Country Brief: Chile

November 19, 2004

            The Republic of Chile is located in Southern South America, bordering the South Pacific Ocean, between Argentina and Peru.[1]  In 1973, Augusto Pinochet led a dictatorial military regime that overthrew Chile’s three-year-old Marxist government.[2]  Pinochet ruled Chile until 1990 when a freely elected president was installed.[3]  The country’s population in 2003 was 15.8 million, with a 17% poverty level[4] and 8.5% unemployment rate.[5]  Chile’s official language is Spanish, and 96.2% of the population over the age of 15 can read and write.[6] 

                Between the years of 1991 and 1997, Chile’s growth in real GDP averaged 8%; but due to the global financial crisis in 1998 and tight monetary policies, the country’s growth rate decreased to approximately 4%.[7]  In 1999, Chile experienced negative economic growth for the first time in more than 15 years when a severe drought worsened the recession.[8]  After a few years of ups and downs, Chile’s growth rate recovered to a rate of 3.2% in 2003.[9] 

Chile’s market-oriented economy is prevalent to foreign trade.  GDP is projected to increase dramatically in 2004 due to a Chile-US Free Trade Agreement that went into effect on January 1, 2004; and due to rising copper prices, growing export earnings, and increasing foreign direct investment.[10]  Chile mainly exports copper, fishmeal, fruits, wood products, paper products, fish, and wine to its major markets: the U.S., the EU, Japan, China, Korea, Mexico, and Brazil.[11]  The country’s main imports are consumer goods, chemicals, motor vehicles, fuels, electrical machinery, heavy industrial machinery, and food from its major suppliers: the EU, Argentina, the U.S., Brazil, China, Korea, and Japan.[12]  Approximately eight percent of Chile’s GDP is derived from mining minerals such as copper, iron ore, nitrates, precious metals, and molybdenum.[13]

Chile’s first-rate Foreign Investment Law is evidence of the country’s welcoming attitude towards foreign direct investment.  Foreign investors are treated the same as Chileans; not only is the registration process straightforward and foreign investors guaranteed access to the official foreign exchange market, but the few restrictive requirements on foreign director investors have also been suspended.[14]  The higher import tariffs on wheat, wheat flour, and sugar have been modified due to Chile’s WTO obligations in 2002; these price bands are to be phased out in the next 12 years according to the US-Chile FTA.[15]  Chile has FTAs with various different countries, such as Canada, Mexico, Central America, the EU, and South Korea, and preferential trade agreements with Venezuela, Colombia, and Ecuador.

Chile had approximately 3.5 million main telephone lines in use, and 6.5 million mobile phones in 2002.[16]  The country has 6585 km of railways, 15,484 km of paved highways,[17] eleven ports and harbors,[18] and 71 paved airports.[19]  Chile is an active member of the UN, the UN family of agencies, the Rio Group, and the Asia-Pacific Economic Cooperation (APEC).[20] 

            Pros and cons the international trade community should be aware of in Chile:

• the international territorial disputes between Chile and Bolivia and Peru, and territorial claims over Beagle Channel islands and Antarctica,[21]
• the use of Chile as an important trading zone for Cocaine destined for Europe and the US, especially through the Iquique Free Trade Zone,[22]
• the country’s relatively marginal level of corruption,
• the country’s capital market transparency ranking 2^nd in the world,[23] and
• Chile’s involvement in APEC and its plans to boost commercial ties to Asian markets. [24]