Permitting delays deepen Chile’s construction slump

Chile’s construction sector is struggling to regain momentum under the current framework for obtaining authorizations, as investors remain uncertain about the time required to secure key permits.

Alfredo Echavarría, head of Chile’s construction chamber (CChC), told the senate’s economy committee during a public hearing that 2024 is expected to end with construction permits in place covering around 7Mm². This figure is equivalent to just half the annual average seen since 1990.

“Our sector is experiencing one of the worst crises in recent decades,” Echavarría stated during a hearing on a proposed bill aimed at simplifying sectoral permitting processes.

The proposed legislation, already approved by the lower house of congress, includes the creation of a new agency called the Sectoral Regulation and Assessment Service. This agency would oversee the coordination of hundreds of permitting processes currently managed by 38 different public agencies and offices.

A key provision of the bill introduces a “threshold” system, which would reduce permitting requirements for certain projects based on their sector and size. For instance, “low threshold” projects could bypass specific authorizations by submitting a sworn declaration instead.

Nicolás León, CChC’s studies and public policy director, described the bill as a step in the right direction. However, he urged lawmakers to ensure that legal deadlines are upheld, implement an open data system and replace fines for officials who miss deadlines with incentives for those who meet them.

León highlighted several permitting processes that currently hinder construction projects, including drafting traffic impact reports, addressing archeological findings, planning modifications to watercourses and obtaining general construction permits.

In 2019, CChC estimated that securing all permits for a construction project took up to four years. Although the data has not been updated, León suggested that the timeframe could now be as long as six years.

León also noted that two thirds of Chile’s total investments involve construction in some capacity. He also suggested that the stagnation in the construction sector was a reflection of broader investment stagnation across the country.

Over the past decade, construction investments have grown by an average of just 0.7% annually, compared with the 7.2% yearly growth rate observed in the previous decade.