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Business and Business and EconomicEconomic
Development in ChileDevelopment in ChileU.S. – Chile FTAU.S. – Chile FTA
AmCham ChileAmCham Chile
Chilean-American Chamber of Commerce, member of the Association of American Chambers of Commerce in Latin America (AACCLA)/U.S. Chamber of Commerce
Mission: Promote free trade and investment between Chile and the U.S., being the effective voice of the members, and facilitating related services
Over 700 member companies: 46% Chilean companies, 30% U.S. companies, 24% mixed capital.
18% of Chile’s GDP and 85% of U.S. investment in Chile.
Events, Research, Publications, Commercial Services
Why Chile?Why Chile?
The Economy Sustained economic growth High domestic savings rate Solid Banking System Political Stability Qualitative Features Strong domestic financial and capital
markets Broad Access to international financing Infrastructure, Human Capital
Chile: Economic HighlightsChile: Economic Highlights Early economic liberalization (1975) compared to
the region (1980). “Chilean miracle”: Record real avg. annual
growth of 8%, 1986-1997, after debt crisis in 1982. Steady GDP growth from US$ 74 billion in 2003 to US$ 120 billion in 2007
Doubled per-capita income / poverty cut in half during the 1990s.
Inflation under control: 2%-4% range from 1999 to 2007, rising in 2008
“A+” Rating from Standard and Poor’s, December 2007
Developed nation by 2020
GDP Growth GDP Growth
GDP (% Annual Variation)
3.2%
-0.8%
4.5%
3.4%
2.2%
3.7%
6.0%5.6%
4.3%5.1%
3.2%
-0.8%
4.5%
3.4%
2.2%
3.7%
6.0%5.6%
4.3%5.1%
-2.0%-1.0%0.0%
1.0%2.0%3.0%4.0%
5.0%6.0%7.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Central Bank of Chile
Unemployment & InflationUnemployment & Inflation
Source: Central Bank of Chile
Unemployment & Inflation 1997 to 2008
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Unemployment Inflation
Chile’s Efforts to Reduce Chile’s Efforts to Reduce PovertyPoverty38,6
32,6
27,5
23,221,7
20,618,8
13,7
20,0
17,516,1
14,914,1
10,5
23,8
25,7
3,24,7
5,75,65,7
7,68,8
12,9
1990 1992 1994 1996 1998 2000 2003 2006
Total P obreza P obreza No Indigente IndigenciaSource: Ecuesta CASEN 2006, Mideplan
Chile Trade OverviewChile Trade Overview Exports: Engine of Chilean economic growth Exports represent approx. 50% of Chile´s GDP Last 3 decades exceptional export growth Increase in productivity & external
competitiveness Exporting products that 30 years ago didn´t
exist:• Salmon, Fruit, Wine, Cellulose
2007 Worldwide exports $66 Billion 2007 Worldwide imports $43 Billion
GDP based on PPP per Capita GDP based on PPP per Capita 20082008
Source: Source: IMD, World Economic Outlook, October 2007
GDP based on Purchasing Power Parity per Capita 2008 estimates
0 10000 20000 30000 40000 50000
IndiaVenezuela
PeruChina
ColombiaBrazi l
Thai landMexico
Costa RicaChile
ArgentinaNew Zealand
AustraliaCanada
Hong Kong SARUnited States
Ireland
US$
Chile: Total TradeChile: Total Trade
Source: Central Bank of Chile
Total Exports and Imports
18,27219,21017,16216,32317,870 18,18021,664
32,520
41,267
58,486
67,644
16,42817,09114,73518,363 15,794 17,94119,298
22,935
30,49235,899
43,991
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Total Exports
Total Imports
Chile Total TradeChile Total TradeTotal Trade Chile
37,168 34,686 31,89736,302 34,700 33,974
39,605
55,455
71,759
94,384
111,635
7%
49%
93%
154%
200%
-9%
-7%
-2%-14%
-7%
0
20,000
40,000
60,000
80,000
100,000
120,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
US
$ M
illi
on
s
-50.00%
0.00%
50.00%
100.00%
150.00%
200.00%
250.00%
Total Trade Development Since 1997
Source: Central Bank
Foreign Investment in ChileForeign Investment in Chile $64.7 billion in FDI, 1974 – 2007 The US is the largest Investor with $16.3 billion,
25% of total FDI in Chile Over 4000 companies from 64 countries have
investments in Chile (300+ U.S. companies in Chile)
Business Clusters in Chile: Shared services, corporate headquarters, IT development & support, call centers
47+ Companies use Chile as a platform for services in the region• IBM, Unilever, Nestle, Zurich, GE,
Falconbridge, Wachovia, Equifax, Packard Bell, Phelps Dodge, Kodak, ALICO.
