Tradeology, the ITA Blog

Ellen Lenny-Pessagno is a Senior Commercial Officer in Santiago, Chile

Name any country economic or commercial indicator, and you will probably find Chile at or near the top among its peers in Latin America.  GDP per capita – #1, Open market – #1, Ease of Doing Business – #1, Smart Cities – #1.  I could go on and on.  Chile’s achievements are even more remarkable given that just 30 years ago, its GDP per capita was among the lowest in South America.

15,426 U.S. companies exported goods to Chile in 2013 – 87.7% were small and medium-sized companies.

But Chile has ambitions to go further still.  As one of just two Latin American countries that are members of the OECD, a grouping of advanced economies, Chileans now gauge their success and guide their development based on how they measure against their OECD peers. In other words, Chile no longer aspires simply to build the strongest economy in Latin America—they also want their economy to be among the strongest in the world.

Chile’s strategy to continue its development is heavily based on integration into the global economy.  Chile’s growth has been spurred by its aggressive pursuit of a free trade, open market model for well over two decades. Today, most goods enter Chile duty free given the trade agreements it has negotiated with the United States and 63 other countries (and counting).  That trend is continuing.  Back in 2005, Chile, along with Brunei, New Zealand and Singapore, developed the P4 to further develop Pacific trade. The original P4 evolved into the Trans-Pacific Partnership, with 12 member countries.

As with other emerging markets, Chile has faced challenges in recent years.  Following more than 20 years with an average annual growth rate of 5%, the Chilean economy slowed to less than 2% annual growth the last two years. This slowdown is expected to continue for another two years, until commodity prices rebound – Chile is the world’s leading copper exporter. Agriculture has also proven crucial to Chile’s robust growth, as the world’s 10th largest agribusiness exporter.

Still, opportunities abound for U.S. exporters in Chile.  Currently, Chile is the 4^th largest export market in Latin America for U.S. exports and the 22^nd largest in the world. Over 15,000 U.S. firms currently export to Chile, 80% of which are U.S.SMEs. In the past two months alone, my team has supported more than 250 U.S. firms in the Chilean market, both through our customized services and through U.S. business participation in key trade shows held in Chile.  During FIDAE, the most important aerospace and defense show in the region, more than 100 U.S. firms promoted their technologies to ranking members of the Armed Forces from all over South America.  At the show, a U.S. aircraft manufacturer celebrated the delivery of three airplanes to the Chilean Forestry Service, which will better equip them for the next round of forest fires. Over 20 years ago, the U.S. Commercial Service founded what has become the second largest mining show in the world, EXPOMIN. U.S. firms outnumbered firms from any other single country at EXPOMIN 2016 – including firms from Chile! I gave a business briefing at EXPOMIN to a standing room-only crowd of U.S. firms, which was followed by a presentation by the regional VP of a U.S. mining extraction company, who discussed how the industry is adapting to lower copper prices and strategies for selling during these lean times. Chilean President Michelle Bachelet attended both FIDAE and EXPOMIN, where she spent significant time in the U.S. pavilions, demonstrating the Chilean government’s commitment to our trade partnership at the highest levels.

U.S.-Chile bilateral trade has quadrupled since the U.S.-Chile FTA entered into force in 2004, and U.S. investments in Chile have grown at comparable rates, due to a transparent, rules-based business environment.  The United States is the largest source of investment in Chile and we expect this trend to continue. Nonetheless, maintaining competitiveness in this very open market is a major challenge. Two years ago, China surpassed us as the country that provided the largest percentage of goods and services to Chile.

So, how can the United States reverse this trend?  By passing the TPP Agreement.  Chile’s domestic debate on the agreement mirrors our own, as civil society and businesses evaluate TPP’s possible impacts on their livelihoods and economic interests. Yet, this relatively small, geographically isolated country recognizes that it benefits from strengthening relationships on both sides of the Pacific. Interestingly, while academic studies forecast that immediate TPP effects on Chile’s trade, investment and income are relatively minimal– as it already has free trade agreements with all the countries included in the agreement – the Chilean government sees the advantages of deepening and expanding free trade integration and the inclusion of harmonious standards as important for its future growth and partnerships.  Chile also values being at the forefront of global trade — part of a group of countries representing over 40% of global GDP — where it plays and active role formulating the rules of the road. The interest already expressed by other Asia-Pacific countries in joining TPP demonstrates how a relatively small market such as Chile can play a key leadership position in the global trade arena.

Once in force, TPP will offer U.S. firms additional export opportunities to Chile. As Chile capitalizes on the products that will receive greater market access via TPP, U.S. firms will be poised to export additional agricultural and food processing equipment needed by Chilean agro-exporters. Increased trade will require expanded road, port and logistics infrastructure, presenting further opportunities for U.S. firms. Unlike any other U.S. FTA, TPP has a chapter dedicated to reducing barriers for small businesses to export, including raising the de minimus for declarations on express shipments, which is likely to have major, positive macroeconomic impacts for the precise SME clients that we serve. Finally, TPP will support the U.S.’s growing services exports to Chile ($3.8 billion in 2015) by expanding market opportunities in retailing, logistics/express delivery, and internet industries.  To learn more about U.S. export opportunities to Chile under TPP visit our Chile TPP Country Report.

If the U.S. Congress fails to approve the TPP Agreement, our partners, such as Chile, will look elsewhere.  For example, Chile is working in parallel to expand another trade pact, the Pacific Alliance, which includes Mexico, Colombia, Peru, and Chile. While this trade agreement is not as comprehensive as the TPP, it allows these countries to deepen economic and commercial ties. Numerous Asia-Pacific countries aspire to join this group, and Chile has already announced the intention to begin discussions with New Zealand and later Australia, regarding potential membership in the Pacific Alliance.

The Chilean government and business community have a deep appreciation for U.S. partnership on a host of issues, arguably the strongest of which is trade. Via TPP, we will continue to build our bilateral trade and investment relationship to forge the way for 21^st century global trade policies that benefit both of our countries.

To learn more about exporting to Chile and the region, come join me at the 2016 Trade Winds – Latin America Business Development Conference and Trade Missions which we are hosting in Santiago from September 7-9.  This two-day conference will assist you to develop sales strategies and sales channels through meetings with my fellow Senior Commercial Officers from the region, panel discussions with experts on market trends, and networking with representatives and buyers. I hope to see you there! To learn more visit Trade Winds.