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2008 Charla Presentation


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2008 Charla Presentation

  1. 1. <ul><li>Business and Economic </li></ul><ul><li>Development in Chile </li></ul><ul><li>U.S. – Chile FTA </li></ul><ul><li> </li></ul>
  2. 2. AmCham Chile <ul><li>Chilean-American Chamber of Commerce, member of the Association of American Chambers of Commerce in Latin America (AACCLA)/U.S. Chamber of Commerce </li></ul><ul><li>Mission: Promote free trade and investment between Chile and the U.S., being the effective voice of the members, and facilitating related services </li></ul><ul><li>Over 700 member companies: 46% Chilean companies, 30% U.S. companies, 24% mixed capital. </li></ul><ul><li>18% of Chile’s GDP and 85% of U.S. investment in Chile. </li></ul><ul><li>Events, Research, Publications, Commercial Services </li></ul>
  3. 3. Why Chile? <ul><li>The Economy </li></ul><ul><li>Sustained economic growth </li></ul><ul><li>High domestic savings rate </li></ul><ul><li>Solid Banking System </li></ul><ul><li>Political Stability </li></ul><ul><li>Qualitative Features </li></ul><ul><li>Strong domestic financial and capital markets </li></ul><ul><li>Broad Access to international financing </li></ul><ul><li>Infrastructure, Human Capital </li></ul>
  4. 5. Chile: Economic Highlights <ul><li>Early economic liberalization (1975) compared to the region (1980). </li></ul><ul><li>“ 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 </li></ul><ul><li>Doubled per-capita income / poverty cut in half during the 1990s. </li></ul><ul><li>Inflation under control: 2%-4% range from 1999 to 2007, rising in 2008 </li></ul><ul><li>“ A+” Rating from Standard and Poor’s, December 2007 </li></ul><ul><li>Developed nation by 2020 </li></ul>
  5. 6. GDP Growth Source: Central Bank of Chile
  6. 7. Unemployment & Inflation Source: Central Bank of Chile
  7. 8. Chile’s Efforts to Reduce Poverty Source: Ecuesta CASEN 2006, Mideplan
  8. 9. Chile Trade Overview <ul><li>Exports: Engine of Chilean economic growth </li></ul><ul><li>Exports represent approx. 50% of Chile´s GDP </li></ul><ul><li>Last 3 decades exceptional export growth </li></ul><ul><li>Increase in productivity & external competitiveness </li></ul><ul><li>Exporting products that 30 years ago didn´t exist: </li></ul><ul><ul><li>Salmon, Fruit, Wine, Cellulose </li></ul></ul><ul><li>2007 Worldwide exports $66 Billion </li></ul><ul><li>2007 Worldwide imports $43 Billion </li></ul>
  9. 10. GDP based on PPP per Capita 2008 <ul><li>Source: Source: IMD, World Economic Outlook, October 2007 </li></ul>
  10. 11. Chile: Total Trade Source: Central Bank of Chile
  11. 12. Chile Total Trade <ul><li>Source: Central Bank </li></ul>
  12. 13. Foreign Investment in Chile <ul><li>$64.7 billion in FDI, 1974 – 2007 </li></ul><ul><li>The US is the largest Investor with $16.3 billion, 25% of total FDI in Chile </li></ul><ul><li>Over 4000 companies from 64 countries have i nvestments in Chile ( 300+ U.S. companies in Chile) </li></ul><ul><li>Business Clusters in Chile: Shared services, corporate headquarters, IT development & support, call centers </li></ul><ul><li>47+ Companies use Chile as a platform for services in the region </li></ul><ul><ul><li>IBM, Unilever, Nestle, Zurich, GE, Falconbridge, Wachovia, Equifax, Packard Bell, Phelps Dodge, Kodak, ALICO. </li></ul></ul>
  13. 14. FDI in Chile by Country Source: Cinvers (Comité de Inversiones Extranjeras), Materialized Foreign Investment (D.L. 600) by Country 1974-2007
  14. 15. Recent Trend of FDI in Chile Source: Cinvers
  15. 16. U.S. FDI in Chile by Sector Source: Cinvers
  16. 17. Materialized FDI in Chile Source: Cinvers
  17. 18. Chile: Business Highlights <ul><li>High standards of business ethics </li></ul><ul><li>Low cost of doing business </li></ul><ul><li>Business Environment Ranking: B 21 (E and 100 being most risky) (Economist Intelligence Unit) </li></ul><ul><li>Highly-skilled and reliable workforce </li></ul><ul><li>Advanced telecommunications and IT infrastructure </li></ul><ul><li>Santiago rated best combination of quality of life & business potential </li></ul><ul><li>Ranked best business center in the region </li></ul><ul><li>Economist Intelligence Unit Democracy Index rates Chile 30th out of 167 countries -- flawed democracy category </li></ul>
  18. 19. Competitiveness Scoreboard Source: IMD, World Economic Outlook, October 2007
  19. 20. Corruption Perception Index Source:
  20. 21. Chile: Services Market <ul><li>Ranked highest in Latin America for connectivity and technology infrastructure </li></ul><ul><li>Ranked 33rd in Ease of Doing Business among 178 countries (down from 28 in 2007) </li></ul><ul><li>Ranked 30 th in E-Readiness (score of 6.47/10); U.S. is 2 nd (score of 8.85/10) </li></ul><ul><li>7th for Offshoring Attractiveness(A.T. Kearney) </li></ul><ul><li>2007/2008 Human Development Index: Ranked 40th (out of 177 countries) as a country with high human development </li></ul><ul><li>Technology & service springboard </li></ul><ul><li>Call centers, IT service centers, Biotechnology, Software Development center </li></ul>