FDI in Chile by CountryFDI in Chile by CountryFDI in Chile by Country (1974-2007)
United Kingdom
9%
Canada17%
Others23%
Australia5%
Spain21%
United States 26%
Source: Cinvers (Comité de Inversiones Extranjeras), Materialized Foreign Investment (D.L. 600) by Country 1974-2007
Recent Trend of FDI in ChileRecent Trend of FDI in Chile
Source: Cinvers
Materialized FDI(US$ Millions)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
U.S. FDI in Chile by SectorU.S. FDI in Chile by Sector
Source: Cinvers
U.S. Materialized Investment by Sector 1974-2007
Transportation and Communications
11,7%
Others0,9%
Manufacturing15,0%
Services23,2%
Electricity, Gas & Water14,5%
Mining33,4%
Forestry1,3%
Materialized FDI in ChileMaterialized FDI in Chile
Source: Cinvers
6,038
9,225
3,039
5,020
1,286
4,636
1,798
3,169
1,371
3,381
266337-15123373551
1,808
788
1,3891,337
-2,000
0
2,000
4,000
6,000
8,000
10,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
UD
$ M
illi
on
s
Total
US
Chile: Business HighlightsChile: Business Highlights High standards of business ethics Low cost of doing business Business Environment Ranking: B 21 (E and 100
being most risky) (Economist Intelligence Unit) Highly-skilled and reliable workforce Advanced telecommunications and IT
infrastructure Santiago rated best combination of quality of life
& business potential Ranked best business center in the region Economist Intelligence Unit Democracy Index
rates Chile 30th out of 167 countries -- flawed democracy category
Competitiveness ScoreboardCompetitiveness ScoreboardWorld Competitiveness Report Card 2007
1
10
15
23
26
27
36
38
47
49
51
55
0 10 20 30 40 50 60
USA
Canada
China
Malaysia
Chile
India
Hungary
Colombia
Mexico
Brazil
Argentina
Venezuela
Ranking
Source: IMD, World Economic Outlook, October 2007
Corruption Perception IndexCorruption Perception Index2007 Corruption Perceptions Index
162105105
727272
6843
412525
222019
1716
141211
94
1
0 20 40 60 80 100 120 140 160
VenezuelaBolivia
ArgentinaChina
PeruBrazil
ColombiaS. Korea
CzechUruguay
SpainChileUSA
FranceIreland
GermanyHong Kong
UKAustraliaCanada
SingaporeFinland
Rank
Source: www.transparency.org
Chile: Services MarketChile: Services Market Ranked highest in Latin America for
connectivity and technology infrastructure Ranked 33rd in Ease of Doing Business among
178 countries (down from 28 in 2007) Ranked 30th in E-Readiness (score of 6.47/10);
U.S. is 2nd (score of 8.85/10) 7th for Offshoring Attractiveness(A.T. Kearney) 2007/2008 Human Development Index:
Ranked 40th (out of 177 countries) as a country with high human development
Technology & service springboard Call centers, IT service centers, Biotechnology,
Software Development center
Doing Business in Chile Doing Business in Chile RankingRanking
Source: Doing Business in Chile 2008, International Finance Corporation
Human Development Index Human Development Index 20072007
Rating Country1 Iceland
3 Australia10 France12 USA16 U.K.21 Hong Kong38 Argentina40 Chile46 Uruguay52 Mexico70 Brazil74 Venezuela75 Colombia81 China87 Peru89 Ecuador
Index is a compilation of:
1. Life expectancy at birth (78.3)
2. Adult literacy rate (% ages 15 and older) (95.7%)
3. Combined primary, secondary and tertiary gross enrollment ratio (82.9%)
4. GDP per capita (PPP US$12,027)
Source: Human Development Report 20072008
Trade AgreementsTrade Agreements Chile has 19 trade agreements with 57 countries,
representing 80% of the world’s international trade; this is more than any other country
Free Trade Agreements: Canada, South Korea, CAFTA, China, Ecuador, EFTA (Iceland, Liechtenstein, Norway and Switzerland), USA, Mexico, Japan and Peru
Economic Cooperation Agreements: Bolivia, Colombia, Venezuela and MERCOSUR (Argentina, Brazil, Uruguay and Paraguay)
