The Vendor Journey: Chilean Company Selling to the Chilean Government

Overview

This document maps the full journey a Chilean business must navigate to compete for and win a government contract through ChileCompra’s Mercado Publico platform. Chile operates one of Latin America’s most advanced and transparent e-procurement systems, with all public purchasing conducted through a single online platform since 2003. The system is governed by Law No. 19,886 (Ley de Bases sobre Contratos Administrativos de Suministro y Prestacion de Servicios), significantly modernized by Law No. 21,634 in December 2023 and implemented through Supreme Decree No. 661/2024.

ChileCompra, a directorate under the Ministry of Finance, administers Mercado Publico. In 2024, over 1,048 purchasing organizations conducted approximately 2 million purchase orders worth more than USD 17 billion through the platform. The supplier base includes 112,000 registered vendors, of which 90% are micro and small enterprises. SMEs capture approximately 42% of total procurement value – a remarkable share that reflects deliberate policy design.

Chile publishes procurement data under the Open Contracting Data Standard (OCDS), and its Observatory monitors procurement in real time. A beneficial ownership mandate introduced in 2024 achieved 59% compliance within three months, making Chile a global leader in procurement transparency.

This document covers three phases: qualification (becoming eligible to bid), bidding (responding to a single opportunity), and the full lifecycle from market entry through contract completion.

Phase 1: The Qualification Gauntlet

Everything a Chilean business must do before it can submit its first bid on Mercado Publico.

Estimated Qualification Cost: $400,000 - $5,500,000 CLP ($425 - $5,800 USD)

Timeline: 1-4 weeks (basic registration); 1-3 months (full readiness with guarantees and insurance)

Key Observations

• Chile’s qualification costs are remarkably low compared to the US ($30K-$1.1M) and even compared to other OECD countries
• Basic Mercado Publico registration is free and immediate – a stark contrast to the multi-week SAM.gov process in the US
• The Registro de Proveedores annual fee is nominal ($21-$53 USD) and differentiated by company size, reducing barriers for micro and small enterprises
• The beneficial ownership mandate (Step 8) is a 2024 innovation that makes Chile a global leader in procurement transparency; 59% compliance was achieved within three months of launch
• The integrity program requirement (Step 13) under DS 661/2024 is a significant new obligation for larger contracts, paralleling anti-corruption compliance programs in OECD countries
• No equivalent to US DCAA-compliant accounting – standard Chilean accounting standards (IFRS-based) apply
• Chile’s guarantee instrument system (Step 12) through IGR institutions is specifically designed to help SMEs access guarantee bonds at lower cost than traditional bank guarantees
• The 90% micro/small enterprise composition of the supplier base reflects low barriers to entry

Phase 2: The Bidding Process

What it takes to respond to a single opportunity through Mercado Publico.

Procurement Methods Under Law 19,886

Chile uses three primary procurement methods, determined by contract value and circumstances:

1. Licitacion Publica (Public Tender) – Open competitive bidding; mandatory for contracts above UTM 1,000 (~$68,000 USD). All qualified suppliers may participate.
2. Licitacion Privada (Private Tender) – Invitation-only competitive process; permitted only under specific circumstances defined by law (e.g., fewer than three bidders in a previous public tender).
3. Trato Directo (Direct Deal) – Single-source procurement; permitted for contracts below UTM 3 (~$215 USD), emergencies, sole-source situations, or other exceptions defined in law. Contracts exceeding UTM 1,000 require publication of the founded resolution.
4. Compra Agil (Agile Purchase) – Simplified process for goods/services up to UTM 100 (~$6,800 USD); requires at least three quotes through the platform.

Key Thresholds (2025, based on UTM ~$68,000 CLP)

Bidding Steps

Estimated Cost Per Bid: $400,000 - $8,500,000 CLP ($425 - $9,000 USD)

Win rate: Estimated 15-25% for experienced vendors; lower for first-time bidders

Evaluation Criteria

Evaluation criteria are specified in each tender’s bases and typically include:

• Technical quality (30-50% weight typical) – methodology, work plan, specifications compliance
• Economic offer (20-40% weight typical) – price competitiveness
• Experience and past performance (10-20% weight typical) – relevant prior contracts
• Team qualifications (5-15% weight typical) – professional certifications, expertise
• Compliance and integrity (5-10% weight typical) – integrity programs, labor compliance, environmental certifications
• SME preference (up to 5% bonus in some tenders) – additional points for micro and small enterprises

