Doing Business in Chile

by: Christian Filli

In many ways, Chile is an outlier among South American nations. It has a very peculiar territorial shape that stretches for more than 4,000 km along the continent’s west coast, with an average width of less than 180 km, and separated from its neighbors by the majestic Andes mountain chain. Chile’s population of 19.2 million is significantly smaller compared to the region’s leading economies (e.g. Brazil, Colombia and Peru), and its soil is more arid and rugged.

However, it has managed to build higher standards of living, currently second only to Uruguay on income per capita (IMF 2020). Economic output is highly concentrated in the capital city of Santiago, home to about 35% of the country’s population. For decades, Chile has been recognized as a very prosperous country (considered South America’s #1 economy by the OECD), earning it the nickname “Jaguar of Latin America”. This has been largely attributed to its successful mining industry, strong financial institutions, an extensive export lineup (e.g. food and beverage), investment-friendly policies, as well as support for small and medium-sized enterprises. The country is ranked 59th out of 190 global economies for ease of doing business (according to the World Bank, 2020), which makes it by far the most competitive country in the region on this measure.

Another singular achievement for Chile has been its low crime rate, along with its ability to keep corruption in check (it ranked 25th out of 198 countries on Transparency International, 2020), though some cracks have been showing recently (more on this in the next paragraph). One could probably say that, if Brazilians are the “optimists” of South America, Chileans are the most dependable, and just as resourceful.

Despite being a regional model for political stability, economic growth and the rule of law, however, Chile has recently experienced a period of intense public outcry against widespread inequality and concentration of power among Santiago's political and business elite. The problem has been directly linked to the Pinochet-era constitution, which gave a huge role to the private sector in state affairs. This has caused resentment to build over time among working-class Chileans, who are fed up with substandard public healthcare and education, rising costs in public transportation, meager pensions for the elderly, and no cultural or land rights for indigenous people (who account for 9% of the population).

In October of 2020, 78% of Chileans voted in a referendum for a new constitution to be drafted by an assembly of 155 elected representatives (due in early 2022). The road ahead seems to hold great promise for many Chileans, yet one of the big questions is whether the country will be able to maintain its “Jaguar” status.

Three most important things for doing business in Chile:

The first key thing to keep in mind is how momentous this shake-up is in Chilean history. Two years of mass demonstrations demanding a reversal of decades-long economic policies, added to a collapse of public trust in the very institutions that have helped Chile grow, have made headlines around the world for good reason. Some Chileans have referred to it as “cathartic”, while others call it “paradoxical”; part of the reason being that a citizenry which historically has been known for behaving very orderly and compliant is now committed to stirring the waters in a very big way - and this shows no signs of dissolving anytime soon.

One of the forces driving such a shift in national mood is likely generational. Those who are old enough to remember the times of the dictatorship (1973-1990) are giving way to a younger segment that did not grow old learning to fear possible abduction, imprisonment, torture or death. Today the 25-34 age bracket is the largest in the country, while increasingly vocal and with a progressive orientation.

The second driving force has been the exposure of corruption scandals, specifically the collusion between the corporate class and political establishment (including the highest levels of government) - a huge blow to a country with a reputation for being so honest and transparent. The failures of trickle down economics have become all too apparent, and people have come to resent free market policies that maintained concentration of wealth among power elites. “Classism” has tended to play a big role in Chilean society and a key factor for career advancement, therefore the growing pushback against the so-called “clase empresarial” (business class) could set the stage for a major paradigm shift in a culture that is not prone to questioning authority and hierarchy.
Another very important thing to know about Chile is that it truly has set itself apart from all other South American cultures. In other words, most things a foreigner might expect to see elsewhere in the region will likely be different or rare (perhaps even not present at all) in Chile. It starts with demographics: Chile has a very small black population, and those residents who are black are likely to be recent migrants from the Caribbean (e.g. Haiti); about a quarter of Chileans self-identify as “mestizo” (a mix of European with Indigenous traits), while an estimated 5% are descendants from Middle Eastern and East Asian immigrants. The fact that the society is relatively homogeneous leads Chileans to focus on classism more than racism.

