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Chile - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Santiago
Area:: 756 km2
Total Population:: 17.465
Annual growth rate:: 1.00%
Density:: 23.00/km2
Urban population:: 89%
Population of Santiago (6.677), Concepción (978), Valparaiso (904)
Official language: Spanish.
Other languages spoken: Indian dialects
Business language: Spanish, English
Ethnic Origins:: 90% descendants of Europeans, 5% Amerindians of whom 87% belong to the Mapuche ethnic group.
Beliefs: Catholics 88.8%, Protestants 11%, Jews 0.2%.
Telephone codes:
To make a call from: 0
To make a call to: +56
Internet suffix:: .cl
Type of State::
A Republic based on parliamentary democracy where the President enjoys considerable powers.
Type of economy::
Upper-middle-income economy, Emerging Financial Market
One of South America's most stable and prosperous nations; World's leading exporter of copper and salmon. Second in Latin America and the Caribbean regarding legislation favorable to business.

Economic overview

Although the Chilean economy is very open, it was able to resist well the 2007-2008 global crisis (-1.5% of GDP in 2009), as well as the impact of a violent earthquake in 2010 which had a total estimated cost of almost USD 30 billion in damages. Despite the tightening of its monetary policy and the uncertainty of the international situation, the country's growth increased by 6% during the period between 2010 and 2012, this was mainly due to a strong domestic demand. In 2013, the growth rate was 4.4%; Chile was affected by the slowdown of the Chinese economy, the decline in copper's prices and a reduction on investments.

Chile has the best performing economy in Latin America and its growth rate, which is one of the strongest in the OECD since 2010, should remain at a good level in 2014. The country is considered by the foreign investors as a model of economic stability. Chile, which joined the OECD in January 2010, remains exposed to the fluctuations in copper prices, being this country the largest producer and exporter of this metal. Following the violent earthquake that stroke the country in 2010, the government continued to focus on rehabilitation and reconstruction through fiscal measures and appropriate spending. The goal of the authorities is to reduce the structural deficit of the central government to 1% of GDP by 2014. In 2013, inflation was under control. Despite a strong domestic demand, inflation should remain moderate in the years to follow thanks to the strength of the national currency (Peso) and the stabilization of oil prices which has an impact on the import of products.The level of public debt is very low. Thanks to the copper's revenue, Chile has a sovereign fund of EUR 15 billion. In the long term, Chile will need to improve its productivity and break off from its dependence on copper (at the moment it represents one-half of its exports and almost one-fifth of its GDP) and it should also develop food production.

Chile's unemployment rate has gone down, it is 5.5% and it mainly affects the young people. Even though Chile has one of the highest GDP per capita in Latin America, poverty continues to affect almost 20% of its population and there is a high level of inequality (it is one of the countries of the OECD with the highest level of inequalities). The socialist Michelle Bachelet was elected president in December 2013 with a large majority. She should focus on the demands for more equality as well as the students who also demand education free of charge. She also wants to pass a new constitution and establish fiscal reforms. Lastly, indigenous people continue to claim their rights to ancestral lands.

Main industries

Chile's economy is dominated by the industrial and the service sectors. These two contribute to more than 96% of the GDP. The main activity sectors in Chile are mining (copper, coal and nitrate), manufactured products (agri-food processing, chemicals, wood) and agriculture (fishing, vineyard, fruits).

The agricultural sector contributes to about 3.5% of the GDP, the industrial sector to more than 37% and the services to 59.5%.

About 13% of the population work in the agricultural sector, more than 23% in the industries and 64% in the services.

The two main challenges in the Chilean economic are: breaking off from its traditional dependence on the price of copper (copper's production represents 50% of the country's exports, the collapse in its price during the financial crisis had a strong effect in Chile's economy) and developing the production of a self-sufficient food supply.

Agriculture and livestock farming are the main activities of the central and the southern parts of the country. Fruit and vegetable exports have reached historical records, thanks to a deliberate strategy of conquering the European, North-American and Asian markets, implemented in the 1990s. Chile benefits from its location in the Southern Hemisphere to offer fruits out of season to the countries of the Northern Hemisphere.

Foreign trade overview

Chile has a very open economy which depends highly on international trade. In 2012 exports represented 38% of the country's GDP. Chile respects the terms of free-trade and has signed free-trade agreements (FTAs) with several important economies, especially with the European Union, the United States, China and South Korea.

Chile's top three customers are China (representing 23% of its national exports in 2012), the United States and Japan. The country mainly exports copper (50% of its exports), fruits and fish products. Chile's main suppliers are the United States, China, Argentina and Brazil. Imports involve mainly fuels, minerals and oil, machinery, vehicles, electric equipment and electronics.

Chile's trade balance is structurally positive, a trend that should continue and become even stronger despite the evolution in the demand for copper. However, this surplus was lower in 2013 (USD 2.4 billion against USD 3.4 billion in 2012) due to the drop of the global price for copper combined with the uptrend appreciation of the national currency and the increase in imports. Chile's dynamic trade with the rest of the world remains steady. Its comparative advantages on the economic level (mining income, competitiveness and counter-seasonal agriculture) give it access to the large markets of North America, Europe and Asia-Pacific (and recently, to South America as well, especially Brazil).

FDI

The flows of foreign direct investments (FDI) in Chile experienced a strong growth until 2008 (flows had multiplied by four in five years), but they slowed down in 2009 due to the effect of the global recession. They have sharply recovered since 2010, reaching a record level for the country. Chile is the second most attractive country in South America in terms of FDI, after Brazil. According to the UNCTAD, Chile ranks 11 in relation to FDI attractiveness. The origin of this good performance is due to the Chilean economic policies founded with a spirit of capital transparency and non-discriminatory against foreign investors. These investors are also attracted by the richness of Chile's natural resources, the stability of its macro-economic system and its growth potential, its juridical security, the country's low level of risk and the high quality of its infrastructures. The mining sector, driver of the Chilean growth, has been receiving significant and steady flows of FDI. The country ranks 34 out of 189 countries in the classification of Doing Business 2014 issued by the World Bank.

Chili ranks fifth among the countries that are the most open to imports and foreign investments in the world. The United States is the largest investor in this country.
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