Key Observations

• Chile’s bidding costs are substantially lower than the US ($10K-$150K per bid) or Australia ($10K-$150K AUD)
• The all-electronic process through Mercado Publico eliminates paper submission costs and physical delivery logistics
• Evaluation criteria are published in advance and must be followed exactly – agencies cannot introduce undisclosed criteria
• The reverse auction mechanism (Step 10) introduces price competition for commodity goods, pushing toward lowest-price outcomes for standardized purchases
• The Tribunal de Contratacion Publica (Step 13) provides judicial review but is costly relative to the small contract values typical in Chilean procurement
• DS 661/2024 prohibits simultaneous bids from companies in the same business group, addressing collusion concerns
• Guarantee instruments (Steps 5, 12) represent a meaningful cost for micro enterprises; the IGR system was designed to address this barrier
• The 30-day minimum publication period for public tenders (required under US-Chile FTA) gives vendors adequate preparation time

Phase 3: The Full Lifecycle

End-to-end pipeline from market entry through contract completion.

Cumulative Investment Before Revenue: $900,000 - $21,500,000 CLP ($950 - $22,800 USD)

Comparison: Chile vs. United States

Connection to Dissertation Research

Chile’s Mercado Publico Model vs. US LPTA

Chile’s procurement system offers several critical insights for the dissertation’s central question about LPTA versus best-value procurement:

Multi-criteria evaluation is the default. Chilean public tenders require evaluation across technical quality, economic offer, experience, team qualifications, and compliance dimensions. Price alone does not determine the winner. This structural commitment to multi-factor evaluation mirrors best-value procurement in the US but applies universally rather than as an agency choice.

Dramatically lower barriers expand competition. A Chilean vendor can be fully qualified to bid for under $6,000 USD. A comparable US vendor faces $30,000-$1,100,000 in qualification costs. This 5-50x cost differential directly tests the dissertation hypothesis that higher barriers correlate with reduced competition and lower public value. Chile’s 90% micro/small enterprise supplier base and 42% SME value share suggest lower barriers produce broader competition.

The single-platform model eliminates fragmentation. All Chilean procurement flows through one portal, unlike the US where opportunities scatter across SAM.gov, agency-specific portals, and GWACs/IDIQs. This architectural simplicity reduces search costs and improves market efficiency – factors that should theoretically improve competitive outcomes.

Reverse auctions introduce a price-only mechanism. Chile’s use of reverse auctions for commodity purchases creates an explicit lowest-price mechanism within an otherwise best-value framework. This provides a natural within-country comparison: do commodities procured via reverse auction show different outcomes (cost overruns, delivery delays, quality issues) than services procured via multi-criteria evaluation?

The 2024 transparency reforms set a new standard. Beneficial ownership mandates, OCDS publication, and the real-time Observatory represent a transparency infrastructure that exceeds US practice. If transparency improves procurement outcomes, Chile’s data should show it.

Implications for the Dissertation

1. Barrier-to-entry effects – Chile’s dramatically lower qualification costs ($950-$22,800 vs. US $30K-$1.1M) and resulting 90% micro/small supplier base provides strong evidence for the competition-barriers hypothesis
2. SME participation outcomes – Chile’s 42% SME value share (vs. US ~26%) under a multi-criteria system tests whether best-value evaluation methods produce broader economic participation
3. Single-platform efficiency – Mercado Publico’s consolidated design reduces transaction costs and may produce more competitive pricing compared to the fragmented US portal ecosystem
4. Reverse auction natural experiment – Chile’s dual use of multi-criteria evaluation and reverse auctions within the same platform enables comparison of evaluation method effects on outcomes
5. Transparency and outcomes – OCDS data publication enables third-party analysis of whether Chile’s transparency investments correlate with better procurement outcomes
6. Latin American context – Chile provides the strongest OECD-member comparison case from Latin America, where procurement corruption perceptions are generally higher

Sources and References

• Law No. 19,886 – Ley de Bases sobre Contratos Administrativos de Suministro y Prestacion de Servicios (bcn.cl/leychile)
• Law No. 21,634 (2023) – Modernization of public procurement law (bcn.cl/leychile)
• Supreme Decree No. 661/2024 – Implementing regulations for modernized procurement law (DLA Piper: Chile’s Supreme Decree No. 661)
• ChileCompra – Direccion de Compras y Contratacion Publica (chilecompra.cl)
• Mercado Publico – Central procurement platform (mercadopublico.cl)
• Registro de Proveedores – Supplier registry fees and requirements (ChileCompra Registro de Proveedores)
• Servicio de Impuestos Internos (SII) – Tax administration, RUT registration (sii.cl)
• Tribunal de Contratacion Publica – Bid protest tribunal (tribunaldecontratacionpublica.cl)
• Open Contracting Partnership – Chile beneficial ownership reform (Companies disclose their real owners)
• Open Ownership – Beneficial ownership in Chile’s procurement reform (Progress and steps taken)
• OECD – Public Procurement in Chile (oecd.org)
• U.S. Department of Commerce – Chile: Selling to the Public Sector (trade.gov)
• ChileAtiende – Firma Electronica Avanzada (chileatiende.gob.cl)
• ChileCompra Directiva No. 41 – Guarantee instruments guidance (chilecompra.cl)
• Garantia Mercado Publico – Guarantee instrument providers (garantiamercadopublico.cl)
• BritCham Chile – Public Procurement guide (britcham.cl)
• Carey Abogados – New regulations of the Public Procurement Law (carey.cl)
• az Abogados – Supreme Decree 661 analysis (az.cl)

