Chile's far northern and southern regions - the "zonas extremas" - host two strategically important free zones: ZOFRI (Zona Franca de Iquique) to the north; and ZonAustral (Punta Arenas) to the south. The zones are intended to bring economic development to the remote communities of Tarapacá and Arica (to the north) and Magallanes and Antártica Chilena (in the South) by integrating these areas with the thriving economy in Santiago.
From October 2016 to March 2017, the World Bank retained Locus Economica to assist the Chilean Ministry of Finance, as well as several regional and local entities, with efforts to improve the free zones programs. Locus conducted diagnostic site assessments of the free zones, interviewed stakeholders from multiple gov't and private-sector entities, and analyzed the the free zone laws and tax incentives in order to identify gaps in the program and provide recommendations. Our report studied the current policies, regulatory institutions, and fiscal costs based on special economic zone best practices and advised on the re-design of the program to energize investment and economic activity and address market failures.