Association Agreements: European Union (27 countries), P-4 (Brunei, New Zealand, Singapore)
Partial Agreements: India and Cuba WIP: Australia, Malaysia, Vietnam, Indonesia, South
Africa and Turkey
Chile´s Trading PartnersChile´s Trading Partners
Source: Lexis Nexis
Countries Exporting to Chile 2007
EU14%
USA17%
Mercosur 22%
Others11%
China12%
Japan4%
CAN8%
Mexico3%
Canada2%
South Korea7%
Chile´s Trading PartnersChile´s Trading Partners
Source: Lexis Nexis
Chilean Export Destinations 2007
EU24%
Others12%
China15%
Japan11%
South Korea6%
USA13%
Mercosur 8%Mexico
4%
CAFTA1%
Canada2%
CAN4%
U.S.-Chile RelationshipU.S.-Chile Relationship The U.S. is Chile’s # 1 trading partner and
foreign investor Trade has reached a record high under the FTA In 2007, total bilateral trade reached US$ 15.7
billion, with a positive trade balance Exports to US of US$ 8.419 billion Imports from the US of US$ 7.253 billion
More than 2,000 businesses exported to the U.S. 90% of them are micro, small and medium-sized businesses as opposed to large companies
In 2007, Chilean companies exported approximately 2,000 different products to the U.S.
U.S. – Chile TradeU.S. – Chile Trade
Source: Central Bank
U.S. Share of Chile's Trade
14%
22%
14%
22%
16%
20%
16%
19%18% 17%
16%16%
14%14% 15%15% 15%15% 16%
12%
17%
19%
0%
5%
10%
15%
20%
25%
Chile Exports to US Chile Imports from US
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
U.S.-Chile Trade U.S.-Chile Trade DevelopmentDevelopment
Source: Central Bank
Bilateral Trade Chile-US 1997-2007
5,9747,945
10,956
15,688
6,771
6,3825,798
6,285
6,048
5,998
14,510
-2,0000
2,0004,0006,0008,000
10,00012,00014,00016,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
US
$ M
illion
Exports to US Imports from US Total Bi lateral Trade Bilateral Trade Balance
Chile Trade DevelopmentChile Trade Development
Source: Central Bank
Bilateral Trade Chile-US (1997-2007)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
US$ M
illions
-50%
0%
50%
100%
150%
Total Bi lateral Trade Development since 1997
132%
The FTAThe FTA Tariff Reduction
• Tariffs eliminated in a maximum period of 12 years (2015)
• Chile - US: tariffs on 95% of products reduced to 0% immediately
• US - Chile: Tariffs on 90% of products reduced to 0% immediately
Telecommunications, E-Commerce Rules of origin and customs procedures defined
Effective dispute resolution Transparency Labor and Environmental Chapters
FTA Benefits - U.S.FTA Benefits - U.S.
Regain competitive positioning Leadership in free trade Impetus towards other agreements
(Peru) Concrete support for countries who have
succesfully applied free market economic reforms and have developed strong democratic political systems
Investment flows Enhanced legal framework Probable tax treaty
FTA Benefits - ChileFTA Benefits - Chile
New export possibilities• Market niches – Textiles, milk
products, oils, nitrates, chemical products, pears, artichokes
• Tariff escalation (discrimination on higher value-added goods) disappears
Decreased unemployment and inflation
FTA ResultsFTA Results
Expectations: Increase bilateral trade by 30% , major gains in terms of investment
Since 2003• 162% increase bilateral trade total• Both exports and imports show
increases of over 140%
ChallengesChallenges Facilitate the exportation of Services More agreements to avoid double
taxes Better customs standards Better English Skills Innovation ( I & D) Intellectual Property –FTA Investment Rate
ConclusionConclusion
Chile has a successful record of reform, growth and stability, standing out as an “island” in Latin America
This success is firmly rooted in trade liberalization
The U.S.-Chile FTA has been beneficial for the U.S. as well as Chile