This research document supports the dissertation “From Lowest Price to Highest Public Value: An Empirical Test of Best-Value Source Selection in Government RFPs” by Richard Davidson, University of Denver, Daniels College of Business.

The Vendor Journey: US Company Entering Chilean Government Procurement

Overview

This document maps the full journey a US-based company must navigate to compete for and win a Chilean government contract through ChileCompra’s Mercado Publico platform. While Chile is one of the most business-friendly countries in Latin America and maintains deep economic ties with the United States through the US-Chile Free Trade Agreement (effective January 1, 2004), US vendors face substantial additional requirements: establishing a Chilean legal entity, obtaining a foreign-entity RUT, navigating an entirely Spanish-language procurement system, complying with Chilean tax obligations, and competing against 112,000 domestic suppliers – 90% of which are micro and small enterprises with deep local knowledge.

The good news for US vendors: the US-Chile FTA Chapter 9 (Government Procurement) provides treaty-based market access with national treatment above defined thresholds. Chile is an OECD member, WTO GPA observer, and operates one of the most transparent procurement systems globally. The bad news: the language barrier is significant (all procurement documents, legal filings, and government communications are in Spanish), Chilean corporate tax rates are high (27% for large companies), and the guarantee instrument system requires Chilean banking relationships.

Chile’s procurement volume exceeded USD 17 billion in 2024 across approximately 2 million purchase orders, administered through Mercado Publico by ChileCompra under the Ministry of Finance. The system is governed by Law No. 19,886, modernized by Law No. 21,634 (2023), and implemented through Supreme Decree No. 661/2024.

Phase 1: The Qualification Gauntlet

Everything a US company must do before it can submit its first bid on Chile’s Mercado Publico platform.

Entity Establishment in Chile

Document Authentication and Translation

Procurement Registration

Tax and Financial Compliance

Foreign Investment Registration

Workforce and Visa Requirements

Estimated Qualification Cost: $22,000,000 - $80,000,000 CLP ($23,300 - $84,800 USD)

Timeline: 3-6 months (entity formation through first bid readiness)

Key Observations

• Entity establishment (Steps 1-6) requires physical presence in Chile for banking, SII registration, and legal representative appointment – cannot be done entirely remotely
• Document authentication (Steps 7-9) is a recurring cost: every tender may require translated and apostilled supporting documents
• The language barrier is the single most significant operational challenge; all procurement, legal, tax, and banking interactions are conducted in Spanish
• Chilean corporate tax at 27% is higher than many competing jurisdictions and applies to worldwide income for subsidiaries
• Transfer pricing scrutiny (Step 18) is aggressive under Chilean law; the SII actively audits intercompany transactions
• The 35% dividend withholding tax means profits repatriated to the US parent face significant tax friction, partially offset by the US-Chile tax treaty (effective 2023)
• Visa processing (Step 23) is relatively straightforward and low-cost compared to US H-1B or Australian 482 visa equivalents
• The 15% foreign workforce cap (Step 24) may constrain staffing for smaller operations

Treaty Access: US-Chile FTA and WTO Framework

US companies benefit from a comprehensive bilateral trade agreement that guarantees procurement market access:

US-Chile Free Trade Agreement – Chapter 9 (Government Procurement)

• In force since: January 1, 2004
• Central government goods and services threshold: ~$183,000 USD (adjusted periodically; 2024 figures)
• Central government construction threshold: ~$12,001,460 USD
• Sub-central entities goods and services: ~$563,000 USD
• Sub-central construction: ~$14,771,718 USD
• National treatment: Chilean Government must treat US suppliers no less favorably than domestic suppliers for covered procurements above thresholds
• Non-discrimination: Procurement processes must be transparent and competitive; minimum 30-day publication period for tenders
• Performance-based specifications: Tenders should use performance-based rather than design-based specifications
• Covered entities: Central government ministries, regional governments, municipal governments (as scheduled)
• Exceptions: National security, indigenous/aboriginal set-asides (limited in Chile), certain agricultural support

