Chile risk report
Companies face very low risks of corruption in Chile, the least corrupt country in Latin America. Chile has strong and transparent institutions that promote business and that have effective mechanisms to investigate and punish corrupt practices. Risks stem mostly from a strong connection between politicians and the economy, which can affect public procurement. A series of corruption cases in 2015 raised concern about corruption, but Chile is actively investigating the issues. The Criminal Code and the Criminal Corporate Liability Law prohibit active and passive bribery of domestic and foreign public officials. Companies operating in Chile are advised to establish an effective compliance system. Facilitation payments and gifts are not explicitly mentioned in Chilean laws, but businesses are unlikely to encounter these in practice. The maximum penalty for bribery is imprisonment of up to five years and fines for individuals, and fines and a ban on applying for government contracts and benefits for corporate entities.
Judicial system Very low risk
Chile's judicial system carries a very low corruption risk for businesses. The judiciary generally operates in a transparent and independent manner, free from government interference (ICS 2015). Companies report that irregular payments to obtain favorable judicial decisions are rarely exchanged and consider Chile's legal framework for settling disputes and challenging regulations to be moderately efficient (GCR 2015-2016). Enforcing contracts in Chile takes on average 480 days, less than the OECD average (DB 2016).
Police Very low risk
There is a very low risk of encountering corruption in the Chilean police force. The country has effective mechanisms in place to investigate and punish police abuse and corruption (FitW 2015). Businesses consider the Chilean police to be among the most reliable in the world (GCR 2015-2016).
Public services Very low risk
There is a low risk of corruption when obtaining Chilean public services. Businesses report that irregular payments or bribes rarely occur when acquiring utilities (GCR 2015-2016). Chile has undertaken several successful reforms to ensure an efficient and professional civil service both through performance-based incentives and through a reduction in political appointees to public service positions (ICS 2015). Furthermore, effective laws are in place that punish abuse of office by Chilean officials, effectively deterring corruption (BTI 2014). Starting a business takes an average of six days (DB 2016).
Land administration Very low risk
There are no reported risks of corruption in the Chilean land administration. Private property is well respected and protected in Chile (BTI 2014). Aside from some administrative limitations in the fisheries and media sectors, Chile generally provides the right to foreign private ownership or establishment (ICS 2015). Dealing with construction permits takes on average 152 days, while registering property takes 28 days (DB 2016).
Tax administration Very low risk
There is a low risk of corruption when dealing with the tax administration in Chile. Companies report that undocumented extra payments or bribes in connection with tax collection are uncommon (GCR 2015-2016). Companies spend on average 291 hours per year on preparing, filing and paying taxes (DB 2016).
In 2015, the Chilean chemical company SQM admitted to tax fraud on $11 million of payments and prosecutors are currently investigating how much of that went to politicians (Bloomberg, Sept. 2015).
Customs administration Very low risk
Corruption when trading across borders does not represent a significant corruption risk for companies in Chile. Border corruption is not an obstacle to importing or exporting; irregular payments and bribes are uncommon (GETR 2014; GCR 2015-2016).
Public procurement Moderate risk
There is a moderate risk of corruption in the Chilean public procurement sector. Public procurement systems are transparent but represent a potential source of corruption as there is a strong connection between politicians and the economy, and ex-ministers or high public officials often take jobs in firms operating in sectors they had previously overseen (BTI 2014). Additionally, public funds are sometimes diverted to companies, individuals or groups due to corruption, and the decisions of government officials concerning contracts and policies at times favor well-connected companies and individuals (GCR 2015-2016). To reduce the risk of corruption in the procurement process, investors are advised to use a specialized due diligence tool on public procurement.
A number of corruption cases were investigated in 2015 involving fraud, influence peddling and bribery by the Penta Group, a conglomerate of firms active in various sectors (PanAm Post, Jan. 2015). The ongoing investigation has led to the arrests of several businessmen and a sentence to probation of a politician and ex-senator (Bloomberg, Nov. 2015; MetroNews, Dec. 2015).
