Business in Chile

Aired March 2004

Chile is one of the Latin American region's most dynamic and promising markets. Its strength and attractiveness lie not in its size (population of 15 million people), but in the energy and professionalism of its entrepreneurs, the transparency of its regulation, and the predictability of its decision-makers. Market-led reforms adopted close to 30 years ago and an increasingly diversified economy with strong ties to buyers and suppliers in the Americas, Europe and Asia have given Chile a wide range of options for further growth. Prudent economic policy-making has secured long-term stability unknown elsewhere in Latin America.

Chile is a particularly promising market for high technology and capital goods. While solid opportunities for U.S. goods abound in Chile, competition is stiff, especially from countries with which Chile has negotiated free trade agreements. The U.S. is Chile's largest single supplier (almost 23 percent of imports), but European and Asian competitors are strong. U.S. exporters to Chile find few problems in financing customers. Sufficient Chilean, U.S., and third-country banks operate in Chile.
The U.S. and Chile are currently working to conclude a bilateral free trade agreement. Chile already has free trade agreements with Canada and Mexico, our two NAFTA partners. A U.S.-Chile bilateral free trade agreement would allow U.S. exporters to also enjoy zero percent import tariffs on most products (U.S. exporters face a 6 percent import tariff in 2003).

Chile has one of the simplest and most transparent regulatory systems in the region for trade and business. Careful review of regulations and full compliance with guidelines will ensure more successful and trouble-free operations in Chile. Chile maintains import and export licensing requirements, but they are more for statistical purposes rather than control. Only agricultural products and a few sensitive items face restrictions.

It is crucial for U.S. companies to establish an effective and efficient presence in Chile. Many foreign companies have subsidiaries or branch offices in Chile; others utilize distributors or representatives. Forty percent of Chile's population resides in the Santiago Metropolitan region and is easily reached. Although 60 percent of the population lives outside Santiago, Chile's unusual geography makes it difficult to cover other population centers. Eighty percent of Chile's economy is controlled from Santiago; most agents/distributors operate from there with offices in the regions.

INFO CHILE

Full country name: Chile
Area: 756,950 sq km
Population: 15,498,930 (July 2002 est.)
Capital city: Santiago
Ethnic groups: and white-Amerindian 95%, Amerindian 3%, other 2%
Language: Spanish
Religion: Roman Catholic 89%, Protestant 11%, Jewish NEGL%
Government: republic
Chief of State: President Ricardo LAGOS Escobar
GDP: power parity - $153 billion (2001 est.)
GDP per head: purchasing power parity - $10,000 (2001 est.)
Annual growth: 3.1% (2001 est )
Inflation: 3.5% (2001 est.)
Budget: $17 billion expenditures: $17 billion, including capital expenditures of $NA (2001 est.)
Major industries: copper, other minerals, foodstuffs, fish processing, iron and steel, wood and wood products, transport equipment, cement, textiles

TOURISM

One of Chile's main characteristics is its astonishing variety of landscapes. Legend says that when God finished Creation, he took the leftovers of the desert, pampas, jungle and mountains, and with them he created the patchwork that is Chile.

Nestled between the Pacific Ocean and the Andes, the world's longest mountain range, Chile's coast stretches for more than 4,000 kilometers. The Andes mountain range defines the territory, with peaks that reach up to 6,000 meters high, the highest in the South-western Hemisphere. Parallel to the Andes, on the western seacoast, runs the coastal mountain range.

In this framework made by the mountains and the sea, there is the world's most arid desert, fields of fruits and beautiful beaches; volcanoes, lakes, woods and the world's second largest rain forest, plus fjords and canals, pampas and glaciers. For visitors, this combination is unforgettable. It can be difficult to travel to many of Chile’s more remote and spectacular regions, but the experience is worth it.

ENERGY

Chile has many different environmental problems, but is moving ahead with plans to achieve a cleaner environment. There is a great opportunity for U.S. companies to get involved in this process.

Demand for environmental services in Chile includes a full range of independent environmental consulting services, such as environmental impact assessments and permitting, base line studies, environmental audits and management, pollution prevention, and project design and construction of wastewater and sewage treatment plants.

The size of Chile’s environmental consulting market is estimated to be US$ 80 million, with a growth rate of 20 to 30 percent in the coming years, as environmental regulations and new standards come into force. It is estimated that U.S. firms hold about one third of this market, competing mostly with Canadian and European companies.

In many cases, the most effective way to enter the market is to work with an established local consulting firm until the potential for success of an independent branch office is determined. In Chile, it is important to have local knowledge and contacts to identify opportunities and navigate through the bidding and permitting systems. The main competitive advantage that a U.S. firm can offer is a long-term market presence, proven experience in the field, and effective solutions for local conditions at a competitive price.

Currently, Chile’s water sector offers excellent short-to-medium term opportunities for the construction of wastewater collection and treatment infrastructure, and in the rehabilitation and expansion of the water supply. U.S. consulting, design and engineering companies can team with other international and local companies to offer a full range of services and financial resources. It is estimated that Chile may invest US$ 10 billion on reduction of wastewater over the next five years.