Economic Data
(In U.S. dollars, 1998 figures)
Total GDP: Purchasing power parity=$184.6 billion
GDP Growth: 3.5%
Per Capita GDP: $12,500
Inflation Rate: 4.7%
Trade Balance: -$2.6 billion (deficit)
Trade with RI: Chile is Rhode Island’s 31st largest trading partner, with $2.8 million in exports in 1998 ($10.2 million in 1994).
Exports: $14.9 billion; copper (37%), other metals and minerals, wood products, fish and fishmeal, and fruits. Export trading partners: Asia (34%), EU (25%), Latin America (20%), U.S. (15%).
Imports: $17.5 billion; capital goods, spare parts, raw materials, petroleum, and foodstuffs. Import trading partners: Latin America (26%), U.S. (25%), EU (18%) and Asia (16%).
Best Prospects for Exports: Pollution control, telecommunications equipment, travel and tourism, medical equipment, security equipment, computers and peripherals, electrical power systems, air conditioning and refrigeration, plastics machinery and resins, mining equipment, port equipment, building materials, food processing and construction equipment.
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Republic of Chile
Location: West coast of South America, bordered by the southern Pacific Ocean to the west, Peru and Bolivia to the north, and Argentina on the east.
Geographic Area: 756,950 sq. km., nearly twice the size of California.
Climate: Temperate – desert in the north, cool and damp in the south, Mediterranean climate in the central region. Spring (October-November) and autumn (March-May) are mild, summers (December-February) are hot and dry.
Major Cities: Santiago (capital), Concepcion, Valparaíso, Antofagasta, Temuco.
Population: 15 million
Ethnic Groups: Whites and white-Amerindian (95%), Amerindian (3%), other (2%).
Languages: Spanish is the main language. English is spoken in the cities and by business people.
Time Zone: GMT – 4 hours, one hour ahead of Eastern Standard Time. Chile is on daylight savings time between mid-October and mid-March.
Workweek: Monday through Friday, 9:00 a.m. to 5:00 p.m., with lunch at noon.
Type of Government: The Chilean government is similar to the U.S. The bicameral National Congress includes a Senate and a Chamber of Deputies. The President is elected through an electoral system like that of the U.S.
Head of State: President Ricardo Lagos, inaugurated in March 2000.
Currency: Chilean Peso=100 centavos
Exchange Rate: U.S.$1 = 506 pesos
Current Political Conditions: Ricardo Lagos, leader of and presidential candidate for the ruling coalition “Concertacion de Partidos por la Democracia,” was elected President in a run-off ballot in January 2000. His election continues the succession of Concertacion candidates who have assumed office since the 1988 plebiscite that denied General Augusto Pinochet the opportunity to run for a second eight-year term. On March 25, 2000, Congress approved a controversial constitutional reform measure that would permit lifetime senators who are former Presidents to resign, yet retain their substantial pension and possibly be immune to prosecution. Whether the reform would apply to General Pinochet, who returned recently from custody in England, is undetermined. The balance of power in the upper house is tipped toward the center-right opposition by nine appointed “institutional” senators.
Economic Conditions and Trends: The Chilean government anticipates strong growth of six percent in 2000. While Chile’s economy has expanded for the last fifteen years, 1998 brought a slowdown that continued into 1999. Because Chilean growth has been led by a boom in exports, concentrated in primary products and processed natural resources (principally copper, fresh fruit, and forestry and fisheries products), the world economic slowdown and consequent decline in commodity prices affected the country’s growth. Soaring investment, both foreign and domestic, sparked the export boom of the 1990s. Although foreign investment remained strong in 1998, domestic investment slowed because of monetary tightening. Both the product mix of, and the markets for, Chile’s exports are becoming increasingly diversified. The traditional dependence on copper has declined, and Latin America has joined the U.S., Asia, and the European Union as important purchasers of Chilean products. Chile’s reliance on exports and desire for market diversification has led it to seek opportunities to open key markets. Chile joined the Asia Pacific Economic Cooperation (APEC) organization in 1994. It has signed bilateral trade-liberalizing agreements with a variety of Latin American nations, and free trade agreements with Mercosur and Canada. Chile and the European Union plan to begin exploratory trade talks in mid-2000, and Chile is an active participant in the negotiation of the Free Trade Area of the Americas (FTAA).
Tarriffs, Trade,Taxes, Trademarks
The Chilean business environment is more transparent and open than most in Latin American countries, and presents few barriers to imports or investment. Foreign firms operating in Chile enjoy the same protections and operate under the same conditions as local Chilean firms. The Chilean tariff rate is currently around 10 percent on nearly all products from most countries, although there are some products, including computers, from certain countries that enter with no tariffs or duties. Chile is prepared to negotiate a free trade agreement with the U.S., similar to the treaty signed by Chile with both Canada and Mexico. Chile strongly advocates the Free Trade Agreement of the Americas (FTAA). All imports require a license, which are granted as a routine procedure for nearly all goods. Such licenses are used more to gather statistics than to control imports.
Taxation: Chile levies two tiers of corporate taxes, a flat tax of ten percent, and a tax on dividends remitted to non-residents abroad. The value-added tax (VAT) of 16 percent is levied on all imports except services.
