Chile: Four Years After the Crisis – From Stability to Recovery

The past few years have been transformative for Chile, a nation once regarded as a pillar of stability in Latin America. From the social upheaval that rocked its foundations to the economic strains of a global pandemic, Chile’s journey has been both challenging and instructive. This article reflects on the key milestones, lessons learned, and the road ahead.

A Turning Point: The Social Outbreak

In October 2019, Chile experienced one of the most significant social crises in its modern history. What began as protests against a public transportation fare hike quickly escalated into nationwide demonstrations addressing deep-seated issues such as the high cost of living, inadequate pensions, and rising healthcare expenses.

The unrest led to curfews, the mobilization of armed forces, and widespread disruptions, significantly affecting the nation’s economy and investor confidence. Chile’s GDP growth fell from 3.9% in 2018 to 1.1% in 2019, reflecting the immediate impact of the unrest.

The Dual Crisis: COVID-19 and Economic Fallout

Just as Chile began grappling with the aftermath of the social crisis, the COVID-19 pandemic struck in early 2020, plunging the economy into further turmoil. Strict lockdowns caused a sharp contraction of 6.1% in GDP for the year, one of the steepest declines in recent memory.

This dual crisis hit industries hard, with construction and manufacturing among the most affected. Rising global material costs, project suspensions, and insolvency filings became common, highlighting the vulnerabilities of businesses during this period. In 2020, the construction sector alone reported a 40% drop in activity, with over 1,200 companies filing for bankruptcy.

Signs of Recovery

Fast forward to 2024, Chile’s economy is showing signs of recovery. GDP growth reached 3.8% in 2023, signaling a gradual return to stability. The government has prioritized economic reforms and investment in emerging sectors like renewable energy and lithium mining, critical to maintaining momentum in the post-pandemic landscape.

While larger corporations are beginning to stabilize, many small and medium-sized enterprises (SMEs) continue to face liquidity challenges. This underscores the need for targeted policies to support these vital contributors to Chile’s economy.

Lessons Learned and the Road Ahead

Chile’s resilience during these turbulent years highlights the importance of adaptability and robust governance. Key initiatives, such as government-backed incentives for SMEs, infrastructure investments, and reforms to improve regulatory efficiency, are setting the foundation for long-term growth.

However, restoring investor confidence remains an uphill battle. The nation must strike a delicate balance between fostering economic growth and addressing social inequalities—a critical factor for sustainable recovery.

IA insights

From an investment perspective, Chile’s recovery story offers valuable insights:

Sector Diversification: Growth opportunities in renewable energy and lithium mining signal a shift toward sustainable industries.

Support for SMEs: Ensuring the financial stability of smaller businesses is essential for broad-based economic recovery.

Policy Innovation: Structural reforms and incentives are critical to maintaining momentum and attracting foreign investment.

As Chile moves forward, its journey from crisis to recovery serves as a powerful reminder of the need for resilience, innovation, and collaboration in overcoming economic and social challenges.

Written by: Victoria Gómez Galaz

*This article is informative and is not to be used as legal, economic, or commercial advice.

Sources: ECLAC 2020 , Central bank of Chile , Invest Chile 2021 , ECLAC 24