The Frei administration (1964–70) imposed extensive import duties and taxes to discourage monetary outflow for nonessential goods and to protect local industries. Imports were curbed by the requirement of advance deposits according to six categories, ranging from 10% for essential goods up to 10,000% for nonessential goods and goods competitive with domestic production. The Allende government revived a high tariff schedule meant to discourage the expenditure of scarce foreign reserves on luxury items.
When the military government came to power at the end of 1973, it adopted a policy of liberalizing trade and returning to an open market. Tariffs were removed on foreign goods to force competition on low-efficiency, high-priced local industries. By 1979, tariffs had been reduced to 10%, the only exception to this uniform rate being some car models. In late 1982, the government introduced legislation permitting higher tariffs on some 20 products, including milk, canned fish products, synthetic fibers, and leather footwear.
Most imported goods are subject to an 18% value-added tax. Automobiles were subject to a luxury tax of 85% on any value above $16,361.97 and other luxury items, such as jewelry, furs, and firearms, were taxed at 50%. Import and export licenses are mandatory, but easily obtainable. In 1977, free trade zones were established in Iquique and Punta Arenas. Chile has free trade agreements with Canada, Mexico, Columbia, Venezuela, Ecuador, Costa Rica, and MERCOSUR. Negotiations are underway with Peru, the United States and NAFTA, South Korea, and the European Union.