- Chile is Australia’s third largest trading partner in Latin America;
- It has a population of 16.6 million, a GDP of US$164 billion;
- Chile’s relatively open business environment has made it an ideal base for Australian companies looking to expand into Latin America;
- It is Latin America’s most stable and transparent commercial environment;
- There are currently around 120 Australian companies actively trading with Chile;
- The Governments of Australia and Chile have concluded negotiations for a free trade agreement, which will be the first for Australia with a Latin American market.
Chile is known for its macroeconomic stability and for being a country open to foreign investments, its recent economic success has been built on the exportation of copper (the world’s largest exporter), as well as agriculture, forestry and fish (salmon).
Chile has an extensive network of Free Trade Agreements (FTAs) and has continued its strong push to engage economically with the Asia Pacific region and to build strategic alliances along the eastern seaboard of South America. In the second half of 2006 it concluded FTAs with Japan, Colombia and Peru, commenced negotiations with Australia in 2007, and began preparing to negotiate FTAs with Thailand, Malaysia and Vietnam. Chile already has preferential trade agreements with 54 countries including with nine APEC members (USA, Canada, South Korea, Mexico, New Zealand, Singapore, Brunei, China and Peru). Chile also has an association agreement with the EU, including an FTA element which entered into effect in 2003. In 2007, Chile commenced services and investment negotiations with China, building on already completed FTA negotiations on goods.
The Minister for Trade, Simon Crean announced in late May that Australia and Chile have concluded negotiations for an FTA that will deliver new trade and investment opportunities to Australia and it will be an important milestone in our growing engagement with the wider Latin American market. The FTA covers trade in goods, services and investment. Tariffs on all existing merchandise trade, in both directions will be eliminated by 2015. The vast majority of Australian goods exported into Chile, and Chilean goods exported to Australia will enter duty free from entry into force of the FTA, which is expected to be 1 January 2009.
The FTA will offer Australian exporters opportunities across the board which will be particularly valuable in services and investment areas, including:
- Mining and energy technology and services, engineering and consulting services, franchising and services, education and training, information technology, tourism and infrastructure.
- Other areas that will benefit include energy (coal, LNG, renewable energy), agriculture (dairy, meat, ovine and bovine genetics, production technologies) and food and beverages including wine.
For more information on the Australia Chile FTA visit the Department of Foreign Affairs and Trade website.
Overhead costs are relatively low and the workforce generally well educated. On average foreign SMEs enjoy the most success by finding the right local partner, either through a JV or acquisition.
Opportunities exist for Australian companies in the areas of:
- Mining (Technology and Services),
- Energy (Coal, LNG, Renewable Energy – Hydro, Wind and Geothermal),
- Agribusiness (Ovine and Bovine Genetics, Production Technologies),
- Food and beverage (specialised),
- Services (including consulting (engineering, vocational education and corporate training),
- Information technology,
- Infrastructure (Concessions in Prisons, Hospitals, Coal Fired Processing Plants, Roads, Airports and Ports), and
- Defence (Spare Parts, Boats, and Technology).
With Chile’s growing middle class and Chileans increased disposable income, franchising has emerged as a new area of opportunity for Australian companies in Chile. Already, Australian chain Boost Juice has a Master Franchisee in Chile, and has opened outlets in two of Santiago’s largest retail malls, and further plans to open up another twenty outlets across Chile in the next four years. Additionally the general interest in Australian products and services continues to diversify into new areas such as aviation.
There are a number of opportunities for companies specialising in financial services in Chile, AIM (Alternative Investment Market) being one. Generally, mid-sized companies (especially mining) find it difficult to raise funds locally because of perceived risk. Mining companies are looking to raise capital, expand/acquire and/or diversify their investment into other business sectors.
Chile is facing its biggest energy crisis for many years. Until recently the country relied heavily on the supply of natural gas from Argentina but with price freezes and economic growth in Argentina, supply has been reduced to a minimum. The government is committed to diversify energy supply – e.g. LNG, hydro, coal and renewables. There are opportunities for companies in asset management, construction and consultancy.
The Chilean government actively supports renewable energy with electricity suppliers being legally obliged to source a portion of their supply from renewable sources. The largest CDM projects have been developed but the next stage of projects should enable smaller project holders to develop projects (bundling) and participate in the CDM market. Opportunities exist for project financing/management, carbon trading and consultancy.
The aquaculture and food sectors are growing in Chile at around 135% per year, reaching around U$20 billion in exports. Chile is aiming to become a global food producer by 2015. There are opportunities in biotech, consultancy, new technologies and environmental solutions.
Chile has one of the most modern and successful road concession programmes in the world. Opportunities exist for asset management, design and consultancy (including PPP/PFI). Santiago’s Metro continues to expand.
Opportunities to sell high-end services and consultancy, particularly to companies that export and have to adhere to strict EU/US technical/corporate governance standards. Also consultancy opportunities for water management and filter/emission control.
The Chilean government has significantly increased public expenditure in education; opportunities exist for English language training/programme consultancy and selling cutting-edge educational products and services.