![]() If your business is looking to expand into Latin America, consider looking at Chile. After breaking the power of a brutal dictatorship in the 1990s, Chile has established itself as one of the most stable democracies in Latin America and one of the fastest growing economies in the region.[1] In the last thirty years, Chile’s GDP per capita has increased more than sevenfold, making it the second wealthiest country in Latin America in terms of GDP per capita behind only Uruguay.[2] Although annual economic growth slowed between 2014 and 2017, the International Monetary Fund (IMF) estimates that Chile’s economy finished 2018 with real GDP growth of 4% and will continue to grow at 3% through 2023.[3] Chile is not a large country, but its population has grown steadily and stands at around 18 million according to data from the World Bank.[4] So what else about this relatively small and geographically isolated country makes it an attractive market for US exporters? 1] Central Intelligence Agency, “The World Factbook: Chile,” https://www.cia.gov/library/publications/the-world-factbook/geos/ci.html. [2] The World Bank, “GDP per capita (current US$),” https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-CL. 3] International Monetary Fund, “World Economic Outlook, October 2018: Challenges to Steady Growth,” 8 October 2018, https://www.imf.org/en/Publications/WEO/Issues/2018/09/24/world-economic-outlook-october-2018. [4] The World Bank, “Population, total,” https://data.worldbank.org/indicator/SP.POP.TOTL?locations=CL Chilean Opportunities
A Bastion of Free Trade and Duty-free Access for US Exports Chile is known for being an open market and one that enthusiastically supports expanding trade opportunities with partners around the world. Chile has negotiated twenty six trade agreements covering 64 countries, including a bilateral agreement with the United States.[1] The US-Chile Free Trade Agreement entered into force in 2004, and since 2015, all US-origin products are eligible to enter Chile duty-free.[2] The US-Chile FTA has been a remarkable success; US exports to Chile have increased by more than 400% in the fifteen years since implementation! In 2017, the US exported $13.6 billion of goods to Chile, the 21st largest US goods export market in that year.[3] The United States is Chile’s second largest trading partner behind China.[4] US Products May Still Have Better Access than Newer FTAs Chile also represents an opportunity for those US exporters who will feel squeezed by greater competition from the entry into force of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Chile was a founding member of the original TPP of which the US withdrew in 2017 and is in the process of ratifying the CPTPP. The US-Chile FTA currently provides better preferential access for US goods than does the CPTPP for goods from member countries. US exporters not already in Chile should consider how and whether their products may compete on cost and quality given duty-free access. Popularity of US Products With the help of duty-free access for US exports, US brands have established themselves in Chile and are considered high quality. This is especially the case for US agricultural and processed food products. As the Chilean middle class continues to grow and prosper, demand for quality and healthy US “consumer oriented” food products has grown substantially. Processed food exports constituted two-thirds of all US agricultural exports to Chile in 2017, a 39% increase from 2016. Chile is an increasingly urbanized society, with around 40% of the population living in the Santiago metro area. With urbanization comes demand for a greater variety of products from different countries.[5] US ag exporters of all sizes should take advantage of this trend and the duty-free access for all US exports that the US-Chile FTA provides. Challenges of the Chilean Market and Differences from the United States High Competition, Small Market Size Chile’s status as one of the world’s leaders in free trade agreements is as much a challenge as it is an opportunity. For a relatively small market of 18 million people, Chile’s myriad free trade agreements means that competition from FTA partners around the world is fierce.[6] The entry into force of the CPTPP will only intensify the competition for US exporters. As Chileans become more sophisticated in their product choices, quality will become increasingly important in this market given the import competition. Restrictive Nutrition Labelling Laws Chileans are progressively turning towards healthier and organic food products due to new nutritional labelling laws enacted in 2015.[7] The new legislation requires companies to explicitly label food products high in sugar, salt, saturated fat, and calories. These regulations have had a significant impact on consumer choice and are forcing companies to innovate with healthier recipes and ingredients.[8] US exporters have the opportunity to turn these challenging regulations into opportunities by catering to the growing demand for healthy and organic products in the Chilean market. Personal Relationships are Paramount The importance of personal business relationships is one major factor that distinguishes the Chilean business environment from that of the United States. Business contracts often require a personal relationship and Chileans prefer face-to-face meetings with their business partners.[9] Establishing a relationship with importers in Chile is an important aspect to consider when exporting to Chile, and it could make the difference in landing a contract. This could be a burden to smaller-sized businesses that don’t always have the means to make the travel necessary to form these relationships. Final Takeaways Chile stands out as an export opportunity because of the country’s reputation as a world leader in free trade. In a period of trade disruption, US exporters can be reassured that Chile’s political class celebrates and seeks out trade opportunities around the world. As Chile continues its steady growth, Chilean consumers will continuously become more sophisticated and seek out a wider variety of products from a diverse array of countries. The US-Chile FTA provides US exporters with the opportunity to export goods to Chile duty-free. Furthermore, US brands are already excelling in the Chilean market and US processed food products are becoming increasingly popular in Chile. US exporters should take advantage of the health trend in the Chilean market that has been fueled by the new nutrition labelling regulations. Finally, Chile is one of the most stable countries in Latin America, and, despite its small size, the country presents a golden opportunity for US exporters who are willing and able to compete in the highly competitive Chilean market. We would love to hear from you. Send us your thoughts on Chile or other potential market opportunities for US exporters on our LinkedIn or Twitter. Scott McCallum [email protected] 240.389.9003 [1] “Chile Country Commercial Guide,” last updated 11/1/2018, https://www.export.gov/article?id=Chile-Trade-Agreements. 2] Office of the United States Trade Representative, “Chile Free Trade Agreement,” https://ustr.gov/trade-agreements/free-trade-agreements/chile-fta. [3] United States Census Bureau, “Trade in Goods with Chile,” https://www.census.gov/foreign-trade/balance/c3370.html#2017. [4] “Chile Country Commercial Guide,” last updated 11/1/2018, https://www.export.gov/article?id=Chile-Trade-Agreements. 5] Ibid. [6] Ibid. [7] Australian Trade and Investment Commission, “Food to Chile: Trends and Opportunities,” https://www.austrade.gov.au/australian/export/export-markets/countries/chile/industries/food-to-chile. [8] “Chile Country Commercial Guide,” last updated 11/1/2018, https://www.export.gov/article?id=Chile-Trade-Agreements. [9] Ibid. Comments are closed.
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