Political Risk - Beri Index

1. Fractionalization of the Political Spectrum

Chile’s political landscape is highly ideologically fragmented, with strong

representation from both far-left and far-right parties. The political left advocates for
stronger state intervention in the economy, particularly in natural resource sectors,
and supports environmental and indigenous claims. The political right, while
economically liberal, increasingly leans toward protectionist and nationalist rhetoric in
strategic industries. This ideological spread has intensified since the 2019 social
protests and has influenced contentious debates around constitutional reform, lithium
governance, and the role of the private sector. Coalition governments frequently
depend on these polar extremes to advance legislation.

Risk Assessment: Medium

Such deep ideological divergence increases the likelihood of policy volatility,
particularly in sectors like mining where public and political narratives evolve rapidly.
Legislative negotiations often lead to uncertain regulatory outcomes and delayed
reforms. For foreign investors, this raises the risk of abrupt shifts in investment
terms. In the case of Chinese firms, the risk may be further magnified due to
political sensitivity toward foreign control in strategic sectors.

2. Fractionalization by Language, Race, and Religion

Chile is relatively ethnically and linguistically homogeneous at the national level, with
Spanish as the dominant language and Catholicism as the predominant religion.
However, significant indigenous populations, particularly the Atacameños and
Mapuche, have grown increasingly assertive in recent decades, especially regarding
land rights, resource sovereignty, and environmental protection. In lithium-rich
regions like the Salar de Atacama, indigenous communities have claimed
insufficient consultation and environmental harm from extractive projects. Chile’s
legal framework recognizes indigenous rights but implementation remains contested
and often leads to community-level disputes.

Risk Assessment: High

While national cohesion is strong, localized ethnic dynamics present serious
political and operational risks in mining zones. Indigenous opposition can lead to
legal injunctions, project delays, or loss of social license to operate. Foreign
firms, especially those seen as lacking community legitimacy or environmental
sensitivity, may face heightened scrutiny. For Chinese investors, perceived as
outsiders with limited local engagement, the risk of reputational backlash and
prolonged negotiations is elevated.

3. Restrictive Measures to Retain Power

Chile has a long-standing tradition of democratic governance, with free and fair
elections, peaceful transfers of power, and institutional checks on executive
authority. Despite recent waves of social unrest and intense political debates,
especially around constitutional reform, there has been no evidence of democratic
backsliding. Civil liberties, press freedom, and judicial independence remain intact.
The current administration, like its predecessors, governs within established
constitutional norms, even when facing public pressure or electoral losses.

Risk Assessment: Low

There is no significant risk of authoritarian consolidation, suppression of
opposition, or erosion of democratic institutions. The regulatory environment remains
transparent, with rule of law largely respected. For foreign investors, including
those from politically sensitive countries, this suggests low likelihood of arbitrary
policy enforcement driven by regime insecurity.

4. Xenophobia, Nationalism, and Corruption

Chile has a generally open and pro-investment environment, with strong legal
institutions and relatively low corruption by regional standards. However, in recent
years, political discourse has seen an increase in economic nationalism, especially
around natural resources such as lithium. Policymakers from across the ideological
spectrum have pushed for greater state involvement or control in strategic sectors.
While xenophobia is not widespread in society, there is growing public and political
sensitivity to the ownership of key assets by foreign entities, particularly when tied to
national interest or environmental impact.

Risk Assessment: High

Although the legal framework remains stable, foreign investors in strategic sectors
may face political resistance, especially when public opinion shifts toward nationalist
or protectionist positions. This can result in tighter regulation, pressure for local
partnerships, or increased scrutiny. Chinese firms, in particular, may attract more
attention due to perceptions around foreign strategic influence.

5. Social Conditions (Population Density and Wealth Distribution)

Chile’s economy has grown significantly in recent decades, yet it continues to exhibit
high levels of income inequality. The Gini coefficient for Chile is approximately
0.44, placing it among the most unequal countries in the OECD. This inequality is
especially visible in access to public services, labor opportunities, and regional
development. Mining regions, despite generating significant revenue, often lack
adequate infrastructure and local reinvestment. These disparities were central to the
2019 mass protests, which reflected widespread frustration with the country’s socio-
economic model.
Risk Assessment: High
Structural inequality creates a persistent risk of social unrest, particularly around
extractive industries viewed as benefiting national elites or foreign entities. Lithium
mining in underdeveloped regions heightens the risk of community backlash and
environmental conflict. Investors operating in such areas must manage not only
regulatory risk but also expectations of equitable development and local benefit-
sharing.

6. Strength of the Radical Left

Chile’s political system includes a strong and vocal radical left, including the
Communist Party and factions of the Frente Amplio. These groups advocate for
increased state ownership of strategic resources, environmental protections, and
indigenous participation in governance. They are especially influential in shaping
public discourse on extractive industries such as lithium. While they do not hold
majority power, they are well-positioned to shape legislative outcomes through
coalition bargaining and activism.

