[Editor’s note: Darren Kaiser, author of Sovereign Man’s Chile Property Investment Black Paper, is filling in for Simon today from Santiago, Chile.]
Chile has been a pretty nice place to be over the last few years, not just to live but also as an investment destination.
Anyone involved in startup businesses or real estate just about anywhere in the country over the last 3, 5, 10, even 20 years, has done quite well.
But as the country becomes an increasingly popular with expats, it’s worth asking the question– is Chile’s growth and success sustainable?
Or even more importantly, what happens to Chile in the event of a global economic turndown? Or a big drop in copper prices?
Remember, Chile’s economy is largely resource dependent and copper is its primary export. So if there were a great economic unraveling in China (as well as in other parts of the world), it’s true that copper exports would decrease. And this would adversely affect Chile.
But, unlike most other countries around the world, Chile has actually been preparing for a global economic turndown.
Many years ago, the Chilean government started the Copper Stabilization Fund (now the Economic and Social Stabilization Fund) which sets aside a portion of government revenue every year when there’s a surplus and holds it as a reserve in case of a future slowdown.
What a concept—saving for a rainy day.
Today this fund is currently valued at $21.7 billion USD, about 8% of the country’s GDP. And in the case of future calamity, this cash reserve will go a long way to keep things afloat in Chile while other countries might be experiencing desperate conditions.
It’s also important to point out that a large-scale global crisis would spur investors and professionals to seek international safe havens.
This is where Chile shines. If major calamity strikes, Chinese, Americans, Europeans, etc. would be more motivated than ever to move their capital to a stable place where—
- foreigners are given the same property rights as locals
- property rights and the rule of law are actually well respected; and
- there is a surplus of fresh food and water
All of this can be found here in Chile. And even with the global economy limping along as it has been, this is already starting to happen.
Just a couple of weeks ago, Chile’s government announced the largest amount of Chinese investment capital ever in the country, roughly $1.2 billion. That’s a prodigious sum of money here, and a big indication of things to come.
Every place has its issues, and Chile is far from perfect. But it definitely has a brighter future than most western countries that are drowning in debt, regulation, spying scandals, and monetary debasement.
Chile is a country with a low national debt, low violent crime rates, low corruption, and abundant economic opportunity.
On top of that, the weather is great, the people are friendly, the cost of living is reasonable, and it’s a comparatively easy process to obtain residency.
Looking around the world, there are –very– few places that share these characteristics. And that’s one of the most important reasons why Chile can be a personal and financial safe haven.
Like everything, the window of opportunity won’t be open forever. As more people start to realize the country’s potential, I expect the government will raise the entry bar, especially with respect to Chile’s easy immigration standards.
So I really encourage you to start thinking in this direction while the door is open—where is the best safe haven for you and your family? You might find Chile to be very high on the list.