The exponential growth in FDI to Chile therefore continued in the 21st century, but as can be expected, was inevitably slowed during years of economic shocks, including the global financial crisis of 2008 and more recently, the COVID-19 pandemic. However, in both cases, the adverse impacts were controlled relatively speedily, through effective fiscal and monetary policies and a focus on a continued favourable regulatory environment, and the Chilean recovery was among the best relative to other emerging markets (IMF, 2022). In fact, its post-pandemic recovery meant that in 2021, in terms of FDI inflows to the country consisted of an astounding increase of 12% above the pre-pandemic levels of 2019 (InvestChile, 2022).
In total, the FDI evolution between 2005 y 2021, meant that in Chile, 1,384 new FDI projects were announced, totalling $120 billion and creating 194,066 jobs (UNECLAC, 2024).
Current trends
Despite stagnation in FDI inflows in the Latin American region in 2023-2024, Chile accumulated $21.7 billion in FDI, representing a 19% increase relative to the previous year, and the highest figure since 2012 (UNECLAC, 2024).
The mining sector came in first place in terms of net inflows by economic sector, followed by the energy sector. This marked a significant shift compared to previous years, especially given the fact that since the period of the energy transition, the energy sector had led this ranking instead, and for 3 consecutive years (from 2019 to 2021). However, 2022 was a turning point, defined by mining reclaiming the top spot, as it had done since the previous century (InvestChile, 2024). However, as we will develop later, this short-term resurgence in mining FDI should not overshadow the broader trend—investors are increasingly favoring renewable energy, digital infrastructure, and logistics. Indeed, the energy sector is far from declining. It continues to grow, and, in fact, in terms of the number of total investment projects, energy was the top sector, attracting the most investment projects in 2024 (InvestChile, 2025).
This recent FDI attraction is largely due to growing interests in green hydrogen. As a country rich in natural resources, Chile has an abundant supply of renewable energy, and at low costs. In addition, Chile was the first country in the region to implement a National Hydrogen Strategy (InvestChile, 2024).
The third sector in Chile with the highest FDI attraction in 2023-2024 was the Global Services and Technology sector, which has achieved significant growth in the last few years. According to InvestChile’s project registry, one of the fastest-growing initiatives was the installation of data centers (InvestChile, 2024).
Source: Chilean Central Bank
This trend of exponential growth in FDI in Chile is undoubtedly linked to the government’s investment-friendly policies and regulatory frameworks which have been implemented not just recently, but since the 80s, and which have positioned Chile as an open and stable economy, with significant potential for growth. One of the most recent legal changes that took place, was the reform of the Decree Law 600, a statute for the regulation of FDI. In 2016, it was replaced by the so-called ‘New Law’, which granted the same rights as the previous law, but without requiring the authorization of the regulatory bodies in charge of FDI in Chile (Carey, 2016).
In fact, the majority of government policies implemented for FDI have focused on cutting red tape, in order to tackle the delays that investors had called out the government for (Council on Infrastructure Policies, 2024). In March, Congress is expected to approve a bill to accelerate and streamline investment processes. This proposal involves a structural reform of sectoral permits, with the goal of shortening approval times for big investments, without compromising regulatory standards (UBS, 2025)
These regulatory changes have come hand in hand with specific programs to incentivize FDI in sectors like energy and technology, as well as with trade agreements and macroeconomic policies for stability. Additionally, new national transparency requirements for transactions have been introduced, along with a new digital model for payment systems. Together, these public policies have resulted in an increase in Chile’s competitiveness, in the region and globally (OECD, 2021).
The top countries from which FDI in Chile originated, were Canada, the United States, Spain, the Netherlands, the UK and Italy (InvestChile, 2024). This ranking has not changed in several years.
Source: InvestChile
Key challenges
Despite Chile having secured a steady inflow of FDI, there are still challenges to tackle and geopolitical and regulatory obstacles that could be hindering the arrival of more FDI.
Firstly, are the internal factors, which include economic issues, in both monetary and fiscal policy. Throughout 2024, Chile’s inflation rate rose to 4.7% in October, way above the levels experienced the year prior, and of course, above the central bank’s target of 3.3% (UBS, 2025). Without signs of further progress in inflation reduction, foreign investors’ confidence could take a dip.