  21. 22. Doing Business in Chile Ranking Source: Doing Business in Chile 2008, International Finance Corporation
  22. 23. Human Development Index 2007 <ul><li>Index is a compilation of: </li></ul><ul><li>Life expectancy at birth (78.3) </li></ul><ul><li>Adult literacy rate (% ages 15 and older) (95.7%) </li></ul><ul><li>Combined primary, secondary and tertiary gross enrollment ratio (82.9%) </li></ul><ul><li>GDP per capita (PPP US$12,027) </li></ul><ul><ul><ul><ul><ul><li>Source: Human Development Report 20072008 </li></ul></ul></ul></ul></ul>
  23. 24. Trade Agreements <ul><li>Chile has 19 trade agreements with 57 countries, representing 80% of the world’s international trade; this is more than any other country </li></ul><ul><li>Free Trade Agreements: Canada, South Korea, CAFTA, China, Ecuador, EFTA (Iceland, Liechtenstein, Norway and Switzerland), USA, Mexico, Japan and Peru </li></ul><ul><li>Economic Cooperation Agreements: Bolivia, Colombia, Venezuela and MERCOSUR (Argentina, Brazil, Uruguay and Paraguay) </li></ul><ul><li>Association Agreements: European Union (27 countries), P-4 (Brunei, New Zealand, Singapore) </li></ul><ul><li>Partial Agreements: India and Cuba </li></ul><ul><li>WIP: Australia, Malaysia, Vietnam, Indonesia, South Africa and Turkey </li></ul>
  24. 25. Chile´s Trading Partners <ul><li>Source: Lexis Nexis </li></ul>
  25. 26. Chile´s Trading Partners <ul><li>Source: Lexis Nexis </li></ul>
  26. 27. U.S.-Chile Relationship <ul><li>The U.S. is Chile’s # 1 trading partner and foreign investor </li></ul><ul><li>Trade has reached a record high under the FTA </li></ul><ul><li>In 2007, total bilateral trade reached US$ 15.7 billion, with a positive trade balance </li></ul><ul><ul><li>Exports to US of US$ 8.419 billion </li></ul></ul><ul><ul><li>Imports from the US of US$ 7.253 billion </li></ul></ul><ul><li>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 </li></ul><ul><li>In 2007, Chilean companies exported approximately 2,000 different products to the U.S. </li></ul>
  27. 28. U.S. – Chile Trade Source: Central Bank
  28. 29. U.S.-Chile Trade Development Source: Central Bank
  29. 30. Chile Trade Development Source: Central Bank 132%
  30. 31. The FTA <ul><li>Tariff Reduction </li></ul><ul><ul><li>Tariffs eliminated in a maximum period of 12 years (2015) </li></ul></ul><ul><ul><li>Chile - US: tariffs on 95% of products reduced to 0% immediately </li></ul></ul><ul><ul><li>US - Chile: Tariffs on 90% of products reduced to 0% immediately </li></ul></ul><ul><li>Telecommunications, E-Commerce </li></ul><ul><li>Rules of origin and customs procedures defined </li></ul><ul><li>Effective dispute resolution </li></ul><ul><li>Transparency </li></ul><ul><li>Labor and Environmental Chapters </li></ul>
  31. 32. FTA Benefits - U.S. <ul><li>Regain competitive positioning </li></ul><ul><li>Leadership in free trade </li></ul><ul><li>Impetus towards other agreements (Peru) </li></ul><ul><li>Concrete support for countries who have succesfully applied free market economic reforms and have developed strong democratic political systems </li></ul><ul><li>Investment flows </li></ul><ul><ul><li>Enhanced legal framework </li></ul></ul><ul><ul><li>Probable tax treaty </li></ul></ul>
  32. 33. FTA Benefits - Chile <ul><li>New export possibilities </li></ul><ul><ul><li>Market niches – Textiles, milk products, oils, nitrates, chemical products, pears, artichokes </li></ul></ul><ul><ul><li>Tariff escalation (discrimination on higher value-added goods) disappears </li></ul></ul><ul><li>Decreased unemployment and inflation </li></ul>
  33. 34. FTA Results <ul><ul><li>Expectations: Increase bilateral trade by 30% , major gains in terms of investment </li></ul></ul><ul><ul><li>Since 2003 </li></ul></ul><ul><ul><li>162% increase bilateral trade total </li></ul></ul><ul><ul><li>Both exports and imports show increases of over 140% </li></ul></ul>
  34. 35. Challenges <ul><li>Facilitate the exportation of Services </li></ul><ul><li>More agreements to avoid double taxes </li></ul><ul><li>Better customs standards </li></ul><ul><li>Better English Skills </li></ul><ul><li>Innovation ( I & D) </li></ul><ul><li>Intellectual Property –FTA </li></ul><ul><li>Investment Rate </li></ul>
  35. 36. Conclusion <ul><li>Chile has a successful record of reform, growth and stability, standing out as an “island” in Latin America </li></ul><ul><li>This success is firmly rooted in trade liberalization </li></ul><ul><li>The U.S.-Chile FTA has been beneficial for the U.S. as well as Chile </li></ul>