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