MOST IMPORTANTLY: HOW TO INTRODUCE YOU AS FOREIGNER INTO THE CULTURE OF CHILE
Change your hard drive when coming to do business in Chile. The most expensive mistakes from a foreigner coming from a developed nation, is that you use your own cultural model to look at the Chilean reality. It doesn't work. It is like watching the world through a colorful pair of glasses. You need to adapt your vision to the new light, colors, shapes, materials, people, attitudes, signs, culture, architecture, food, fruits, music, language, social behavior, how to deal with Tu and Usted, and many other expectations of a totally new country and territory. It is not easy. Our bureaucracy, our "mañana", our tardiness, our intense use of specific and expensive public notaries, all of that, and much more, can break your nerves. It will take you some time, and you will probably loose some money trying to follow your own way. Hopefully not as much, and you will accept professional guidance at the end. But there is always some learning cost when starting in a new country and every entrepreneur and adventurous spirit knows he has to pay it. Just 100 years ago, people had to challenge brave oceans during weeks to arrive to the promised land of his dreams, on the other side of the world. Life itself was on stake.
Nowadays it is not as hard, fortunately, but anyone willing to leave the stability of his home country must have a set of good reasons leaving such comfort zone, and taking the challenges involved. I have advised quite a number of foreigners from developed nations and they always try to follow the lyric of Frank Sinatra: My Way. However, at some point they start feeling that they could do better if they start to blend with the local culture. We can be on your side when you decide to blend with our reality. We can guide you to get the most of our country while issuing warnings of danger here and there when your English left driving attitudes, try to drive on a right lane country. Or come into your rescue if you like to do business in Chile trough the hard knocks path. Instead, let me point some dots of the Chilean Path on this Consulting Map, to ease some, at the end, your own Chilean Way. You need to learn the Neruda Way, or The Gabriela Mistral Way, or the Violeta Parra Way, or the Vino Tinto and empanadas way. You and I, our Chilean Way of living together and Doing Business in Chile.
YOU CAN BE A PARTNER ON A SOCIETY FROM THE START IN CHILE
You can not start a business on your own name. Not at all. Impossible unless you may have a few years living in Chile. However, you can be a partner in a society either with a Chilean or another foreigner. Or the other partner could be a society, Chilean or foreigner. Or create a society composed of two or more legal entities.
This society can be a limited partnership or a corporation. So, you can own a business right from the beginning. Certainly, there are some formalities to accomplish. You and your foreign partners must request a taxpayer number, what we call RUT number. Without such identification number, it is almost impossible to buy something for you. On a day or two is obtained.
Your partner may have 1% of the society. Generally speaking, there is no limit on this matter, except for some specific area where there is a restriction.
REPRESENTING A FOREIGN ENTITY IN CHILE
A frequent problem is that senior officers or investors buy properties or sign the incorporation as a partner or shareholder of companies on their own name, when they should have done it on the name of the legal entity. I must warn you that the Chilean Internal Revenue Service and the Chilean Central Bank regulations, are very rigid. You can not tell the authorities later something different, if you signed a deed on a Notary on your personal name. So, you must speak out frankly which are your plans when coming to Chile, to ask you the proper paperwork ahead of time to put strong foundation for your business from the very first moment.
We still can arrange past mistakes, but it is expensive.
LEGAL REPRESENTATION OF A FOREIGN COMPANY IN CHILE
Unless you got a local VISA authorized by the State of Chile, with no less than two years staying on this country, you can not be the legal representative for the company on which you are the owner. Impossible. Most of the time this person would be a lawyer, your partner, an accountant or a manager that you hired. He takes a lot of responsibilities over his shoulder in case you fail. He must represent you at the IRS, at Customs, at banks, at all the Chilean legal entities, etc. You can buy or sign all the rest regarding private matters, but for official issues, and for many important contracts, your counterparts will ask for a Chilean signing also, in case they need to sue someone if you fail. On the proper Mandate that you sign for him, you can limit his power.
