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Chile: Market Profile

Major Economic Indicators

Table: Major economic indicators of Chile
Table: Major economic indicators of Chile

Recent Developments

  • Chile offers attractive investment openings in sectors that include mining, services, food, infrastructure, tourism and energy. Since the Foreign Investment Statute (D.L. 600) came into force in 1974, it has been used by most foreign investors to bring in their capital. Under this regime, foreign investors can opt to sign a contract with the state of Chile – establishing their rights and obligations – which authorises the transfer of capital and other forms of investment into the country. There is also an alternative regime, Chapter XIV of the Chilean Central Bank’s Compendium of Foreign Exchange Regulations, under which foreign investors must register in order to bring in capital. More information on the investment environment and the relevant regulations can be found at InvestChile.

  • The inflows of foreign direct investment (FDI) to Chile exceeded US$15.8 billion in 2015, with China contributing US$6.9 million. As of the end of 2015, China’s total stock of FDI to Chile topped US$204 million, up from US$10.8 million in 2006. Hong Kong, holding an FDI stock of US$1.3 billion as of end-2015, was the 2nd largest Asian investor in Chile, after only Japan.

  • As an important step in accommodating greater synergies, Hong Kong signed a free trade agreement with Chile on 7 September 2012, which entered into force on 9 October 2014. Moreover, Hong Kong and Chile signed on 18 November 2016 an Investment Promotion and Protection Agreement (IPPA) – an Investment Agreement under the free trade agreement between Hong Kong, China and Chile – which is now pending entry into force.

  • Hong Kong’s total exports to Chile fell by 10% to US$328 million in the first seven months of 2017, while its imports from Chile slid by 14% to US$528 million.

Current Economic Situation

Stronger commodity prices and the resulting revival in investment in the mining sector have underpinned the economic growth of the Chilean economy, leading to better consumer confidence and investment sentiment. Also, the positive effects of consistent stimuli from the government on infrastructure and healthcare are continuing to sink in and hence give economic growth a sustained boost. In all, the Chilean economy is expected to post a 1.7% growth this year, before accelerating to 2.3% in 2018.

Trade Policy

Chile’s import system is based on the principle that all goods may be freely imported and anyone may engage freely in international trade transactions. As such, importers are not subject to any registration requirements. However, they are required to hire an accredited customs broker to enter the merchandise if the FOB value of such merchandise is higher than US$500. The use of a customs broker is not mandatory in several other instances, including merchandise entering into a free trade zone.

Chile adopts the Harmonised System for Tariff Classification and affords at least most favoured tariff treatment to all its trading partners. Virtually all imports are subject to a most-favoured-nation (MFN) duty of 6% ad valorem. Apart from import duties, products imported and/or circulated in Chile are essentially subject to a value-added tax (VAT) of 19% as domestic goods, excise taxes and some other charges, including an airport tax.

Regarding safeguard measures, Chile has been extremely restrained in its use of trade remedies. It does not apply any anti-dumping (AD) or countervailing (CV) measures on imports from the Chinese mainland or Hong Kong. Besides, Chile does not have any import quotas in place, nor does it impose any licensing requirements on imports or have any pre-shipment inspection requirements. However, certain goods require approval or certification prior to importation, while other goods require approval or certification for customs clearance.

Concerning foreign exchange, Chile does not impose any limits on the amount of currency derived from trade operations that can be brought in or out of the country, although Chilean exporters and importers with a total export or import value of US$5 million or higher on an FOB basis in any single year are required to provide certain information to Chile’s Central Bank.

Over the past two decades, Chile has developed an extensive web of FTAs with a range of partner countries in the Americas, Asia, Europe and the Pacific region. Specifically, Chile has signed FTAs with more than 90% of its trade partners, including Australia, China, Hong Kong, India, Japan, Mexico, the US, the EU and South Korea. Moreover, Chile is the only member of the Trans-Pacific Partnership (TPP) Agreement, which was formally signed by its 12 signatories in February 2016 although the new US president Donald Trump signed an executive order formally withdrawing the US from the trade deal in January 2017, to have a free trade agreement in place with every other TPP member.

