SWOT Analysis of Chile: Business and economic trends

SWOT Analysis of chili pepper work and economic trendsCountry Profile chilli 20142014 LATIN American BUSINESS ENVIRONMENT REPORTINTRODUCTION In 2014 the business environment in Latin America did non live up to expectations, and seems that it will not deliver significant results for 2014.Growth rate set protrudeped again, down in 13 of the 18 countries covered in the LABER analysis. Lower commodity prices and financial market volatility in Latin America Governments struggled to cope with growing economic imbalances and rising social discontent.The 14 countries adhering to the centrist social-market paradigm, in spite of these pressures, did not deviate from its more business-friendly policies. Should the economic slump deepen in 2014, it was not unreasonable to expect pressures for change to deepen.Country Profile ChilePolitical FactorsSWOT Analysis of ChileStrengthsChile experiences open economy and the bilateral, regional and multilateral trade agreements led to a increase i n foreign tradeInternational competitiveness has faced an change magnitude growth rate ascribable to the trade agreementsChile offers foreign investors some of the pieces most competitive business costsPrivatization and deregulation read created in the public eye(predicate) utility and telecommunications industriesCorporate taxes and labor costs argon relatively lowNo evidence of active terrorism in Chile feature of serious offences ashes relatively low, despite reports of increased crime levelsChile capital, Santiago is considered one of the safest countries in Latin AmericaEnjoys a stable classless political system, with strong institutionsComprehensive legal framework and independent judiciaryWeaknessesBinomial electoral system is ripe for reformChile is vulnerable to remote shocks due to overdependence on primary export industriesSupply shortages and potential power stoppages due to heavy dependence on imported sources of abilityReforms of Chiles institutions and labor market remain unlikely.Absence of reform exacerbate structural imbalances in the economyAbsence hales on economic growthOpportunitiesForeign investors are supported by the Government through three enthronization mechanismsThe mechanisms offer the rights of both the state and the investor throughout the implementation of projectSignificant opportunities for inbound investment in areas of power generation and deificationation, as well as grunter productionSince 1990, Chile has enjoyed an uninterrupted period of stable democracyVoting is overbearing for all voters older than 18.Government took important measures to increase efficiency of public administration by 2003 and ensuring a transparent authoritiesCongress also sanctioned a law to regulate the financing of political parties and election campaignsThreatsGrowing public protests among the poorer sections of societyHigh levels of income inequality and discontent with the cost of education weakening governments popularityChiles major(ip)(ip) ports and industrial mines suffer growing labour unrestBusiness environment in the rural areaBMI Business Environment Risk RatingsChile ranks 28th out of 191 countries in business environment rankings and scoring around 64.0. This makes Chile the outperformer of the neighboring countries by some outperform and places it higher than several developed industrial economies. In terms of market orientation, it ranks well ahead of many developed states including the US and the UK. Nonetheless, causes for concern remain. The arena has a sizeable infrastructure deficit, reflected in our relatively weak score for Chiles business infrastructure, a category in which Chile ranks except 55th globally.Chile is an open economy and practices bilateral, regional and multilateral trade agreements. This has led to a steady increase in foreign trade and the countrys international competitiveness. Chile offers foreign investors some of the worlds most competitive business costs. Priva tization 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 concomitantorsChile is a exceedingly Election dominated environment. It possesses the following features with regard to the environmentSolid economic performanceThroughout the region of Latin America growth softened, but the drop was not steep in Chile and the outlook was encouraging with average annual growth rates for the period 2004-12. The causes of s set out economic growth were lower export earnings, weaker investment and slower growth in the domestic demand. The local stock market has downgraded by 15% in dollar terms for the year, do 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 perfor mance. (upto 521 to the dollar)Exports softened but FDI surgedChile is the worlds largest producers of copper. Being in its maximum height of production, the decline in world copper prices affected Chiles market negatively. Copper accounts for 60% of exports and 20% of gross domestic product. Chile drew its attention away from copper due to the long-term need to diversify the economy and such heavy dependence on a single 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.Public protests broke out againChile was recognized as a world leader in the implementation of the market reforms that was responsible for the generation 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 first 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 frustrated Alianza por Chile, the candidate of the governing 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 longer mandatory, especially among first-time voters who were expected to deliver an easy first-round victory.Central Bank lowered interest rates to awake growthIn order to stimulate the growth in the face of weak domestic demand, the Central Bank cut interest rates. This will throw out 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 agenda price of copperIndustry structure and competitive dynamics in terms of Infrastructure mashInfrastructureChile 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 physical infrastructure has improved substantially.Though gigantic damage was done to the existing countrys infrastructure network by the devastating 2010 earthquake, the ongoing focus of government attention ens ure 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 seaport infrastructure.Chile is working to develop a network of transport corridors across 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 relations with its neighbors to realize the precious energy supply. The reliance on energy imports, particularly on natural gas from Argentina (where 80% of gas imports originate), is a growing problem.The Chilean government has prioritized addressing the electricity issue.Intellectual Property RightsIn the International Property Ri ghts Index of 2013, Chile comes in 28th place out of 130 countries. This places Chile the highest class-conscious of all emerging markets. Chile approved legislation to bring the country into compliance with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) signer obligations .As per the TRIPS signatory, Chile must meet 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 for steady, albeit slower, economic progress. Due to its high reliance on copper exports and oil imports, Chile is posed to a high risk to e conomic progress. Diversification of the countrys economic drivers will be inseparable to ensuring sustainable growth to accept the high dependence on the copper exports and oil imports. But 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 least 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 age 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 growth. capablenesss Risks and bottlenecks faced by Chile GovernmentChile faces few terrorist activity 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 real wages are slowly increasing in a less dismay way and high corporate profits have led to greater worker resentment. Strike action is becoming more widespread. It is not totally red carpet(prenominal) 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 large mining and energy projects.Mapuche political activists pose a growing threat to the foreign investments due to hindrances in the domestic security and the countrys business climate. These conflicts lead to a significant drag on the Chilean business envir onment if left unresolved. According to government statistics, crime rates are falling.Chile OUTLOOK in the face of lovely Business EnvironmentsIn the business environment analysis conducted by Business Monitor, only 9 nine countries emerged with the most business attractive environments in the Latin America region. Although there are differences among them, they all share significant positive strengthsSustained growth with moderate inflationFavorable external profilesDeclining poverty and growing middle classesStable, multiparty, centrist politicsSocial-market economic policiesSlowly improving legal systemsSeven of the nine ranked highest of the 18 LABER environments on the 2013 World Economic assemblages global competitiveness score as given below.Chile government supports business and related investments with its strong and efficient legal framework more or less accommodative in the regionGovernment continues to place attracting foreign investment high on its priority listInfra structure 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) terminationCorruption and criminal activity remains a nuisancePiera government has struggled to produce results on these fronts