Can a Special Economic Zone Finally Offset the Cost of Distance in Aysén?

FTZ News: Coyhaique is a long way from anywhere that matters in the Chilean economy. Roughly 1,700 kilometers south of Santiago, the road still depends on ferries in places, and the airport only recently started looking like it belongs to a region that expects serious traffic. The whole of Aysén has a little over 100,000 people. Its labor market is the smallest in the country. Unemployment has been running around 4 percent — sometimes lower — which on paper looks like near full employment. Yet the place still feels structurally stuck.

The Weight of Geography

That is the background to the proposal the municipality of Coyhaique and the University of Aysén took to the National Congress in mid-August. They want Chile to study a special economic zone for the region. Mayor Carlos Gatica has been careful with the language. He says they are not asking for privileges. They are asking the country to stop pretending that a territory where every shipment costs more and every specialized hire is harder to keep can compete under the exact same rules as the central valley.

What the Numbers Show

The numbers are hard to argue with. Salmon aquaculture still drives most of the regional growth. In recent years it has pushed Aysén’s GDP expansion into the high single digits and occasionally higher, but the gains have not spread evenly. Tourism has improved — high-season occupancy rates have beaten the national average — yet it remains seasonal and geographically concentrated. A large share of formal jobs still sits in public administration and basic services. The region’s overall contribution to national output stays small even when its growth rate looks impressive.

Why Existing Tools Fall Short

Chile already has tools for places like this. The Austral Law offers tax credits for fixed investment. The extreme-zone development plans have poured public money into roads, hospitals and other infrastructure. The latest multi-year package for Aysén is valued at nearly two billion dollars. These things help. They do not, however, change the private-sector arithmetic. When logistics are more expensive and talent is harder to attract, capital usually goes somewhere less complicated.

What the Proposal Actually Asks For

The Coyhaique–university proposal tries to address that directly. It asks for an incentive regime that would offset the higher costs, but only under conditions: local hiring, use of regional suppliers, measurable innovation, environmental compliance, and a commitment to stay. The sectors they have in mind are specific — renewable energy, higher-value tourism, knowledge-economy activities, southern science, specialized logistics, and processed foods.

The Risks No One Can Ignore

There are obvious risks. Chile has little recent experience with the kind of concentrated special economic zones common in Asia or other parts of Latin America. Most of its extreme-zone policy has relied on tax credits and public spending rather than territorial regimes that alter corporate tax treatment or customs rules. Design the incentives too generously and the zone becomes a fiscal leak with weak local multipliers. Design them too cautiously and nothing moves.

There is also the internal distribution problem. Coyhaique already holds more than half the region’s population. A special zone built around the administrative capital could pull even more activity into the center and leave smaller coastal and inland towns further behind.

A Larger Question About Chilean Development

At root the proposal forces a larger question about how Chile thinks about development. The national model has long assumed that uniform rules will eventually equalize opportunity. In truly remote territories that assumption has been tested for decades and found wanting. Low unemployment coexists with the steady departure of young people who leave for education and do not return. Distance continues to function as a quiet tax.

Congress now has to decide whether to recognize that tax and build a tool to offset it, or to keep relying on the same instruments that have never quite closed the gap./.