The determinants of the regional foreign direct investment in Chile

Over the last 30 years, Foreign Direct Investment (FDI) has played an important role in the Chilean economy. In the early 1970s, when the government exercised total control of capital movements, in addition to control of credit and the interest rate, capital inflows were close to zero and even negative. However, in September of 1973, there was an attenuation of the restrictions affecting the amount of profits and dividends of external firms that could be repatriated, in order to encourage and increase foreign investment. This was under a mechanism called Decree Law 600. In the late 1970s and early 1980s, Chile was facing a financial debt crisis, which was mostly solved through stabilization programs and the program of debt-equity swaps using foreign investors. Although there were many privatizations, by 1990, these companies were not foreign-owned. During the first years of the 1990s decade, FDI mostly concentrated in the mining sector, but it followed an evolutionary process towards investment in the services sector.