Building Win-Win Relationships with Chilean Business

As the United States and Chile Free Trade Agreement (FTA) concludes its third year, commercial trade, both in products and services, has been a resounding success. As of January 1, 2004, 90 percent of U.S. exports to Chile entered duty free, with all remaining tariffs to be phased out by 2015. Chile was Latin America’s fastest growing economy in the 1990s, and thanks to its conservative fiscal and monetary policies, it has enjoyed unprecedented economic stability while much of the rest of Latin America experienced its share of ups and downs.

As several Latin American countries held presidential elections this year, many U.S. companies were left wondering what possible implications these new leaders might have on trade and investment. Whereas some newly elected presidents are still defining their economic and trade policies, Chile’s president – who took office in March- remains steadfast in her commitment to market-oriented policies.

Most significant is that it was President Michelle Bachelet’s administration (the first woman president in Chile and a socialist party leader) which continued to pursue market-oriented strategies. Chile’s private sector leaders eagerly pursue improving and expanding global commercial ties, while boasting the region’s largest number of bilateral free-trade agreements; partners range from traditional markets such as the United States and the European Union to new Asian counterparts including China, India, South Korea, and Japan. This offers a unique opportunity for U.S. exporters interested in expanding their business in arguably the most open, stable and attractive market in Latin America. Many U.S. companies consider Chile an excellent platform for doing business in the region.

Chile’s Favorable Investment Climate
Given the favorable investment climate and continued economic growth, business opportunities in this country abound. Its economy grew 6.3 percent in 2005 and is projected to expand by approximately 4.6 percent in 2006. This growing economy offers very attractive opportunities for U.S. suppliers and investors in areas ranging from construction and electric power equipment to mining and franchising sectors. For example, road construction concessions in the southern part of Chile present opportunities for construction companies and associated businesses that specialize in earth moving equipment, security surveillance systems, etc. In the energy sector, investment possibilities abound in both traditional and non-traditional electric energy generation systems, such as wind farms, bio-fuels, large diesel-operated electric back-up systems, and hydroelectric plants.

Two-way trade is also expected to continue to reap the benefits of a sound economic and political environment. U.S. exports to Chile in the first six months of 2006 totaled $3.22 billion, compared to $1.28 billion exported to Chile in the first half of 2003, before the FTA took effect. In the first half of 2006, U.S. exports to Chile increased 26 percent compared to the $2.56 billion in the first six months of last year -a 152 percent increase over the same period in 2003. It appears that 2006 also promises to be another strong year for Chile’s outbound trade. U.S. imports from Chile grew 59 percent from $3.24 billion during the first six months of 2005 to $4.79 billion this year. An even more impressive figure is the 135 percent increase from the $2.04 billion in U.S. imports during the first half of 2003.

Opportunities and Challenges in the Chile Market
Perhaps the greatest challenge to a U.S. firm seeking to do business in Chile is the high degree of competition and finding the right partner. A commitment to long- term relationships and sensitivity to cultural and language barriers can go a long way in Chile. The government has already taken care of ensuring a stable economy, while addressing challenges such as poverty, inequality and incorporating those previously marginalized into the mainstream political and economic life.

Sun Pacific Shippers Sales
Los Angeles, CA
With the FTA, Sun Pacific Shippers Sales of Los Angeles, California, and leading Chilean fruit exporter Subsole Exportadora de Frutas, found it attractive to export California-grown citrus to meet market demand during Chile’s off-season, as the FTA immediately reduced Chilean duties on products such as clementines from six percent to zero. After discussions with Sun Pacific, Subsole agreed to import clementines as a test case for the Chilean market. The idea was a success; with the assistance of the U.S. Foreign Commercial Service in Santiago, $42,000 of Sun Pacific’s “California Cuties” reached Chilean supermarkets and the companies have since met to discuss future opportunities. The fact that California and Chile have opposite growing seasons, combined with new market access afforded by the FTA, holds promise for continued U.S. fresh fruit exports to the Chilean market.

Project Development International (PDI)
Clearwater, FL
Started in 1984, Project Development International (PDI) is a small company of eighteen professional employees dedicated to innovative and effective management services for the construction industry. With the assistance of the U.S. Commercial Service staff in Santiago, PDI recently signed a representation agreement with Integra Proyectos, a Chilean consultancy firm based in Santiago. The company believes the FTA facilitated this partnership and will make it easier for PDI to export its services. Working with PDI, Integra is currently bidding on various construction projects in Chile, including a military hospital.

U.S. Commercial Service, Your Partner in Trade
The Commercial Service at the U.S. Embassy in Santiago facilitates trade by helping Chilean importers identify the best products and state-of-the-art technology to ensure their global competitiveness. In the United States, with a presence of 109 offices, Commercial Service staff helps U.S. exporters capitalize on growth opportunities overseas, understand global markets and facilitate communication between parties. For example, increased knowledge of standards and product-specifics in Chile would open the door for more small and medium-size manufacturers to this market.
Companies in the United States are encouraged to contact their local U.S. Export Assistance Center at www.export.gov. U.S. and Chilean companies are encouraged to visit the U.S. Commercial Service in Chile at www.buyusa.gov for the latest trade leads and other information.
 

Americo Tadeu is the Commercial Counselor and Wanda Barquin is the Commercial Attachè at the U.S. Embassy in Santiago, Chile.

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Viewpoints Americas is a publication of the Americas Society and the Council of the Americas. It helps Council member companies achieve their business goals by stimulating thoughtful debate on the most pressing issues facing Latin America. The positions and opinions expressed in this publication are those of the authors or guest commentators and speakers and do not represent those of the Americas Society and the Council of the Americas or its members or the Board of Directors of either organization. No part of this publication may be reproduced in any form without permission in writing from the Americas Society and the Council of the Americas.