Also, one should not expect to encounter a light and festive culture in Chile as one would see, for instance, in Colombia. Neither should one expect to find in Chile the spontaneity and easy-going style that is so characteristic of Brazilians. And one should definitely not expect Chileans to be similar to Argentineans, just because they share the world’s third-longest border or because they are the only nations in Latin America to have had a woman serve two presidential terms.

Perhaps even more importantly, one should not be overconfident in one’s language skills upon arriving in Chile, as natives seem to speak a Spanish dialect that may require some time to adapt. However, what one can expect is the typical Chilean to be generally proper and polite, fairly introverted, very trustworthy, well educated and conservative leaning. They are also known for their uprightness and follow-through.
Lastly, although Chile behaves similarly to other Latin American cultures in terms of its preference towards centralized control, collectivism and conservative values - dimensions of Power Distance (PDI), Individualism (IDV) and Uncertainty Avoidance (UAI), respectively - it scores much lower than its neighboring nations on the dimension of Masculinity (MAS), at 28. This essentially means that Chileans tend to approach conflict differently, favoring modesty over assertiveness, consensus over toughness, and social responsibility over material success.

In a certain sense, this underlying “feminine” cultural impulse may have been the core motivation behind citizens taking to the streets to demand economic policy reform, and why there is a growing focus on social well-being and a desire to achieve it through negotiation and compromise (i.e. having elected representatives re-write the constitution). The degree to which this unprecedented level of popular uprising and civic engagement might actually lead to Chile becoming a more equitable society is certainly something the world will be watching closely over the next few years.

What to look for in a reliable business partner in Chile:

Much like in other Latin American countries, doing business in Chile can be slower and more complicated than in Europe or North America, though far from being as bureaucratic as Brazil and Mexico (or some Asian countries like India). A good business partner should be someone who knows how to maneuver around the system with as little friction as possible.
Despite having a vibrant business community, Chileans tend to be fairly cautious and conservative when it comes to embarking on innovative or ambitious endeavors. The current mood throughout the country may have increased this, which is why a good business partner should be attuned to the situation while simultaneously demonstrating confidence in their ability to initiate and advance projects.
Business in Chile is controlled by a relatively small number of economic groups and families, making it a fairly close-knit community, thus not readily easy to enter. Ask your potential partner about their contacts and connections, even personal acquaintances. You are interested in partners who have already laid some of the groundwork and can open as many doors as possible for you.
Never underestimate the value of meeting face-to-face. This will help build rapport and set the foundation for a mutually supportive relationship and more seamless negotiations down the road. In these times of uncertainty, this can be even more important.
Basic courtesy goes a long way in Chile. Make sure to partner with someone who exhibits this personality trait as part of their leadership and/or negotiation style.

Business Culture and Etiquette

As in most Latin American countries, networking and personal relationships are extremely important in Chilean culture. Therefore, investing time in getting to know colleagues and clients, and taking a sincere interest in people, is vital for conducting business. Having the ‘right’ contacts is key, as third party introductions are often a prerequisite for opening doors. A few specific suggestions below:

It is critical to remember that Chilean culture is highly collectivistic and “feminine” (low MAS), thus self-promotion is strongly frowned upon. This is one of the reasons Chileans are not easily excited by celebrities, heroic figures or charismatic leaders. Though they tend to be straightforward, they are also polite. Modesty is much more preferable than assertiveness, so one’s communication style must be carefully balanced in order not to come across as hard-selling or overbearing. Again, younger Chileans may be exercising their right to speak their mind as they seek political change, but this should not be confused with the prevailing cultural norms.
Punctuality is generally appreciated and expected in Chilean business culture (this is particularly true with online meetings), but people can still sometimes show a more relaxed approach to time than Europeans when it comes to social occasions or gatherings (e.g. dinner).
Chileans are usually friendly and warm, however they tend to be more reserved, introverted and formal than their South American counterparts. One should observe boundaries (i.e. read the room) as skillfully as possible in the early stages of a relationship.
Chileans are hard working, and take pride in being ‘workaholics’, particularly in the large urban areas. That said, they also enjoy their summer and winter holiday months. Keep this in mind when scheduling business meetings and trips to Chile.
It should be noted that Chilean Spanish is quite unique in pronunciation and in some of its vocabulary, including an array of slang words and expressions (known as “chilenismos”). The word “taco”, for example, means ‘traffic jam’, and when people say “al tiro” (to the gunshot), they mean ‘right away’. Many business people have basic knowledge of English but foreigners should not assume this will be the norm. If you do not have proficient knowledge of Spanish it is wise to bring an interpreter.