WTO Government Procurement Agreement (GPA)

• Chile’s status: Observer (not full signatory as of 2025)
• Practical impact: Chile has bilateral procurement commitments through FTAs rather than multilateral GPA coverage; the US-Chile FTA provides direct bilateral access
• Note: Chile’s observer status means GPA thresholds do not directly apply, but the FTA Chapter 9 thresholds are broadly aligned with GPA standards

CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership)

• Chile is a signatory to CPTPP (formerly TPP-11)
• The US is not a member of CPTPP (withdrew in 2017)
• Impact: US companies do not benefit from CPTPP procurement provisions in Chile; competitors from CPTPP member countries (Australia, Canada, Japan, New Zealand, Singapore, etc.) may have parallel access under CPTPP Chapter 15

Practical Impact of Treaty Access

Treaty access means US companies cannot be excluded from covered procurements solely based on nationality. However, treaties do not exempt US vendors from:

• Chilean entity formation and RUT requirements
• Spanish-language submission requirements
• Chilean tax and VAT obligations
• Beneficial ownership disclosure
• Guarantee instrument requirements (must be issued by Chilean financial institutions)
• Integrity program requirements under DS 661/2024
• Practical disadvantages of competing against local firms with established relationships, Spanish-language capability, and demonstrated local past performance

Phase 2: The Bidding Process

What it takes for a US company to respond to a single Chilean government opportunity through Mercado Publico.

Estimated Cost Per Bid: $2,200,000 - $40,200,000 CLP ($2,330 - $42,600 USD)

Win rate for foreign entrants: estimated 5-12% (no official statistics; language and local-presence disadvantages significant)

Key Observations

• Translation costs (Steps 2, 3, 6, 8) are a recurring expense unique to foreign vendors and represent the single largest per-bid cost premium over local competitors
• The guarantee instrument requirement (Steps 5, 13) forces foreign companies to maintain active Chilean banking relationships with sufficient credit lines
• US past performance evidence (Step 8) must be translated, apostilled, and may carry less weight than Chilean contract performance
• Currency risk (Step 7) is meaningful: contracts paid in CLP while many costs incurred in USD; the CLP/USD rate can fluctuate 10-15% annually
• The Tribunal de Contratacion Publica (Step 14) is accessible to foreign suppliers but proceedings are entirely in Spanish
• Time zone alignment is actually favorable: Chile is only 1-3 hours ahead of US East Coast, unlike the 14-19 hour gap with Australia
• DS 661/2024’s prohibition on simultaneous bids from the same business group applies equally to foreign corporate groups

Phase 3: The Full Lifecycle

End-to-end pipeline from US market entry through Chilean contract completion.

Cumulative Investment Before Revenue: $25,000,000 - $141,000,000 CLP ($26,500 - $149,500 USD)

Additional Costs Unique to Foreign Entry

Connection to Dissertation Research

What Chile Reveals About LPTA vs. Best-Value from a Foreign Entry Perspective

Chile’s procurement system offers the dissertation a uniquely compelling international comparison that illuminates the relationship between market access barriers, evaluation methods, and public value:

The language barrier is the dominant foreign-entry cost driver. Unlike Australia or the UK (where US vendors face zero language barriers), or South Korea (where simultaneous Korean-English submissions are sometimes accepted), Chile’s all-Spanish procurement system creates a persistent per-bid cost premium of $1,000-$15,000+ for translation alone. This linguistic barrier functions as an effective non-tariff barrier even when treaty access formally guarantees national treatment.

Treaty access without practical access. The US-Chile FTA Chapter 9 provides strong formal protections: national treatment, transparent processes, 30-day minimum publication periods, and performance-based specifications. Yet the practical requirements – Spanish-language submission, Chilean guarantee instruments, local legal representation, and demonstrated Chilean past performance – create de facto barriers that treaties cannot eliminate. This gap between formal access and effective access is a central theme in international procurement research.

Chile’s low domestic barriers produce a competitive market that is hard for foreigners to crack. With 112,000 registered suppliers (90% micro/small), a Chilean government buyer already has deep domestic competition. Adding a foreign entrant with higher costs, no local track record, and language disadvantages creates an uphill battle. The 42% SME value share suggests the domestic market is already serving the policy goal of broad competition without needing foreign entrants.

The cost multiplier for foreign entry is moderate but real. A US company faces approximately $26,500-$149,500 in cumulative costs before first revenue, compared to $950-$22,800 for a Chilean local firm – a 6-28x multiplier. This is lower than the Australia multiplier (7-40x) because Chile’s overall procurement costs are lower, but the proportional gap is wider because domestic entry costs are so low.

