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Country Commercial Guides for FY 2000: Chile Report prepared by U.S. Embassy Santiago, released July 1999

CHAPTER I.   EXECUTIVE SUMMARY

This Country Commercial Guide (CCG) presents a comprehensive look at Chile's commercial environment, using economic, political, and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the American business community. Country Commercial Guides are prepared annually at U.S. embassies through the combined efforts of U.S. Government agencies.

Chile is among the region's most dynamic and promising markets. Its strength and attractiveness lie not in its size (as a country of 15 million people, it is relatively small), but in the energy and professionalism of its entrepreneurs, the transparency of its regulation, and in the predictability of its decision-makers.

Market-led reforms over 25 years have yielded 16 straight years of economic growth, which averaged 8.1 percent from 1988-1997. An increasingly diversified economy and strengthening ties with buyers and suppliers in Europe, Asia, and the Americas have given Chile a wide range of options for further growth. Prudent economic policy-making has secured long-term stability unknown elsewhere in Latin America. The Asian crisis and the resulting fall in commodity prices reduced economic growth in 1998 and 1999 in Chile's natural resource-based economy, but this should be a temporary phenomenon that will reverse in 2000.

Chile has enjoyed a consistent budget surplus and until 1998 enjoyed balance of payments surpluses due to substantial foreign investment. It has sufficient funding to finance growth. Foreign investment is mostly long-term.

The Chilean political system is responsible for a good part of this success. In 1990, Chile emerged from 17 years of military government with an overall consensus about the general parameters of economic management. Occasional frictions occur in otherwise good civil-military relations, but Chile has enjoyed a relatively smooth transition to democracy and democratic government is irreversible.

Chile is a particularly promising market for high technology and capital goods. These include electricity generation and related products, pollution control equipment, telecommunications equipment, computers and peripherals, mining and construction industry equipment, building materials, medical equipment, port equipment, food processing equipment, air conditioning and refrigeration equipment, and security equipment.

U.S. exporters to Chile find few problems in financing customers. Sufficient Chilean, U.S., and third-country banks operate in Chile. Chilean banks enjoy all the trade credit they need. OPIC and EXIM are both active. The World Bank and the Inter-American Development Bank provide project financing to the extent that Chile needs and wants it. Chile has the highest Moody's and Standard and Poor's ratings in Latin America, BAA-1 and A-, respectively. Chilean reserves in May 1999 were over $17 billion (almost a year of imports), more than enough for its needs.

Solid opportunities for U.S. goods abound in Chile, but competition is stiff, especially from countries with which Chile has negotiated free trade agreements. The U.S. is Chile's largest single supplier (almost 23 percent of imports), but European and Asian competitors are strong. It is crucial to establish an effective and efficient presence. Many foreign companies have subsidiaries or branch offices in Chile; others utilize distributors or representatives. Although the 40 percent of Chile's population resident in the Santiago region is easily reached, Chile's unusual geography makes it sometimes difficult to cover other population centers, making knowledgeable and well-connected Chilean representation important. However, 80 percent of Chile's economy is controlled from Santiago; most agents/ distributors operate from there with offices in the regions.

Chile has one of the simplest and most transparent regulatory systems in the region for trade and business. Careful review of regulations and full compliance with guidelines will ensure more successful and trouble-free operations in Chile. Chile maintains import and export licensing requirements, but they are more for statistical purposes rather than control. Only agricultural products and a few sensitive items face restrictions.

It is not hard for foreign businesspersons to operate in Chile, important because personal contact is essential to doing business. There are non-stop flights to Santiago from Miami, New York, and Dallas/Ft. Worth; in-country connections are plentiful. Visa restrictions are minimal.

Country Commercial Guides are available for U.S. exporters on the National Trade Data Bank's CD ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the Worldwide Web at http://www.stat-usa.gov and http.//state.gov/. They can also be ordered in hard copy or diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. More information on Chile and consular information for U.S. citizens is available through the U.S. Embassy's home page: http://usembassy.cl or via electronic mail addressed to: osantiago@mail.doc.gov. All amounts in this report are in U.S. dollars unless otherwise stated.