Government and institution measures in response to COVID-19.

Government and institution measures in response to COVID-19.

Return to homepage  |  Last updated: 10 Jun, 2020

General Information

The Government announced a fiscal stimulus package worth US$11.8bn (4.7% of GDP) to tackle the economic impact of the novel coronavirus (Covid-19) outbreak. The stimulus package—the largest in the country's history—consists of three main pillars: boosting the budget of the healthcare system, implementing measures to protect workers against a loss of income, and providing support for small and medium-sized enterprises (SMEs) through tax measures. The Central Bank of Chile has reduced the fiscal policy interest rate to 0.5% and announced an increase of its bond purchase program of US$4bn. Also, the Central Bank in coordination with the financial industry regulation (the Financial Market Commission or CMF) have announced measures loosening regulatory credit requirements and increasing the flow of credit to companies and consumers.

Employment-related measures

(e.g. state compensation schemes, training…)

Ready to be enacted is legislation that was approved on March 31 by Congress, which  provides protections to workers and imposes obligations on employers when the suspension of the employment relationship is mandated by the authority in response to the Covid-19 outbreak.. Some of the central aspects include:

  • Employees that meet minimum requirements can apply for unemployment insurance which will cover 70%, 55%, and 45% of the salary during the first, second and following months of suspension respectively
  • Employer and employee can agree on a suspension of the labor relationship
  • During the suspension, the employer is required to make social security and health insurance payments with certain ceilings
  • Under certain conditions, employers and employees can agree a reduction of the work hours with a proportional reduction of the salary, in which case the employee can obtain unemployment insurance benefits of up to 25% of her salary
  • The unemployment benefits are limited to the equivalent of US$265 approx. per month.

Law in protection of employment:

  • Suspension of working contract due to an authority mandate: If the government considers convenient to take extreme sanitary and safety measures which imply the paralysation or total stop of economic activities, individual employment contract must be suspended, unless exists an arrangement between both parts which stipulates that the employee may continue to offer services, which of course has to be written on a contract. In this case, the employer must continue providing their social security payment excluding solely occupational accidents. During this period of time employers can only decide to terminate contracts with their employees by cause of need of the company.
  • Suspension arrangement of the working contract: When employers see their economic activities affected by the covid-19 crisis. They can arrange individually or collectively  with their employers the partial suspension of the working contract. This pact follows the same effects than the suspension mention earlier.
  • Temporary reduction of working hours: Employers can reduce with the approval of their employees the temporal reduction of legal working hours up to 50%, with the remaining salary covered by the pension security system.

Independent employers or entrepreneurs:

  • Early return on income taxation:  Anticipation of income tax returns to the month of April 2020 instead of May 2020.
  • Return on tax retentions in January and February 2020

Economic stimulus measures

(e.g. loans, moratorium on debt repayments…)

  • Reduction by the Central Bank of the fiscal policy interest rate to 0.5%
  • Measures announced by the Financial Market Regulator (CMF) with the purpose of loosening the flow of credit to individuals and companies. These measures include:
    • Regulatory exception for provisions to deferral of up to 3 installments for mortgage backed loans
    • Flexibilization of loan maturities for SMEs up to 6 months without qualifying as a renegotiation
  • Possibility to use mortgage guarantees for loans by SMEs 
  • US$ 500m capitalization of BancoEstado, a state owned commercial bank
  • Supplemental bonuses for families eligible to governmental subsidies

Additional support:

  • "Compra ágil”, new website destinated to speed up and help out the SMBs in their daily offer of services and supplies to public entities.
  • Banco Estado (National Bank) capitalization by US$ 500 millions. This measure will increase the credit capacity of the Bank up to US$ 4.400 millions which are aimed to mainly support citizens and SMBs

Micro Business:

  • Creation of a social fund holding US$ 100 millions: In case of social emergency due to big drops in sales of the local micro business.

Financing for entrepreneurs:

  • US$ 3.000 Millions on state guarantees contemplated for SMBs to have access to credits in order to finance working capital. This measure, contemplated in the second emergency plan announced by the government, consists in a state line of credit which will allow companies to finance credits up to US$ 24.000 millions in total and  will be available until September 30th 2020.

Other measures and sources

Security and protection:

  • Employers must look after the safety of their employees, and employees in that matter are allowed to abandon their work places in protection and wellbeing of their life or health. Due to Covid 19 the employer has to inform about any associated risks, keep adequate hygiene conditions at the work place and provide the proper elements to prevent any contagion with the virus.

Medical License:

  • In case that any employee is diagnosed with Covid 19, he or she must require medical license. Rights to provide services and therefore of regular remuneration are suspended. In consequence, public subsidy gets activated which consists in covering up payments related to the health care system in which the person is affiliated (ISAPRE or FONASA).

Home office:

  • New regulation has been announced concerning “teleworking”, this allows employees to work from home and feel confident about their rights which have the same formal conditions contemplated in any normal context and as any other worker. A Covid 19 perspective has thought about the possibility of employers to cease remunerations consisting on mobility and lunch.

Protection for the most vulnerable:

  • US$ 2.000 millions desginated to citizens who do not have formal employment, therefore do not have any unemployment insurance.

Other measures:

  • The Central Bank in coordination with the CMF provided flexibility for the implementation of Basel III standards by the financial industry
  • 15 day extension for submitting to the CMF annual audited financials by listed companies.
  • Deferral of hearings and other judicial procedures, except for specific matters (domestic violence, detention control).
  • Assistance with payment of utilities and basic services (power, telecoms, water) for lower income households.
  • Price caps for certain pharmaceutical products, medical devices and medical and sanitary supplies. The price for the Covid-19 detection exam is capped at the equivalent of US$30 approx.

Contact us

Tax: Francisco Lyon -
Legal: Andres Martínez -
Employment: Alberto Cuevas -