Permanent residency in Chile is fairly easy to obtain for foreigners. Once you obtain your permanent residency you can for the most part do all the things a Chilean citizen can do immediately, with a few exceptions. You can own property, open bank accounts, work, and more or less live as any Chilean citizen. In fact, many of these things such as owning property as a foreigner  you can do in Chile without ever even visiting Chile. Property rights are constitutionally guaranteed for Foreigners and Expats in Chile, but there are some small advantages to taking the next step from Permanent residency to citizenship in Chile.

After your first five years of permanent residency in Chile, you can do the following.

Register to vote in Elections in Chile
You do not need to apply for citizenship to register to vote. Once you have been in Chile for 5 years. However, there are other reasons you may wish to apply.

Apply for Chilean Citizenship
Chile allows for dual citizenship with dual passports for all permanent residents that have lived in the country for over five years. For the most part your day to day life as just a permanent resident of Chile vs. a full citizen will not change much. Let us be clear, this in no way is a tax advantage or disadvantage to being a citizen. Foreign permanent residents in Chile are taxed the same as citizens. You may however be able to gain some tax advantage from it in another country.

Apply for a Chilean Passport
One advantage of being a citizen of Chile is that you can apply for a second passport. This may or may not be useful to you, but is perhaps one of those things it is nice to have.

Another advantage that may be of more use is that as a permanent resident in Chile, if you leave the country for more than 2 years you can loose your permanent residency status. As a citizen of Chile there is no such concern, and in fact you would gain certain import tax advantages for Chileans returning home to Chile such as being able to import a used car.

Another advantage to a foreigner obtaining Chilean Dual Citizenship or just citizenship is access to certain rights under Chile's recent wide range of free trade agreements with other countries.  

So how long does it take to get Chilean Citizenship?

Application for temporary residency visa: about 2-4 months (currently as of January 2010)
Temporary residency period in Chile: 180 days in one year present in Chile. The earliest you can apply after receiving your temporary residency approval in Chile is 9 months.

Permanent residency in Chile: at least five years of full permanent residency in Chile.

Application for Citizenship:  This can take a while. Current reports as of January 2010 is at least 6 months.