Chile has emerged in recent years as a highly attractive emerging market for foreign investment, thanks to its economic stability, legal security and trade openness. However, beyond its attractiveness as an investment destination, the South American country has set itself an ambitious goal: to lead the transition towards a more ecological and sustainable production matrix.
This objective is particularly relevant in a global context where the fight against climate change has become an urgent priority for most countries. As noted in the article by the Boston Consulting Group (BCG), “COP27 highlighted the complexities of mobilizing the trillions of dollars needed for climate change adaptation and mitigation in developing countries, which have contributed the least to global warming but suffer the most from its consequences.”
In this regard, Chile has demonstrated its commitment to combating climate change, being one of the first countries to establish a goal of carbon emissions neutrality by 2050. In addition, it has developed a series of public policies to encourage investment in clean technologies and promote energy efficiency in productive sectors.
The role of FDI in a greener economy
To achieve these goals, Chile needs foreign investment, especially in sectors related to climate change, known as “green FDI.” This type of investment includes projects in sectors such as agriculture, renewable energy, infrastructure and environmental services.
According to the BCG report, green FDI investment flows have increased significantly in recent years, becoming the largest category of foreign direct investment. Despite this, developing countries, including Chile, still face difficulties in attracting this type of investment, which represents a challenge to achieving sustainable development goals.
To improve this situation, emerging countries need to have public and regulatory policies that encourage investment in green projects, and to establish collaboration mechanisms between different actors, including international financial institutions, the private sector and civil society.
Chile’s commitment to transitioning to a greener economy not only benefits the environment but also represents an opportunity for the country’s economy. Investment in clean technologies and energy efficiency can create jobs and improve the competitiveness of productive sectors while contributing to the fight against climate change.
Chile: A timely change that is now paying dividends
“Chile ranks near the top of most of our green FDI measures,” BCG notes. With investment flows of US$17.4 billion over the past five years, it ranks fourth on the list of developing countries with the largest green investment flows over that period, ahead of much larger economies such as Indonesia and India.
These flows have helped drive the transformation of Chile’s energy sector. In 2022, the country generated more electricity from solar and wind power (29%) than from coal (27%) for the first time. This growth has been spectacular: in 2016, the share of renewable energy was just 6.6%.
Chile sowed the seeds for these changes in the 2000s. The economy was heavily dependent on imported energy, and most electricity came from coal. When Argentina decided in 2004 to restrict natural gas exports because of domestic shortages, prices soared.
Energy-intensive mining, a key sector of the Chilean economy, seemed especially vulnerable. Abundant renewable resources (solar in the northern desert, wind along the long coast) offered a different path. So a 2008 law kicked off the development of new energy sources.
The efforts resulted in a market where renewables could fully compete with conventional energy, achieving a broad expansion of wind and solar power capacity, financed mainly by the private sector.
According to figures from fDi Markets, Chile has been the recipient country of more than 260 green projects with foreign capital since 2003, the majority in renewable energy. In recent years, attention has focused on industries such as green hydrogen, whose production requires renewable electrical capacity, giving Chile a significant advantage.
