Chile's Shifting Migration Policy and Its Implications for Labor-Intensive Sectors: Assessing the Risk-Reward Trade-Off for Foreign Labor-Dependent Industries

Chile's migration policy has undergone a dramatic transformation from 2023 to 2025, driven by rising anti-immigrant sentiment and political pressures. What began as a relatively open approach under President Michelle Bachelet has shifted toward stricter controls under subsequent administrations, including the deployment of military forces to northern border regions and the repatriation of over 900 undocumented immigrants by October 2024, according to a USIP report. These changes, coupled with legislative reforms expanding expulsion criteria and tightening visa requirements, have created a complex landscape for industries reliant on foreign labor. For investors, the challenge lies in balancing the risks of labor shortages and rising costs against the potential rewards of a more regulated and stable workforce.

Agriculture: A Sector on the Brink of Crisis

The agricultural sector, a cornerstone of Chile's economy, is facing a critical labor shortage. During peak harvest seasons (November to April), the industry requires approximately 300,000 workers, yet domestic labor alone cannot meet this demand. Foreign workers, particularly from Bolivia under the Mercosur Visa agreement, now account for 7.7% of agricultural labor in 2025, according to a HortiDaily report. However, stricter migration policies and public backlash threaten to exacerbate this gap. Industry leaders are increasingly advocating for structured seasonal worker programs modeled after Spain's GECO or Canada's Seasonal Agricultural Worker Program (SAWP) to ensure a reliable labor supply, the report notes.

The risk-reward trade-off here is stark. While formalized programs could stabilize labor flows and reduce dependency on informal migration, the political climate-where 87% of Chileans support stricter immigration controls, as the USIP report shows-poses a significant barrier. A failure to secure sufficient foreign labor could jeopardize up to 25% of Chile's agricultural output, directly impacting its $13.5 billion export sector, the HortiDaily report notes.

Construction and Services: Navigating Regulatory Hurdles

The construction sector, projected to grow at 4.5% annually from 2026 to 2029, according to a Business Wire report, faces its own set of challenges. New migration laws, including Law No. 21,325, require foreign workers to obtain visas before entering Chile, a process that has led to delays in hiring, as noted in a Chambers report. Additionally, the National Migration Service (SERMIG) now has the authority to revoke residence permits for repeated minor infractions, such as noise disturbances or unauthorized street vending, the Business Wire report states. These measures, while aimed at enhancing national security, risk destabilizing the workforce in construction and services, where informal labor has historically filled gaps.

Investors must weigh the potential benefits of a more skilled and regulated labor force against the immediate costs of labor shortages. For example, companies are investing in technologies like Building Information Modelling (BIM) and 3D printing to offset labor constraints, the Business Wire report says. However, these adaptations require upfront capital, which may strain smaller firms. The services sector, particularly in hospitality and retail, is also grappling with rising labor costs as demand for skilled workers outpaces supply, according to the Chambers report.

The Political Calculus: A Nation Divided

Migration remains a polarizing issue in Chile, with hard-right candidates like José Antonio Kast and Evelyn Matthei pushing for tighter controls ahead of the 2025 elections, according to a Stratfor analysis. Public opinion, as reflected in December 2024 polls, shows 71% support for expelling undocumented immigrants and 77% viewing immigration as detrimental to the country, the USIP report shows. This sentiment is amplified by media narratives linking immigrants to rising crime rates and social tensions, the USIP report notes.

For foreign labor-dependent industries, the political risk is twofold: (1) further restrictions on immigration could deepen labor shortages, and (2) the potential for populist policies to prioritize short-term political gains over long-term economic stability. Conversely, a shift toward more balanced policies-such as the regularization of non-criminal immigrants-could provide a temporary reprieve for sectors struggling to adapt, the USIP report suggests.

Risk-Reward Analysis: A Delicate Balance

The migration policy changes present a dual-edged sword for investors. On one hand, stricter regulations may deter unskilled labor inflows, driving up wages and forcing industries to invest in automation or training. On the other, the risk of prolonged labor shortages-particularly in agriculture-could disrupt supply chains and reduce export competitiveness.

For the construction sector, the rewards of a more skilled workforce could offset higher labor costs, especially as Chile's infrastructure projects (e.g., renewable energy and metro expansions) gain momentum, the Business Wire report notes. However, the immediate costs of navigating complex visa processes and adapting to new regulations may outweigh these benefits in the short term.

Conclusion: Strategic Adaptation in a Shifting Landscape

Chile's migration policies are reshaping the economic landscape for labor-intensive sectors. While the political climate favors tighter controls, industries must innovate to mitigate risks. Investors should prioritize companies that are proactively adopting technology, diversifying labor sources, and engaging in policy dialogue to shape a more sustainable immigration framework. The coming months will test whether Chile can balance its national security concerns with the economic needs of a labor-starved economy.