Over the last decades, numerous US companies have successfully undertaken the challenge of doing business in Chile, a country that is known for having the best business expansion opportunities in Latin America. Last year, direct investment in Chile increased by US$11.928 million, and for the first half of 2020 the country registered a record figure of US$4.779 million.
This encouraging panorama has historically and currently attracted investors from all over the US, expanding their business in the industry of mining, technology, and Venture Capital.
A paradigmatic example of recent US investment in Chile came in 2019 when Jeff Bezos – founder and CEO of the e-commerce company Amazon – invested millions of dollars in the Chilean start-up NOTCo, which successfully mimics the flavor and texture of certain foods using only vegetable-based ingredients.
Although Chile’s dynamic and developed market has been in the scope for multiple US companies, executives should be aware of the challenges they may face to prosper in the country.
In this article, we review the principal challenges for US companies doing business in Chile and how to overcome them.
5 Challenges for US companies doing business in Chile
US executives must not assume that everybody in Chile speaks English. Even though English is increasingly common and is taught in most schools to a large percentage of the population, US companies doing business in Chile will find to their surprise that aside from most lawyers, fully fluent English speaking professionals are not easy to find.
It is difficult to find fully bilingual English-speaking accountants. Most non-executive staff at public entities like banks, notaries, and some private establishments such as insurance companies, will not speak English fluently.
The best way to overcome this challenge for US companies doing business in Chile is to partner with local and trusted specialists able to engage on your behalf with the different key players in the Chilean business and financial world.
2. Understanding the framework in place
US companies doing business in Chile need to grasp and understand as best as possible the legal and compliance framework in place.
Even though the Chilean Economy shares significant similarities with those found in the American economy, as many of our institutions and legislations have mirrored those of the US, there are still several particularities and complexities that aim to be navigated and understood to ensure complete local compliance and ultimately commercial success.
Any successful company doing business in Chile must be fully compliant in terms of the local laws and statutory regulations. Thus, all market entry strategies need to embrace them through a partnership with professional experienced firms able to provide bilingual consultancy and guidance in tax, legal affairs, migration, and other important areas.
3. Understanding the local way of conducting business
Chile excels in comparison with other neighboring countries in aspects regarding anti-corruption, transparency, economic strength, and social stability. These factors play a part in influencing Chileans’ approach to conducting business locally.
One of the most important aspects to note regards timing and overall compliance; US companies doing business in Chile will immediately notice that people in this country have acquired the habit of leaving things for the last minute.
Corporate governance also plays a key role in business activity. Apart from public institutions that offer their shares in the stock market, corporate governance has seen limited development within the “private realm”, composed by medium and small companies. A direct consequence of the latter, is usually a complete lack of internal structure concerning powers of representation, administration, etc.
A reasonable approach would involve US companies doing business in Chile adapting and customizing their offshore business model to the Chilean idiosyncrasy. As mentioned before, an adequate way to procure this is by engaging with a trusted and professional partner so that the odds for commercial success are significantly increased.
4. Navigating the payroll system
Human capital is at the core of any business plan and strategy. However, US companies doing business in Chile may underestimate the complexities that arise when employing people in the country. Whether the newly incorporated company has one or thirty employees, payroll calculations need to be considered to comply with all Chilean labor regulations. This is achieved by a teamwork of professional services provided by lawyers, accountants, and administrative executives, whose mission is to ensure the company is in good standing with local labor and tax authorities.
There are a series of preliminary steps and calculations that US companies doing business in Chile need to consider when interacting with organizations such as insurance companies, health providers, or pension funds. It is vital to count on local experts, as any incompliance on these delicate areas will trigger investigations and eventual fines by local authorities.
5. Opening a bank account
US companies doing business in Chile will inevitably conclude that it is almost impossible to operate without a local bank account. Future investors should negotiate with Chilean banks to ensure an account is swiftly open.
While multinational companies will not face problems when opening a bank account through a bank’s “international desks”, small organizations might find this process challenging. The reason for this is simply because local banks see much risk involved.
Therefore, it is vital to understand that in most cases, all corporate bank accounts come by default with lines of credit, ensuring the existence of a shareholder or legal representative that might assume the possible risks.
US companies doing business in Chile should partner with local specialists who can provide a legal representative already recognized by local banks. In this way, the business operation would be not considered a potential risk.
Navigate challenges for US companies doing business in Chile with a trusted local provider
Although Chile is a very favorable business destination, there may arise some complexities when doing business abroad due to legal and cultural hurdles. This includes understanding a company’s corporate compliance requirements.
Avoid unnecessary setbacks and protect yourself and your company by seeking an entity health check in Chile from experienced and trusted experts. At Biz Latin Hub, our group of local and expatriate professionals offers a full suite of market entry and back-office services that can support your company operations and ensure you operate in full compliance with local regulations.
Reach out to us at [email protected] to receive personalized guidance on legal, accounting, tax, payroll, employment, trade, due diligence, and other matters.
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