Another worrying indicator is the country’s fiscal position. In 2024, Chile’s fiscal deficit grew, due to limited economic growth from the previous year, together with increased public spending. In September 2024, the Chilean fiscal deficit was of 3.7% of GDP, while the target for 2025 is set at 2.3%, which makes it unlikely to be achieved even with the spending cuts announced by the government (UBS, 2025). This situation is generating uncertainty over the long-term sustainability of its government debt and could adversely affect FDI throughout the year.
Security in the city of Santiago also is a significant barrier to higher inflows of FDI and was ranked as the highest concern for Chileans at the start of this year. This worry is shared by foreign investors, since it taints their vision of the Chilean capital as a safe place to develop their projects. This challenge has persisted since October 2019, following the declaration of the State of Emergency.
In terms of Chile’s economic policies and regulations, the regulatory framework for the green hydrogen and lithium sectors also poses a slight barrier to investment, as uncertainties remain regarding permits and the profitability of foreign investment projects (OECD, 2025).
Furthermore, it is important to consider the cloudy horizon that there is for the country’s public policies, given that the Presidential elections are taking place this year and the possible uncertainty that would arise from the formations of a coalition government.
Aside from these domestic challenges, there are geopolitical risks that could indirectly damage the country’s ability to attract FDI. For example, as a country which is highly dependent on commodity exports, particularly copper, Chile is more exposed to supply chain disruptions and demand fluctuations caused by geopolitical events or global economic shocks (OECD, 2025).
The threat of new tariffs under the Trump administration could also pose a risk, because potential tariffs on China could affect Chile, given that China is its main trading partner (UBS, 2025).
Opportunities and outlook for the future
Looking ahead, Chile has significant potential to continue attracting FDI and even increase such inflows. In fact, BloombergNEF ranks Chile as one of the three most attractive countries in the world for foreign investors in the renewable energy sector, nearly on par with the largest emerging economies, India and China (InvestChile, 2024).
Chile could also focus its efforts on diversifying FDI inflows, in order to attract more investment in its technology and infrastructure industries. This would not only benefit economic growth but also enhance competitiveness, while also generating positive spillover effects in the key FDI-attracting sectors. Progress in the creation of data centers, as previously mentioned, indicates positive steps in this direction. Even more promising still, are Saudi Arabia’s investment plans in Chilean infrastructure in 2024-2025, which could lead to additional future investments if accompanied by adequate support through public policies and regulatory frameworks in that sector, similar to those being implemented in the energy sector.
In the renewable energy sector, future prospects remain very positive. The second largest investment project in this sector in all Latin America was secured for Chile. It involves the creation of a new company in the country by Hive Energy, a British renewable energy firm, which will develop a green ammonia project in Chile. The investment is expected to be around $8 billion (UNECLAC, 2024). (UNECLAC, 2024).
These types of projects, which are growing in number, indicate that green hydrogen remains an investment area of untapped potential, and large-scale initiatives like this one demonstrate that a lot of opportunities remain for investors to capitalize on and compete in this emerging market.
In the mining sector, government efforts to promote FDI have yielded results with mining’s reclaiming its spot at the top of the ranking of net FDI inflows by sector. However, it is important to note that this resurgence was also largely a result of the rise in international copper prices. By prioritizing sectoral policies as a key pillar of FDI attraction strategies, mining has rebounded, but at the same time, there has been a surge in renewable energy investments. Given the significant limitation in the mining sector—namely, its reliance on copper prices, which can negatively impact Chile’s economy and potentially deter some investors—and the fact that the highest number of new investment projects in 2024 have been concentrated in the energy sector, it is highly likely that energy will also surpass mining in net FDI inflows in the coming years if copper prices decline. Failure to adapt to this clear trend could expose Chile to greater volatility, particularly if copper prices fall or other copper-rich emerging countries become more competitive.
In fact, given that the great limitation in mining is the dependence on the price of copper which could negatively affect its economy and disincentivize certain investors, and that the biggest number of investment projects in 2024 was already in the energy sector, it is very likely that energy will also surpass mining in terms of net FDI inflows gained in the next years. This situation could also be exacerbated iwith a fall in the international price of copper.
