Tech companies push to stop Chile’s AI regulation plans

In Chile, a government initiative to impose ethical guidelines for artificial intelligence is facing pushback from major global technology companies, sparking a debate that may influence nations around the world to regulate the rapidly growing industry.

Chile draws tech companies by offering economic and political stability, strong fiber optics, subsea data cables, and abundant green energy to run power-hungry data centres. If it passes legislation, Chile would become a regulatory leader among developing economies.

Regulation outside of the European Union and China tends to be inconsistent.

The Andean nation is expected to gain a significant investment, with cloud giant Amazon Web Services committing to US$4 billion on three data centres that will start up simultaneously in Santiago next year. Meanwhile, Alphabet Inc’s Google is planning a second data centrein the country and is laying a new 14,000-kilometre (8,700-mile) data cable from Chile to Australia.

The AI bill is now awaiting Senate approval after passing in the lower house in October, categorising AI systems by risk level. The higher the potential harm to people or society, the more strict regulations and oversight.

Limited-risk systems must meet transparency and security requirements, while those deemed unacceptable are banned. Violators can be fined as much as 20,000 UTM (US$1.5 million).

The bill will accompany Chile’s cybersecurity law that began this year, and a data protection law that takes full effect in December 2026.

When addressing lawmakers in October, Science Minister Aldo Valle said the bill protects fundamental rights and the freedom to innovate without prior state approval. The question is not whether Chile will have AI, but under what rules, Valle said.

Whereas, tech executives say the proposal is too rigid, suggesting Europe's tech lag compared to the US as evidence that Chile is going awry. And there’s no clarity on timing.

“We’re not against regulation,” AWS Chile Country Manager Felipe Ramírez said in an interview. “What we don’t like to see are processes that take too long.”

“Some companies might say, ‘you know what, let’s better wait until the law comes out before we decide what to do because we don’t want to end up working on an initiative and then later realize it was illegal’,” he said.

Matías Aránguiz, Law professor and director of the Law, Science and Technology Program at Pontificia Universidad Católica de Chile in Santiago, said Chile is “exponentially increasing the technological regulatory burden” by leaning too heavenly in one direction.

“I think we’re missing a bit of a pro-investment approach, because we’re too focused on a pro-ethical regulation approach,” he said, adding that Chile could risk potentially discouraging technology capital.

Under the leadership of US-aligned libertarian Javier Milei, Argentina was recently picked by Open-AI as the location to build a US$25-billion data centre complex.

Brazil’s leftist president President Luiz Inácio Lula da Silva has approved a provisional measure that offers tax breaks for AI-related equipment imports, while Google is eyeing a vast data center complex around Rio de Janeiro.

AI Passion

Chile currently has more than 40 data centres, mostly in the Santiago region. Equinix Inc. Chile and Peru Managing Director Francisco Basoalto stated that the country ranks second only to Brazil in terms of installed capacity in Latin America.

He leads a local trade association for data centres, representing dozens of tech companies, equipment suppliers, contractors and service providers who have major interest in the pending legislation.

According to the real-estate company Colliers, installed data centre capacity in Chile has nearly tripled to 240 megawatts since 2015, and is expected to exceed 500 megawatts by 2030. This growth is fueled by AI expansion, digitalisation of services and the arrival of tech giants like Google.

Chile’s data center growth is “firstly due to the energy matrix, which is a key enabler, and secondly, it has to do with connectivity,” Basoalto said. Chile is likely among the five countries with the fastest broadband speeds, in addition to international cable extensions. By 2030, data centre capacity is expected to double, he said.

Chile’s tech-savvy President Gabriel Boric is continuing the digital agenda that started with his predecessor Sebastián Piñera, who announced a national data centre plan last year to attract tech investors as AI uptake among Chilean companies was surging.

According to a study conducted for AWS, around 171,000 companies started using AI last year, roughly one every five minutes. Now, 35 percent of all firms in the country use AI, up from 26 percent a year earlier, and nearly nine out of 10 report increased revenue as a result.

Chile ranked number one in a regional index of AI preparedness last year, followed by Brazil and Uruguay. Local universities are now offering advanced AI degrees to cultivate future talent.

In an August speech, Boric praised efforts to develop a Latin American Large Language Model as a way to resist “cultural hegemony” from countries where leading LLMs originate. He joked that he has both ChatGPT and Chinese competitor DeepSeek installed on his phone.

AI shouldn’t strike fear, Boric said, adding that AI can transmit a poem, but not the passion it conveys. “We have to regulate it, of course, we have to think ethically,” he said. “But it’s a tremendous opportunity.”

Boric is not alone in seeking to temper AI. OpenAI CEO Sam Altman has urged US senators to regulate it. “If this technology goes wrong, it can go quite wrong,” he said in 2023.

Despite these concerns, industry experts warn that Chile can’t afford to shun tech capital through restrictive regulations. By raising the costs of development and compliance, the bill might hinder the progress of Boric’s beloved LatamGPT.

Rodrigo Durán, who manages CENIA, Chile’s national center for artificial intelligence, says the country’s state apparatus still lacks the tools and political will to implement a coordinated digital strategy. He describes the data center plan as a “good declaration of intentions” but “lacking in concrete measures.”

Chile’s Science Ministry disagrees. “To claim that there is a lack of government interest is to ignore the effort made to position Chile as the digital hub of the Southern Cone,” the ministry said in response to written questions.

Even if the senate approves the AI bill, implementation will likely require more regulations and measures that could take time to form. For example, A law governing gig work, known as the Uber law after the ride-hailing app, passed in 2023 but is still not in effect.

Permitting Cloud

Investment in Chile has faced challenges due to red tape and unpredictability. Last year, Google withdrew a permit application for a US$200-million data centre project after an environmental tribunal partially overturned it, mainly because of water concerns.

The company has said it is redesigning the project and will reapply for a permit at an undisclosed date.

Durán highlights a disconnect between public perception and technological reality. “There’s a belief that the data center industry still works like it did 20 years ago, when a data center could consume as much water as a copper mine,” he said. “That’s not how it works today.

Because Chile generates a surplus in renewable energy, the main challenge in powering tech infrastructure is more about transmission than supply. A project intended to bring solar power stranded in the northern desert to Santiago is taking longer to approve than data centers.

“Companies need legal certainty, regulatory coherence and long-term vision that will allow them to invest and scale technological solutions without fear of disproportionate restrictions,” Colliers real estate manager Sergio Correa said in an email.

As Boric prepares to leave office in March, investors have largely given up on meaningful incentives before next year.

“I don’t see any real interest in the current government in promoting technology,” said Aránguiz. “They’re more focused on regulating, on setting safeguards, which is reasonable, but it’s not the whole part of the job.”