On 18 November 2005, Chile signed its FTA with China, which entered into force on 1 October 2006. Roughly half of China’s exports to Chile in value terms were afforded duty-free treatment upon entry into force of the agreement. Duties for an additional 21% of China’s exports are to be phased out in equal stages over a five-year period, while duties on 26% of China’s exports will be phased out over a ten-year period. Only some 3% of China’s exports are excluded from the scope of the free trade agreement. Products subject to five-year staging is now tariff-free (since 1 January 2010), while products subject to ten-year staging currently face a 2.4% duty rate.

On 13 April 2008, China and Chile signed the Supplementary Agreement on Service Trade to the Free Trade Agreement. According to the agreement, China’s 23 sectors and sub-sectors, including service in sector of computer, management and consulting, real estate, mining, environment, sports and air transport, and Chile’s 37 sectors and sub-sectors, including service in sector of legal service, construction and architecture, engineering, computer, R&D, real estate, advertisement, management and consulting, mining, manufacturing, leasing, distribution, education, environment, tourism, sports and air transport were also opened up to each other under the WTO commitments.

In the furtherance of trade and investment co-operation, Hong Kong and Chile signed a bilateral free trade agreement on 7 September 2012, which became effective on 9 October 2014. Under the agreement, approximately 88% of total Chilean goods imports from Hong Kong benefit from duty-free treatment with immediate effect and about 97.7% of all goods imports will enjoy such treatment by the third year. The remaining 2.3% of tariff lines have been excluded from the agreement and will continue to be subject to regular most-favoured-nation rates of duty, including include certain cereals, sugars, textiles, apparel, steel products, concrete, used tyres and household appliances.

Chilean standards and technical regulations do not distinguish between foreign and domestic goods. Chile has so far issued over 1,000 technical regulations covering a broad spectrum of products. Standards, on the other hand, are voluntary and are adopted through consensus among parties from both the public and private sectors who are invited to participate in the consultations. The National Institute for Standardisation (INN) has overall responsibility for the elaboration of standards. In addition, Chile is a member of the Pan-American Standards Commission (COPANT), the International Organisation for Standardisation (ISO), the Inter-American Metrology System (SIM) and the InterAmerican Accreditation Cooperation (IAAC).

Chile has labelling regulations in place for a wide range of products. In general, products commercialised in Chile must be labelled with the name or registered brand and address of the producer or importer, the country of origin and care instructions. The information included must be accurate and be provided in Spanish.

There are two free trade zones in Chile: the Free Zone of Iquique (ZOFRI), Region I, in the far north, and the Free Zone of Punta Arenas (PARANEZON), Region XII, in the far south. ZOFRI is a major entry point for products bound for Bolivia and Peru, Paraguay and northern Argentina. ZOFRI encompasses the free ports of Arica and Iquique, while PARANEZON also has a free port. Each free trade zone is equipped with manufacturing, packaging and exporting facilities. Imports entering the free zones of Iquique and Punta Arenas are duty-free. However, imports leaving the free trade zones to enter the Chilean market pay full tariff and VAT charges.

Hong Kong's Trade with Chile [1]

Hong Kong’s total exports to Chile decreased by 10% to US$328 million in the first seven months of 2017, after a 8% growth to US$657 million in 2016. Major exports to Chile in January-July 2017 included telecommunications equipment & parts (shared 66% of the total), computers (10%), footwear (5%), watches and clocks (2%) and electrical machinery & apparatus (2%).

On the other hand, Hong Kong’s total imports from Chile slid by 14% to US$528 million in the first seven months of 2017, after soaring by 59% to US$817 million in 2016. Leading imports in January-July 2017 included fresh or dried fruit and nuts (not including oil nuts) (shared 92% of the total), alcoholic beverages (2%), fresh (live or dead), chilled or frozen fish (1%), fresh, chilled or frozen meat & edible meat offal (1%) and crustaceans, molluscs & aquatic invertebrates, chilled, frozen, dried, salted or in brine (1%).

Table: Hong Kong’s trade with Chile
Table: Hong Kong’s trade with Chile

 


[1] Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

Content provided by Picture: Louis Chan