Risk Assessment: Moderate

Although China is officially Marxist, the Chilean left does not uniformly support
Chinese investment. Ideological alignment takes a back seat to concerns over
foreign control, environmental degradation, and social accountability. Chinese
firms are sometimes viewed as large, opaque actors lacking local engagement. That
said, some factions may view China more favorably than Western
multinationals, seeing it as a counterweight to U.S. or European influence. This
creates a mixed risk environment, where support or opposition depends on how
the investment is structured and perceived locally.

7. Dependence on or Importance to a Hostile Major Power

Chile maintains strong trade ties with China, which is its largest trading partner,
particularly in copper and lithium exports. At the same time, Chile is integrated into
Western-led trade and diplomatic frameworks, including the OECD, CPTPP, and
bilateral agreements with the United States and the European Union. While Chile
has not taken explicit sides in global rivalries, its growing reliance on Chinese
demand and investment in strategic sectors has drawn international attention,
especially in the context of shifting geopolitical alignments.

Risk Assessment: Moderate

Chile is not directly dependent on a hostile power, but its close economic
relationship with China places it in a position of strategic sensitivity. As Chinese
investments in lithium increase, foreign policy balancing may become more
complicated. For Chinese firms, this dynamic may lead to heightened scrutiny,
regulatory caution, or increased pressure for transparency and local partnerships.
8. Negative Influence of Regional Political Forces

Chile generally maintains an independent and pragmatic foreign policy, with limited
political entanglement in its immediate neighborhood. However, it operates in a
region where several governments have embraced resource nationalism, including
Bolivia and Mexico. Bolivia’s lithium policy, which emphasizes full state control and
limited foreign participation, has influenced political discourse in Chile. Additionally,
the resurgence of leftist governments across Latin America has created a regional
environment more sympathetic to state intervention in strategic sectors, including
energy and mining.

Risk Assessment: Moderate

Although Chile is institutionally stronger than many of its neighbors, regional
narratives around sovereignty and anti-extractivism may influence its domestic policy
debates. Politicians and activists often draw comparisons with Bolivia’s state-led
lithium model, which can shape expectations and public sentiment. For foreign
investors, this creates a risk of policy drift toward more restrictive frameworks.

9. Societal Conflict (Demonstrations, Strikes, Violence)

Chile has experienced significant waves of protest and civil unrest in recent years.
The 2019 social uprising, sparked by inequality and cost-of-living concerns, led to a
prolonged period of political uncertainty and demands for systemic reform. In mining
regions, communities often organize around environmental and indigenous rights,
especially when projects involve water use or land claims. Protests, legal actions,
and road blockades are common forms of resistance, and civil society organizations
play a strong role in coordinating opposition.

Risk Assessment: High

Mining projects are highly exposed to community-led resistance, particularly when
there is a perception of environmental harm or lack of local benefit. Foreign firms
may become symbolic targets, especially in underdeveloped regions where distrust
of extractive industries runs high. Societal pressure can delay projects, increase
compliance costs, or damage investor reputation.

10. Instability (Non-Constitutional Changes, Coups, Assassinations)

Chile is one of the most politically stable countries in Latin America. It has a strong
constitutional framework, regular elections, and an independent judiciary. The
military remains under civilian control, and there is no history of recent coups or
extra-legal power transitions. Even during periods of intense civil unrest or political
reform, such as the constitutional rewriting process, change has occurred through
legal and democratic mechanisms.
Risk Assessment: Low
The risk of unconstitutional regime change or violent political instability is minimal.
For foreign investors, this ensures continuity in institutional frameworks and legal
protections. Political disagreements are processed within democratic channels,
which contributes to a stable investment climate.

Factors Assesment
Fractionalization of the Political Spectrum Medium
Fractionalization by Language, Race, and Religion High
Restrictive Measures to Retain Power Low
Xenophobia, Nationalism, Corruption High
Social Conditions (Population Density and Wealth Distribution) High
Strength of the Radical Left Medium
Dependence on and/or Importance to a Hostile Major Power Medium
Negative Influences of Regional Political Forces Medium
Societal Conflict (Demonstrations, Strikes, or Street Violence) High
Instability (Non-Constitutional Changes, Assassinations, Civil War) Low

Summary

Chile presents a medium-to-high political risk profile for foreign investors in the
lithium sector. While the country benefits from institutional stability, democratic
governance, and low risks of unconstitutional power retention, several sector-specific
and social risks elevate the overall profile. Key concerns include rising economic
nationalism, community-level resistance in mining regions, and a fragmented
political landscape where extreme ideological actors influence regulatory
outcomes.

Chinese investors in particular may face heightened scrutiny due to perceptions

around strategic control and environmental accountability. Investors should be
prepared for regulatory volatility, delays in project execution, and the need for
proactive community and stakeholder engagement to mitigate both reputational
and operational risks.