At the start of the year, the Chilean economy faced rising inflation, external risks and political instability. Despite these challenges, there was hope for recovery, and by May, the economy had performed better than expected, supported by increased domestic demand.

Chile’s gross domestic product (GDP) grew by 0.7% in the first quarter of 2025 from the previous quarter, surpassing economists’ prediction of a 0.5% increase, according to Reuters. GDP growth is largely driven by trade, manufacturing, personal services and agriculture. Comparatively, mining, financial services and construction sectors recorded losses.

Economic resilience is met with challenges such as persistent inflationary pressures. Today, the inflation rate stands at 4.4%, above the central bank’s 3% target, but is projected to reach that goal in the first half of 2026. Chilean President Gabriel Boric’s decision to raise electricity rates over the next few months to improve the country’s economic standing has contributed to rising inflation.

“In April, Chilean lawmakers approved an electricity rate stabilization law to pay down accumulated debt, with the first rate hike set for July, rising to a 60% increase by 2025,” reads a Reuters article. “Earlier this month, the central bank cited the power rate hike for regulated consumers as a major factor in adding 1.45 percentage points to its estimate of inflation for the next 12 months.”

Meanwhile, trade diversions linked to global geopolitical tensions may help mitigate  some costs. Because Chile imports a significant volume of goods from China, some of these products are expected to decline in price. “In the medium term, the trade war and rising geopolitical tensions will continue to affect the economic scenario, so risks are high,” reads the Benco Central de Chile report. “While the Chilean economy is not isolated from what happens abroad, it is prepared to mitigate the impacts of possible new events. In case of any eventuality, the monetary policy rate (MPR) has room for adjustments to ensure inflation convergence to the 3% target.”

On the credit front, payment behavior in Chile has shown improvement. In May, customers in Chile averaged 10 days beyond terms, an improvement from 25 days in November, according to the FCIB Credit and Collections Survey. Among credit professionals who participated in the survey, 57% reported that payment delays have remained the same, a 7% increase from November.

The most common cause of payment delays continues to be customer payment policy (67%). However, supply chain and shipping issues have now become equally significant (67%). Survey respondents emphasized that gaining an understanding of Chilean culture and maintaining a strong relationship with their Chilean customers are essential. Additionally, understanding the payment cycle is vital when doing business in Chile.

The bottom line: Chile’s economy is showing signs of resilience after a challenging start to the year, outperforming growth expectations and improving payment behavior. However, inflation remains elevated, driven in part by upcoming electricity rate hikes. Staying alert to external risks and maintaining strong local relationships can help navigate the evolving economic landscape.