Chile is an export-based economy, and its leading trade partners include the United States, Japan, United Kingdom, Brazil, Argentina, Italy, China, Taiwan and Germany. In 1999 the UK was Chile's third most important export destination worldwide, and fifth in bilateral trade. Principal Chilean exports to the UK are copper, gold, silver, wine, table grapes, and fresh fruit. The UK exports a wide range of goods to Chile, with specialised machinery and whisky heading the list.

Over the past two decades, the Pacific Ocean has become one of the world's busiest trade routes. As distinct from other Southern Cone nations, whose trade with Asia is rather minor, Chile's largest single trading partner is the USA followed by China. Asia, the USA and Europe each receive between 25 - 30% of total Chile exports, with the balance mainly exported to other South American countries.

Turning to investment, Chile has one of the most flexible and modern platforms worldwide, and is classed as an A- investment risk by risk rater Standard & Poor's. The 1974 Foreign Investment Statute (Decree Law 600) regulates the entry of foreign investments and guarantees equal treatment for national and foreign investors, ensuring non-discrimination. The majority of foreign investors enter the Chilean market using this mechanism. Competitive advantages in mining have attracted over 40% of total foreign investment realised through DL 600 from 1974-1999, over 80% of which was effected in the closing decade of the 20th century. Power, gas, water and infrastructure have also been dynamic sectors attracted by privatisation and concession programmes.

The Foreign Investment Committee registers investment and provides detailed information to foreigners about opportunities in the marketplace.

Chile in the Eyes of the International Rating Agencies

In March 2005, Fitch Ratings upgraded Chile's long-term foreign-currency sovereign rating to A, up from A-. According to the agency's report, the fiscal surplus that the government ran in 2004 "demonstrates that Chile's structural fiscal balance rule is working, allowing the government to pay down debt during periods of faster growth while leaving space for some counter-cyclical easing when the economy slows".

 

Chile as a Regional Base In 2000 British-Dutch Unilever acquired Bestfoods, a US-based food company, it made the biggest acquisition of its history. That deal meant changes in the company, including a restructuring into two divisions -Bestfoods, through which it now operates in the food, ice cream and soft drinks market, and its HPC division through which it manufactures and markets laundry, household and personal care products. “Chile has a track record and credibility; it’s also successfully promoted itself as a regional business center; those are all important points in its favor”, says Sobredo. However, it is not, he warns, the end of the road, but simply a stage on the journey. “Chile still needs to improve standards of English and computer literacy and we’re anxious to see it implementing more double-taxation treaties”, he argues.

Inward Investment

Chile has achieved widespread recognition for its strong track record in attracting foreign direct investment (FDI). Indeed, according to the 2005 World Investment Report , published by the United Nations Conference on Trade and Development (UNCTAD), the stock of FDI in Chile reached 58.2% of GDP in 2004, up from just 33.2% in 1990. By comparison, in 2004, the average world figure reached 21.7% and that for developing countries was running at 29.1% .

 

Chilean Outward Investment

In the period from 1990 to 1998, more than 260 Chilean firms invested about US$21,916 million in projects abroad. Leading destinations were Brazil, Argentina, Peru, El Salvador and Venezuela.

In 1998, the energy sector accounted for 44% (US$1,002 million) of Chilean investment abroad. This sector is followed by industry 17% (US$386 million), commerce 16% (US$370 million), banking and finance (US$171 million) and telecommunications (US$130 million).

 

Chile in the Eyes of the World:

Bilateral Trade Treaties

Americas
Country Signed on Status*
Argentina August 2,1991 In Force since February 27, 1995
Bolivia September 22, 1994 In Force since July 21, 1999
Brazil March 22, 1994 Not in force
Colombia January 22, 2000 Not in force
Costa Rica July 11, 1996 In Force since July 8, 2000
Cuba January 10, 1996 In Force since September 30, 2000
Ecuador October 23, 1993 In Force since February 21, 1996
El Salvador November 8, 1996 In Force since November 18, 1999
República Dominicana November 28, 2000 Not in force
Guatemala November 8, 1996 In Force since December 10, 2001
Honduras November 11, 1996 In Force since January 10, 2002
Nicaragua November 8, 1996 In Force since January 10, 2001
Panama November 8, 1996 In Force since December 21, 1999
Paraguay August 7, 1995 In Force since September 16, 1997
Peru February 2, 2000 In Force since August 11, 2001
Uruguay October 26,1995 In Force since April 22, 1999
Venezuela April 2, 1993 In Force since May 17, 1994

Europe
Country Signed on Status*
Austria
September 8, 1997 In Force since November 17, 2000
Belgium July 15, 1992 In Force since August 5, 1999
Croatia November 28, 1994 In Force since July 31, 1996
Czech Republic April 24, 1995 In Force since December 2, 1996
Denmark May 28, 1993 In Force since December 30, 1995
Finland May 27, 1993 In Force since June 14, 1996
France July 14, 1992 In Force since December 5, 1994
Germany Octuber 21, 1991 In Force since June 18, 1999
Greece July 10, 1996 In Force since March 7, 2003
Hungary March 10, 1997 Not in force
Island June 26, 2003 Not in force
Italy March 8, 1993 In Force since June 23, 1995
The Netherlands November 30, 1998 Not in force
Norway June 1, 1993 In Force since November 4, 1994
Poland July 5, 1995 In Force since September 22, 2000
Portugal April 28, 1995 In Force since February 24, 1998
Romania July 4, 1995 In Force since August 27, 1997
Spain October 10, 1991 In Force since April 27, 1994
Sweden May 24, 1993 In Force since February 13, 1996
Swiss September 24, 1999 In Force since August 22, 2002
Turkey August 21, 1998 Not in force
Ukraine October 30, 1995 In Force since August 29, 1997
United Kingdom January 8 1996 In Force since June 23, 1997

Asia, Pacific Islands and the Middle East
Country Signed on Status*
Australia July 9, 1996 In Force since November 18, 1999
China March 23, 1994 in Force since October 14, 1995

India -limited FTA under negotiation.
Indonesia April 7, 1999 Not in force
Lebanon October 13, 1999 Not in force
Malaysia November 11, 1992 In Force since August 4, 1995
New Zealand July 22, 1999 Not in force
Philippines November 20, 1995 In Force since November 6, 1997
Vietnam September 16, 1999 Not in force

Africa
Country Signed on Status*
South Africa November 12, 1998 Not in force
Egypt August 5, 1999 Not in force
Tunisia October 23, 1998 Not in force

* Signed

Double Taxation Agreements

In force:

Poland, Spain, Peru, Ecuador, South Korea, Norway, Brazil, Mexico, Canada, Argentina, United Kingdom, Denmark, Croatia.

Awaiting Ratification:

Ireland, Potugal, Paraguay, Russia, Malaysia, France, NewZealand.  Sweden will come into force in 2006.

Foreign Exchange Regulations

Since 2002 foreign exchange regulations fall into 3 categories:

1.  Operations that must be performed through the formal exchange market (ie a commercial bank) and reported to the Central Bank

2.  Operations that must be performed through the formal exchange market

3.  Operations that only need to be reported to the Central Bank.

Thus, there are no transactions that require prior approval by the Central Bank.

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