Building Trust

A useful way of thinking about Chile is as if it were an island - being naturally “walled off” by the Andes mountains (“la cordillera”) to the east and the Pacific ocean to the west can have a similar psychological effect. Picture perhaps New Zealand, Ireland or Cuba. The Aymara people, who were among the oldest inhabitants of the northern high plains, used to refer to their territory as “the end of the world”, and this remains a common expression among Chileans.

It is, therefore, important for outsiders wanting to do business here to be aware of Chile’s unique geopolitical profile in the region, since it adds an extra layer of complexity to a culture that blends high Power Distance, low Masculinity, high Collectivism and high Uncertainty Avoidance. Chileans tend to be very group-oriented and self-contained; business deals will only move forward if strong interpersonal bonds are established and successful relationships are built. And, as it was outlined earlier, the usually peaceful Chileans are a bit more on edge nowadays, as they traverse a moment of social upheaval and change. Any foreigner would be well advised to be extra sensitive to the national mood as they try to insert themselves into this context.

Be Aware of Human Rights and Indigenous Cultures

The memory of a brutal military dictatorship in the later part of the 20th century is still very much alive in the collective conscience of Chileans, which inevitably shines a spotlight on the nation’s human rights record. In addition to seeking greater economic opportunity and gender equality, there is also a renewed push for ethnic inclusion. Despite having been relegated to second-class citizens since Chilean independence in the early 19th century, nine distinct indigenous groups still make up 9% of Chile’s population. Its largest one is the Mapuche, who are also the most politically active. They played a vital role in the recent protests, utilizing the national outrage to fight for their voice to be heard and promote their interests. Mapuche culture has had a positive influence on Chilean culture, instilling values of wisdom, courage, perseverance, kindness, and optimism, which are now being reclaimed in 21st century Chile.

Short Case Study

Marco was invited to join one of Chile’s leading mining companies as vice-president of sales, based in Santiago. He relocated from Venezuela, where he had lived for over eight years. His wife was from Caracas and they had a 4 year old son, so it was not an easy decision to move. But the on-going economic crisis in the country had left them virtually no choice.

As a native from Milan, Marco had felt quite at home in Venezuela. People found his Italian accent charming, and his passion for music helped him gain instant appreciation for local folklore and culture. The company he worked for appreciated his extroversion and go-getter attitude, as well as his capacity to make fact-based decisions. Marco seemed to be the kind of guy who did not mind pushing people to be their best, even if that meant coming across as a little abrasive sometimes. As far as he was concerned, his results-oriented mindset served as the foundation for his success.

One year after working in Chile, Marco received his first formal performance evaluation. He was shocked to learn that much of the feedback from his peers, subordinates and even some of his clients had been very disapproving, to a degree that he had never experienced before. Some of his scores were in fact so low that it had a negative impact on his bonus. The report was overflowing with testimonials describing him as someone who is thoughtless, selfish and “mandón” (bossy / domineering). Several of his peers expressed concerns about Marco constantly correcting them in management meetings and not sharing best practices. His direct reports declared being stretched too thin and exhausted. One of the firm’s top clients had even reached out to the COO requesting that someone else be assigned to the account because, in his opinion, Marco was a poor listener and “too full of himself”.

Question: If you were Marco’s boss, how would you interpret/frame this feedback through the lens of Hofstede’s cultural dimensions, and what developmental advice would you give him?