In order to analyze what laws and regulations affect business negotiations in Chile, it must first be determined in what form an American company can be operating in that country. As the Chilean corporate law stands now, a non-resident company or individual can operate in Chile either by appointing a representative; by forming an agency or branch of a foreign corporation; or by forming a partnership or corporation under Chilean law (Deloitt & Touche, 1996).
A representative acts on the basis of a mandate, contained in his or her contract, that the non-resident principal confers to a Chilean resident individual or company. The representative acts on behalf and at the risk of the foreign principal to carry out one or more business transactions.
If a foreign company wants to open a Chilean branch, it must first appoint an agent. The agent must notarize the following documents that must be written in the official language of the foreign country and accompanied by a translation into Spanish:
- Proof that the corporation is legally incorporated abroad
- Certification that the corporation is still in existence
- Authenticated copy of the corporation’s current policies
- General power of attorney issued by the corporation to the agent that will represent it in Chile; the power of attorney must state clearly that the agent acts in Chile in the corporation’s name.
At the same time, the agent, on behalf of the corporation, must notarize a deed that indicates that:
- The corporation will maintain in Chile realizable assets to cover the liabilities that must be served in Chile
- The effective capital assigned to the Chilean branch or agency and the way and dates that such capital will be brought into the country
- The location of the principal agency or branch in Chile.
Within 60 days, a summary of the notarized documents must be filed with the Chilean Register of Commerce. Within the same time period, the summary must also be published once in the Official Gazette, or Diario Oficial. Branches of foreign limited-liability partnerships require only the granting of a power of attorney (Deloitt & Touche, 1996).
Under Chilean commercial law, there are a number of partnerships or corporations that can be formed. First, there is a corporation or sociedad anonima, which is a corporate body that results from the forming of a single equity contributed by the shareholders. The shareholders’ liability is limited to the amount of their individual contributions. The corporation can be publicly traded or closely held and a Board of Directors, whose members can be replaced at any time, administers its affairs. Chilean law considers corporation’s activities to be always mercantile, even if it is formed to carry out actions that otherwise would be deemed civil (Deloitt & Touche, 1996).
Second form of a company is a general partnership. In it, all the partners administrate the company individually or through an elected representative. Each partner is solely responsible for all legal liabilities of the partnership.
Finally, an association is a contract between two or more business people or entities to share in one or more commercial transactions, which will be carried out by one of them in his or her own name. Such partner must render an account to his other partners and share with them any profit or loss that might result.
One must remember that while corporate laws in Chile do not differ significantly from those in North America, aside from the actual tax rates and tariffs, ways of conducting actual negotions are markedly different to the ones we are used to in the States. There are a number of things to remember when conducting business negotiations with the Chileans.
Chilean business culture has a definite hierarchical order, and a non-resident businessperson is expected to defer to the most senior person present at the negotiations. In case a foreign businessperson is unsure who is the most senior individual at the negotiations, one way to understanding the chain of command is by observing the amount of deference given to others during the meeting. The seriousness of one’s intentions to do business in Chile also will be gauged by who begins negotiations on the side of the outside interested party. When opening negotiations, an upper-level executive should make an initial visit, with the later visits by mid-level executives. Mid-level executives will attend subsequent visits to conduct negotiations that go into greater depth (ExecutivePlanet.com, 2001).
Chilean businesspeople tend to be serious, straightforward negotiators. Nevertheless, using the ‘hard-sell’ and other aggressive tactics will not go over well with them. Instead, the interested non-residential party representative should specify the company’s priorities, terms, and conditions. Proposing a strong financial package, with options such as nontraditional financing terms, is another asset.
Usually, those in the highest positions of authority, such as the upper-level presidente or gerente general, are entrusted with the final decision, with the gerente and mid- to low-level managers providing support. Gestures are sometimes made toward allowing input from other ranks in the organization, so it is important for the outside partner to remain patient. It may be necessary to take several trips before the transaction is concluded (ExecutivePlanet.com, 2001).
Providing continuous service to Chilean clients, despite the long distances involved, is a welcomed and appreciated gesture of commitment. This is because Chilean businesspeople wish to overcome the isolation imposed on them by their geographic location.
The corrupt business executives often circumvent laws and regulations in other Latin American countries, and bribery is the accepted form of conducting successful negotiations there. In Chile, however, adhering to the legal statute is taken very seriously. Trying to bribe business executives with whom an outside agency is conducting negotiations may land that company’s representative or agent in jail. It is a norm in Chile for contract agreements to be followed rigidly, problems to be resolved swiftly and with a minimum arbitration involvement from the government, and payments to be made promptly on the deadline. Chilean business culture also is not as bureaucratic as other Latin American countries; higher-level executives have reputation for efficiency (ExecutivePlanet.com, 2001).
Doing Business in Chile. Deloitte & Touche, December 1996.
Lets Make a Deal! What you should know before negotiating in Chile. From ExecutivePlanet.com, September 2001.