The World Bank In Chile

Chile has a track record of sound macroeconomic policies and robust institutions, which enabled it to restore macroeconomic balance after the disruptions created by COVID-19 and its aftermath. Over the past decade, growth averaged 2 percent, while productivity stagnated, constraining the creation of better and higher-paying jobs. Gender gaps in labor market outcomes remain pronounced. While income poverty has significantly declined, regional disparities persist and progress in non-monetary dimensions lags. Inequality of opportunities and low quality of public services constrain upward social mobility.

Real GDP grew 1.9 percent y-o-y in the first half of 2024, largely driven by the mining sector. Gender gaps in the labor market deepened. Unemployment fell to 7.9 percent for men but rose to 9.0 percent for women. Job quality deteriorated, especially among women, with informality reaching levels of 26.9 and 29.9 percent for men and women, respectively. The inflation reduction trajectory since the peak in 2022 hit a bump in March 2024 when inflation started rising again and reached 4.7 y-o-y in August.

In 2024 real GDP growth is expected at 2.5 percent and will converge to potential in 2025 and 2026. The successive adjustments to electricity tariffs will keep inflation above 4 percent in the coming quarters, returning to the 3 percent target by the first half of 2026. Poverty (US$6.85/day, 2017 PPP) and income inequality are estimated to remain around 5 percent and 43 Gini points in 2024, respectively, and fall gradually thereafter.

Reforms focusing on reducing regulatory barriers, fostering technology adoption, promoting competition, improving education and managerial capabilities, and increasing female labor force participation and job quality could help raise potential growth. Chile is expected to benefit from the green transition given its potential for renewable energy and endowment with copper and lithium, critical inputs to electrification. 

Last Updated: Oct 14, 2024

The World Bank Group (WBG) has supported Chile’s development for more than 75 years, through a range of instruments including loans, insurance, grants, technical assistance, and knowledge sharing.

Since receiving in 1948 the first World Bank loan made to a country outside of Europe, Chile has continued to engage in a joint learning process to tackle its biggest development challenges. The opening of the World Bank’s first office in Santiago in December 2017 enabled it to continue strengthening its collaboration with the country.

This strategy is based on public policy recommendations for Chile to achieve sustainable and inclusive development and on recommendations to develop a stronger private sector for a more productive and inclusive society.

As of March 2024, the World Bank has an active portfolio that comprises two lending operations for a total of $350 million in support of a green hydrogen financing facility and improving primary healthcare.  There is also a REDD+ emissions reduction program for $26 million and a $5m grant for implementation of carbon markets. There are six RAS under implementation with a total value of $8.76 million covering themes such as gender, health, social protection, and digitizing transport.

The International Finance Corporation (IFC) has actively supported Chile's private sector in enhancing productivity, promoting inclusion, and advancing sustainability. Some of IFC’s most innovative projects are taking place in Chile: this includes E-buses, special products designed to promote financial inclusion; and green hydrogen. In FY23, IFCs achieved a record year in Chile, with new commitments totaling $1.7 billion– an almost 200% increase compared to FY22.

The Multilateral Investment Guarantee Agency (MIGA) is expanding its involvement in Chile by working with State-Owned Enterprises on credit enhancement solutions to attract cross-border investments, in particular, with a focus on promoting the decarbonization of key sectors of the Chilean economy.

As of March 2024, the World Bank has an active portfolio that comprises two lending operations for a total of $350 million in support of a green hydrogen financing facility and improving universal primary healthcare.  There is also a REDD+ emissions reduction program for $26 million and a $5m grant for implementation of carbon markets. There are six RAS under implementation with a total value of $8.76 million covering themes such as gender, health, social protection, national statistics and digitizing transport.

The International Finance Corporation (IFC) has actively supported Chile's private sector in enhancing productivity, promoting inclusion, and advancing sustainability. Some of IFC’s most innovative projects are taking place in Chile: this includes E-buses, special products designed to promote financial inclusion; and green hydrogen. Between July 2023 and June 2024, IFC's new commitments in Chile reached a record $2.9 billion, an increase of almost 300% compared to the same period last year.

The Multilateral Investment Guarantee Agency (MIGA) issued a USD 765 million guarantee to Crédit Agricole Corporate and Investment Bank to provide credit enhancement coverage to Codelco. The guarantee will enable Crédit Agricole CIB to provide a long-term loan to be used to cover Codelco's payment obligations under five renewable energy power purchase agreements with external private power producers that supply Codelco with electricity. 

In today’s challenging global context, Chile is a strategic partner for reshaping development and moving toward greater sustainability and inclusion.

Last Updated: Oct 14, 2024

Increased environmental sustainability and climate change resilience

Chile received the World Bank’s first-ever global loan to promote green hydrogen and support climate change mitigation efforts. The project seeks to boost investment in green hydrogen projects in Chile to help accelerate green growth and energy transition in the country and support its commitment to carbon neutrality by 2050.

Extensive work has also been done to address water challenges, a key element of development and resilience, including the approval of a loan to advance Chile's just water transition and a more sustainable and equitable water resources management.

Disaster preparedness

To provide Chile with financial protection to mitigate potential negative economic impacts of earthquakes and the tsunamis that they generate, the World Bank supported Chile's issuance of a US$630 million catastrophe bond and swap, its largest single-country transaction. This will provide Chile with readily available funds in the event of a disaster, enabling the country to protect its fiscal budget and reduce the potential need to mobilize debt after an event.

Universal primary health care coverage and resilience

The Program for Universal Primary Health Care Coverage and Resilience will improve the population’s access to high-quality health services through innovative measures aimed at increasing the accessibility, resilience, and efficiency of primary health care. This program will help solidify primary health care as the bedrock of health care service delivery.

The project will be implemented gradually and aims to reach 187 of the country’s 346 communes by the end of 2027. A number of cross-cutting measures will also be implemented for the benefit of all Chileans.

Strengthening of State Universities

The Strengthening of State Universities project, which ended in June 2023, made significant achievements in terms of improvements in quality and equity, despite the difficult situation caused by the pandemic. Third-year dropout rates for the most vulnerable students fell by almost 10 percent from 36.6 percent in 2018 to 26.8 percent in 2022. The number of research projects awarded to these universities and the number of professors with doctorates also increased.

Increased efficiency in the delivery of social benefits

In coordination with the Ministry of Social and Family Development, the WB is providing technical assistance to the Local Social Management (GSL) project, the Local Offices for Children (OLN) and the implementation of the National System of Support and Care (Chile Cuida).

GSL, which promotes the integrated delivery of social services and benefits in municipalities, is already available in 93% of the country's municipalities and is expected to reach universality by the end of 2024. A “one-stop shop” provides officials with access to programs and subsidies available to eligible beneficiaries, paving the way for improved social care delivery and enhanced public spending efficiency.

Together with the Undersecretariat for Children, progress has been made in the installation of the OLNs in more than 80% of the country's municipalities, offering integrated care, promotion and protection of the rights of children and adolescents.

The program continues to grow to meet the challenges of the new National System of Support and Care (Chile Cuida), through which it is expected to provide services and benefits to near 75 thousand people with severe dependency, including the elderly and people with disabilities, and their caregivers throughout Chile.

The knowledge we have gained by working together with Chile has been shared with several countries around the world that face similar development challenges. In recent years, we have received delegations from every region.

Last Updated: Oct 14, 2024