Chile is planning to implement strict rules for tobacco, including plain packaging that depict the gory consequences of consuming such products.
The government is proposing a bill that mandates tobacco firms to bring in changes in packaging.
The bill also seeks restrictions on smoking at beaches and parks, and a ban on menthol cigarettes.
Having secured approval from the Senate, the bill awaits clearance in the the lower house, reported AFP.
The move is being opposed by the tobacco industry, including London-based British American Tobacco (BAT), which holds 90% of the market share in Chile.
BAT Chile corporate affairs Carlos Lopez said: "If they pass the bill as it stands today, we'll close our factory."
The tobacco firm has expressed concerns that such legal provisions would support a black market.
Chile houses $2bn tobacco industry providing direct or indirect employment to 15,000 jobs, according to the National Agriculture Society. The country has highest percentage of smokers in Latin America with 28% of the adults smoking at least once a day.
The bill would put Chile along Uruguay and Panama as countries codifying the toughest anti-smoking laws in Latin America.
Earlier this year, tobacco firms, including BAT, sued the UK Government opposing the implementation of plain packaging rule in the country. They contended that the move was against the trademark law.
Plain packaging, which was put to vote in March in the UK Parliament, is expected to be effective in 2017. Similar legal provision is already in vogue in Australia.