Natural resources Very low risk
Chile's natural resource sector carries a very low corruption risk for companies. The resource-rich country has high levels of budget transparency and corruption control (NRGI 2013). Resource governance is very strong and distinguishes Chile from other corruption-stricken countries in the region (Brookings, Feb. 2015; Finance & Development, Sept. 2015).
Chile's anti-corruption legislation is strong and well-enforced. The Chilean Criminal Code criminalizes active and passive bribery of public officials (cohecho) and foreign officials; the maximum penalty for domestic bribery is imprisonment of up to three years and a fine from a half to three times the amount of the benefit requested or accepted (Baker & McKenzie, Aug. 2015). Facilitation payments are prohibited (Latinlawyer, Oct. 2015). The Corporate Criminal Liability Law criminalizes money laundering, financing of terrorism, and bribery of domestic and foreign public officials (FCPA Americas, Dec. 2013). Corporate entities can be penalized with fines (up to approximately USD 630,000), temporary bans from contracts with governmental institutions and/or the temporary loss of the right to receive governmental benefits (Latinlawyer, Oct. 2015). Chilean law explicitly obliges companies to actively prevent crimes such as bribery, which can be done by implementing corporate compliance programs (modelos de prevención) (FCPA Americas, Dec. 2013). Chile’s Securities and Insurance Authority (in Spanish) authorizes a group of local firms to review and certify companies’ compliance programs as sufficient (FCPA Americas, Dec. 2013).
The law 20.205 (in Spanish) provides protection for public employee whistleblowers, but there are no safeguards for private sector employees (ICS 2015; BFFS 2014). Chile has ratified the Inter-American Convention Against Corruption (IACAC) and the United Nations Convention against Corruption None(UNCAC). Chile is a signatory to the OECD Convention but is criticised for not adequately establishing corporate liability for foreign bribery offenses (Transparency International, 2015).
A functioning democratic government, an efficient judiciary, and independent press promote freedom of speech in Chile (HRR 2014). Some old laws regarding criminal defamation and desacato (insult) from the Pinochet dictatorship have not yet been revised, restricting freedom in the media (FotP 2015). Nevertheless, Chile stands out in the region for offering an open environment for press freedom and journalism without harassment or intimidation (FotP 2015). Another weakness of Chile's media environment is a lack of diversity, especially in print media (FoP 2015). Independent political and civil society organizations operate freely in Chile (BTI 2014), and the rights to freedom of assembly and association are well respected by the government (FitW 2015).
- World Bank & IFC: Doing Business 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- US Department of State: Investment Climate Statement - Chile 2015.
- Latinlawyer: Anti-Corruption 2016, 14 October 2015.
- Bloomberg: "SQM Gains as Ponce Exits Holding Company Boards Amid Chile Probe", 9 September 2015.
- Baker& McKenzie's: "Global Overview of Anti-Corruption Laws 2015", 3 August 2015.
- Freedom House: Freedom of the Press - Chile 2015.
- Freedom House: Freedom in the World - Chile 2015.
- Transparency International: Exporting Corruption, Chile 2015.
- Finance & Development: "Corruption Matters", September 2015.
- Metro News Canada: "Chilean Judge to Rule on Arrests in Bribery Scandal on Saturday", 2 December 2015.
- Bloomberg Business: "Chilean Judge to Rule on Arrests in Bribery Scandal on Saturday", 6 March 2015.
- Brookings: "The Time is Now for Addressing Resource Governance Challenges in Latin America", 9 February 2015.
- PanAm Post: "Chile’s Penta Case Pulls Dozens into Corruption Scandal", 16 January 2015.
- US Department of State: Human Rights Report - Chile 2014.
- World Economic Forum: Global Enabling Trade Report 2014.
- Bertelsmann Foundation: Transformation Index 2014.
- Blueprint For Free Speech: Chile – Whistleblower Protection, Overview, 2014.
- Natural Resource Governance Institute: Natural Resource Governance Index, Chile 2013.
- FCPA Americas: "Anti-Corruption Laws in Chile: Three things companies should know", 19 December 2013.