The beneficial ownership mandate tests transparency effects on foreign participation. Chile’s requirement that all suppliers disclose ultimate beneficial owners creates an interesting dynamic for US companies: US ownership structures must be disclosed to the Chilean government, while the US itself has struggled to implement comparable beneficial ownership requirements (FinCEN BOI rule contested). This asymmetry may affect US companies’ willingness to participate.

Reverse auctions create a direct LPTA comparison. Chile uses reverse auctions for commodity purchases – effectively a lowest-price mechanism. Comparing outcomes of reverse-auction procurements against multi-criteria tender procurements within the same platform provides a natural experiment relevant to the dissertation’s LPTA-vs-best-value question, observable through Chile’s OCDS-published data.

Implications for the Dissertation

1. Language as a non-tariff barrier – Chile quantifies what the language barrier costs foreign vendors per bid, enabling comparison with English-speaking markets (US, Australia, UK) where this barrier is absent
2. Treaty effectiveness gap – The US-Chile FTA provides formal access, but practical participation data (if available through OCDS) can test whether treaty rights translate to actual foreign vendor wins
3. Domestic competition sufficiency – Chile’s 42% SME value share and 112,000 supplier base suggest that low domestic barriers alone may achieve the competition goals that US policy pursues through more complex means (8(a), HUBZone, WOSB set-asides)
4. Cost multiplier benchmarking – The 6-28x foreign-to-domestic cost multiplier in Chile provides a benchmark for comparing how different countries’ procurement systems affect international competition
5. Transparency and data availability – Chile’s OCDS publication makes it one of the few countries where procurement outcome data is publicly available in machine-readable format, enabling empirical analysis
6. Reverse auction natural experiment – Dual evaluation methods (multi-criteria and reverse auction) within the same platform enable within-country comparison of LPTA-equivalent versus best-value outcomes
7. Latin American governance context – Chile’s procurement reforms (beneficial ownership, integrity programs, OCDS) represent best practice in a region where procurement corruption perceptions are generally higher, testing whether institutional design overcomes governance challenges

Sources and References

• Law No. 19,886 – Ley de Bases sobre Contratos Administrativos de Suministro y Prestacion de Servicios (bcn.cl/leychile)
• Law No. 21,634 (2023) – Modernization of public procurement law (bcn.cl/leychile)
• Law No. 20,848 (2016) – Foreign Direct Investment Framework, replaced DL 600 (RSM Chile)
• Supreme Decree No. 661/2024 – Implementing regulations (DLA Piper)
• US-Chile Free Trade Agreement – Chapter 9 – Government Procurement (USTR)
• Federal Register (2026) – Procurement Thresholds for Trade Agreements Act (Federal Register)
• ChileCompra – Direccion de Compras y Contratacion Publica (chilecompra.cl)
• Mercado Publico – Central procurement platform (mercadopublico.cl)
• Servicio de Impuestos Internos (SII) – Foreign investor RUT registration (SII)
• Tribunal de Contratacion Publica – Bid protest tribunal (tribunaldecontratacionpublica.cl)
• PWC Tax Summaries – Chile corporate taxes, VAT, withholding taxes (taxsummaries.pwc.com)
• Chambers and Partners – Corporate Tax 2025 Chile (practiceguides.chambers.com)
• Chambers and Partners – Corporate Immigration 2025 Chile (practiceguides.chambers.com)
• National Migration Service (SERMIG) – Visa fees and processes (serviciomigraciones.cl)
• InvestChile – Foreign Investor’s Guide (investchile.gob.cl)
• U.S. Department of Commerce – Chile: Selling to the Public Sector (trade.gov)
• Biz Latin Hub – Company Formation in Chile (bizlatinhub.com)
• Commenda – Chile Business Setup and Corporate Tax Guide (commenda.io)
• Open Contracting Partnership – Chile beneficial ownership reform (open-contracting.org)
• Open Ownership – Beneficial ownership in Chile’s procurement reform (openownership.org)
• Carey Abogados – New regulations of the Public Procurement Law (carey.cl)
• az Abogados – Supreme Decree 661 as benchmark (az.cl)
• Garantia Mercado Publico – Guarantee instrument providers (garantiamercadopublico.cl)
• Expat.cl – RUT/RUN guide, work visa guide (expat.cl)

This research document supports the dissertation “From Lowest Price to Highest Public Value: An Empirical Test of Best-Value Source Selection in Government RFPs” by Richard Davidson, University of Denver, Daniels College of Business.