Be aware that you must incur on a cost to hire someone experimented to represent your interest locally, because he takes your burden on his shoulder. Secondly, if you try to save money hiring a naive person and cheap in cost, this decision may cost you a fortune later fixing past mistakes -as I have seen -, because for lack of experience, he or she will not take care thoroughly that your business may meet the law. Or otherwise, find a local partner that can take the risks jointly with you, plus hiring always the proper business advice needed by yourself. I guess, that after three years, you will be familiar with the Chilean culture.
THE STRENGTH AND VALUE OF THE LAW IN CHILE FOR FOREIGNERS AND EXPATS
Socially speaking, there is a great complaint from many people that Justice is not working properly in Chile. However, for all our purposes, and in particular for a foreigner, you can not take these Chilean conversations, as synonymous that the ruling is just a matter of influencing the judge, the ruler, or the public officer in charge. For instance if you try to bribe the officer in charge of the primary step of the Justice ladder - a carabinero, the policeman stopping you on the traffic- he will take you immediately into jail. Do not start with the wrong foot doing that in Chile. On this small nation, since almost the start of the Republic, some wise founding Fathers, designed laws, regulations to organize our public life. The Chilean Civil Code issued in 1855 was started by Andres Bello in 1840. This Code was copied or served as inspiration for several nations in Latin America. So, in Chile the adherence to the law, is stronger than the loyalty to the ruling Officer. This provides stability to the country and safety to the investors, as there is not going to be a huge change when a government or an officer looses his position, unless the Congress change the laws !!! That is part of the Chilean way that you need to learn. The law is mostly above all. This sometimes can be frustrating because we are bureaucratic and slow motion. The other side, is that the country is stable. So, when you plan on doing business in Chile, be aware of this two facts of our culture: The law is above all and we move slow. If you plan with that on mind, you can stay here for decades with a business.
So, you need a good and professional advice to drive trough both, our complex legal system and the people handling it. If you do not care for our legal system, officers are not going to respect you. Most likely, you will loose your money for following your way, and not the Chilean way for doing business. You will be in halt by the law, not for a particular officer.
If someone offers you a magic solution because he is going to bribe such and such important ruling officers, you are going directly to the dump. You are going to loose that money plus putting in total jeopardy your investment. Instead start putting solid foundations for your endeavors in Chile, investing in respecting the law, because in the worst case scenario, you could still sell your business to a third party, because a due diligence proves that it is legally healthy. That is valuable in Chile. May be in another nation it is most important who is on charge. In Chile it is also important, but he will not dare to loose his position for breaking the law for giving you a benefit. This is the most likely scenario on the 98% of the cases. So, do not undervalue the strength of the law to raise yourself and your business. Include the respect to our whole legal system, as part of your assets that you must preserve. I mean for whole legal system, many civil, criminal, tax, labor, environmental, financial, custom, municipal and all kind of laws, regulations and practices.
ADVANTAGES AND COSTS OF INVESTING IN CHILE
This country is not cheap, compared to all Latinoamerican countries. This is a surprise for some businessmen, but it shouldn't be. If you are coming to the most stable nation in Latin America in democracy during the last 24 years, plus the most stable growing economy during 30 years, then you must pay the price for dealing with this stable environment. Read the article on this blog, Why to invest in Chile to value the market you are getting into.
I just will highlight some elements. Chile is among the handful of nations more open to foreign trade in the world. There are almost no barriers for bringing in your products, and the duties are near to zero. ( There are a few exemptions that prove the general rule.) We have Trade agreements with all the larger economies and our nearly US$ 80 billion in annual exports are going to many regions of the planet. We import just about the same. The law is highly respected since ever, and your property rights are a serious matter here. This small country is member of the OECD, the only one in South America. Also, we do not need a VISA to enter USA for 90 days, the only Latino American country thus far in 2014.
So, many foreigners like you have come to Chile for these advantages, investing billions of dollars in Chile, aiding pressure to keep the prices high. Although competition is very intense. You still may find some prices very low on different goods and services, but there is also an inner pressure from the public to increase wages to diminish the inequalities.
If you invest in Chile, you are investing in stability.
This is my contribution to newcomers to Chile. Hope it may help you. My English is not as polite as I would like, but I hope the ideas are clear for you.
If you need further assistance, contact us to businessinchile@gmail.com
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