Foreign Investment: Chile’s development strategy includes an open attitude toward foreign investors. Applications are quickly approved, often within days and almost always within one month. Profits may be repatriated immediately, but capital cannot be taken out until after one year. The Central Bank requires that a percentage of investment funds from foreign sources be placed in a non-interest bearing account, or encaje, at the Central Bank for two years in order to control the flow of foreign capital.
Free Trade Zones: The Free Zone of Iquique, in the northern tip of the country, and the Free Zone of Punta Arenas in the southern tip of Chile are Chile’s two free trade zones. Imports entering Chile’s free trade zones pay no duty or VAT. However, imports leaving the free trade zones to enter the greater Chilean market pay full tariff and VAT charges.
Trade Finance: The Chilean banking system offers many of the products available in international financial centers. Foreign trade financing and money exchange operations are particularly active and efficient compared to the rest of Latin America. The banking sector has entered a period of consolidation as banks combine to achieve economies of scale necessary to compete in a global market. Corporate lending focuses on medium-sized businesses, because restrictions on the percentage of a bank’s assets that can be lent to a single customer lead firms wanting large loans to resort to international sources of finance. Companies utilize a variety of financing sources, including retained earnings, stock, direct investment, bank debt, bonds, and the issue of American Depository Receipts (ADRs) on U.S. stock exchanges. Eurobonds are also utilized. Larger corporations have moved away from the use of bank debt to public source of funds, such as locally issued stock and bonds and to international capital markets.
Marketing and Selling Factors: Price is the most important selling factor in Chile. Price-competitive Asian basic consumer products outsell more expensive European or North American brands. When dependability, quality and after-market support are more important, North American and European goods are favored. The best guarantee of efficient service and appropriate promotion is to establish a subsidiary or appoint a representative in Chile. Approximately 3,000 importers are active in Chile. Traditional storefronts and department stores are the typical sales channels. Shopping malls located in the larger cities, with anchor department stores and specialty shops, are an excellent way to market textiles, electronic goods, sporting goods, cosmetics, office supplies and home goods. Direct marketing or catalog sales are not yet common in the market. Consumers prefer to window shop and select goods personally. Television, radio, newspaper and magazine advertising is used heavily to reinforce in-store merchandising methods. Private agencies handle most advertising.
Product Labeling and Marking: Imported products normally consumed by the Chilean public must display the country of origin on them before being sold in Chile. Packaged goods must be marked to show the quality, purity, ingredients, weight, and measure of contents. Canned or packaged foodstuffs imported into Chile must bear labels in Spanish for all ingredients, additives, manufacturing and expiration dates, and the name of the producer and importer. All sizes and measurements must be converted to the metric system.
Electronic Commerce: Chileans recognize the enormous potential of e-commerce in an export-based, service-oriented economy. Telecommunications Undersecretary Cristian Nicolai tapped Internet development as one of the main components of the government’s infrastructure plan.
Patents/Trademarks/Copyrights: Protection of property rights is guaranteed by a strong legal regime, although patent protection is deficient. Patents are granted for 15 years from the date of the grant. Well-known trademarks are frequently registered by local Chileans. When challenged, the courts usually vacate the trademarks if investment in them is small. Since this litigation process can take as much as four years, many foreign claimants choose to buy back the trademark rather than spend time and money in lengthy litigation.
Key Contacts
The John H. Chafee Center for International Business and World Trade Center, Bryant College
Raymond W. Fogarty, Director, Edward Barr, World Trade Center Manager Telephone: (401) 232-6407 or (410) 232-6408
Fax: (401) 232-6416 E-mail: postoffice@itdn.net
Website: http://www.rieac.org
Rhode Island Economic Development Corporation (RIEDC)
Maureen Mezei, International Trade Director
Telephone: 222-2601, ext. 123 E-Mail: mmezei@riedc.com
U.S. Export Assistance Center, Department of Commerce
Keith M. Yatsuhashi, International Trade Specialist
Telephone: (401) 528-5104 E-Mail: kyatsuha@mail.doc.gov
U.S. Small Business Administration
Marilyn Bogue, International Trade Officer
Telephone: 528-4585 E-Mail: marilyn.bogue@sba.gov
U.S. Embassy in Chile
Avenida Andres Bello 2800, Casilla 27-D, Santiago
Telephone: (56-2) 232-2600, Fax: (56-2) 330-3710
Embassy of the Republic of Chile
1732 Massachusetts Avenue, NW
Washington, DC 20036
Telephone: (202) 785-1746, Fax: (202) 887-5579
American Chamber of Commerce Chile
Av Americo Vespucio Sur 80-9 Piso
82 Correro 34, Santiago, Chile
Telephone: (56-2) 290-9700, Fax: (56-2) 206-0911
Web site: http://www.amchamchile.cl
Email: jamie.bazan@amchanchilecl
U.S. Department of Commerce
Country Desk – Chile
15th St and Constitution Ave, NW
Washington, DC 20230, Telephone: (202) 482-233
Country Profile
Compiled by Providence Business News,
in collaboration with Bryant College Export Assistance Center.
