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Red hot Chile peppers the world with FTAs

Dr Andres Velasco, Chile’s Treasurer is in Australia this week on the back of our just announced FTA. You have got to hand it to the Chileans – they’re keen.


In fact, Chile (along with Mexico) is the leading forger of trade deals in the global economy. Whilst the rest of South America ran ill-conceived economic nationalist policies, Chile (the ‘Jaguar’ economy of South America), opened up its markets and became free trade agitator global arena. Eventually the rest of the continent followed with Mercosur.  

In fact, Chile’s FTA with New Zealand first signalled its global economic aspirations. According to Manfred Wilhelmy of the Chile Pacific Foundation: "Many Chileans are keen to position themselves as a Pacific nation as well as a Latin American one." According to Pro-Chile’s Sydney based Trade Commissioner Marcelo Salas, Chile wants an FTA  "So we can do more with Australia in terms of energy, mining  technology, innovation and R &D, education and financial services – particularly given Chile and Australia’s unique superannuation models." But what is in it for Australia?

The first survey of Australian exporters did show a positive response, with 21 per cent of exporters believe that a FTA with Chile would be good for their business with only 2 per cent being negative. Whilst, it is not at the same positive levels as say, China at 43 per cent, ASEAN on 42 per cent or USA on 40 per cent, the approval rate is still in promising territory. According to Nigel Warren, Australia’s Senior Trade Commissioner in Santiago, there are great opportunities are there on the ground for Australian businesses in Chile: "The key areas are in mining technology and services where Australian companies are uniquely positioned to provide equipment, technologies and specialised services.

Environmental technologies are also booming, in areas such as Coal Fired Processing Plants, LNG and Renewable Energies such as Hydro, Wind and GeoThermal. Chile is also investing in two LNG terminals and the opportunity exists to export LNG to Chile. Other strong areas include aquaculture, viticulture and animal genetics." But more importantly, Chile plays a "gateway" role for Australian businesses in South America.

According to Austrade research, 425 Australian businesses export to Chile and Santiago is the regional headquarters for 50 Australian corporates. Many miners, like BHP Billiton, Mincom, Surpac, Groundprobe, Ludowici and GRD Minproc have been in Chile for up to 20 years. But Australia is also moving beyond mining in Chile. Australian companies can be as  diverse as SKM, Worley Parsons, GHD and Sedgman in the Consulting sector as well as Orica, Energy Sector Pacific Hydro, Hydro Chile, Cedar Creek and NuFarm.  On the services side too there’s mass-franchiser Boost Juice and the University of Queensland.

This week’s visit by Dr Velasco paves the way for the visit to Australia of Michele Bachelet, Chile’s first women President in September at APEC. The last time Dr Bachelet set in foot in Sydney was when she was in exile from the Pinochet regime, so she, like her nation of Chile has certainly come a long way. *Tim Harcourt is chief economist at Austrade and author of Beyond Our Shores.

www.austrade.gov.au/economistscorner

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