Mining companies themselves, while continuing to invest in Chile, are also hedging their bets by diversifying into energy projects. The government’s own policies reflect this acknowledgment of mining’s limitations, as seen in its prioritization of infrastructure and renewable energy development.
Indeed, although Chile’s FDI successful evolution of FDI has been built on a foundation of stability measures and openness, this foundation alone is no longer sufficient. The country must now adapt to the changing trends of global investment priorities, and technological advancements. To continue attracting record levels of FDI inflows, it must adapt, and prioritize its progressive transition from an extractive-based economy to a more infrastructure- and energy-driven model.
Taking into account all the discussed challenges and opportunities, the following are a list of recommended measures to be taken to further strengthen Chile’s FDI appeal:
Talent retention and measures to prevent brain drain
The government previously highlighted the challenge of meeting the labour demand for programmers and other high-skill workers due to the shortage in Chile (Council on Infrastructure Policies, 2024). Measures must be implemented to address this issue, particularly to ensure that the technology and digitalization sectors can attract more investment.
Implement the bill currently in Congress and pair it with further measures targeting long bureaucratic processes
Since projections indicate that there will be no shortage of foreign investment, its retention should be a priority. Complaints from foreign investors about excessive bureaucratic hurdles must be addressed to maintain Chile’s competitiveness. Initiatives could include more efficient authorization systems and reducing processing times (Council on Infrastructure Policies, 2024).
Promote Research and Development (R&D) policies
Compared to similar economies in the OECD, Chile has below-average spending on R&D, which reduces its competitiveness and could potentially lead to concerns about the long-term sustainability of its GDP growth. Therefore, Chile must incentivise R&D through fiscal policies and with dedicated R&D programs (OECD, 2025).
Prioritize supportive policies for strategic sectors
According to Latin American FDI agencies, post-investment assistance and continuous support for the entire duration of foreign investment projects are crucial (UNECLAC, 2024). Instead of primarily focusing on reactive problem-solving approaches, as Argentina does, Chile should establish additional support policies aimed at building solid relationships with foreign investors (UNECLAC, 2024).
Overall, the future outlook for FDI growth in Chile remains positive, even after weighing in existing challenges.
Firstly, given that all estimations by organisations like the OECD and UNCTAD for 2023 were of stagnation of 2-7% for Latin America (UNECLAC, 2024), yet Chile surpassed its pre-pandemic FDI levels, suggests that investors are not too worried about the economic performance of Chile or of occasional inflation spikes. This is because its regulatory frameworks and decade-long investment-friendly policies provide investors with a substantial level of security and confidence.
Inflation forecasts for 2025 are also positive. To ensure FDI continues growing, it is crucial that inflation gradually declines toward the 3% target, a figure which is expected to be met (UBS, 2025).
While projections include fiscal targets to be missed in 2025, and that the government’s forecast for 2.7% GDP growth may, with all likelihood, fall short, Chile continues to have an A- credit rating. That, alongside its strong history of investment-friendly policies and rising FDI flows in recent years, it is expected that FDI will continue increasing in 2025, as has been the case in the last few years.
All forecasts for 2025 predict that Chile’s ability to attract FDI inflows will continue, and perhaps even surpass records. Chile will continue to be recognized as one of the best investment destination countries in Latin America (Lloyds Bank, 2025).
In conclusion, an in-depth analysis of FDI in Chile reveals a very positive evolution, but also one that is evolving. This resilience in maintaining FDI inflows even during periods of crisis is evidently a direct result of decades of macroeconomic stability measures and regulatory frameworks dedicated to incentivizing FDI. Crucially, Chile must also address internal challenges such as excessive red tape, talent retention and insufficient investment in R&D in efforts to remain competitive regionally, since other Latin American countries are also attracting larger flows of FDI. Without a doubt, Chile has a unique opportunity to capitalize on its potential as a regional leader in renewable energy while maintaining its expertise in mining. Despite this, to meet FDI growth projections for 2025 and beyond, Chile must not commit the mistake of over-relying on its historical FDI success and, instead, should proactively shape its future investment landscape. Success should not be taken for granted. As always, it will depend on the policies that are implemented in the coming years to tackle these challenges and barriers effectively.
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Written by Laura Rebollo
