Column: Chile’s participation in the world economy

“Agreements can always be improved when the parties reach a consensus, but updating and expanding our international agreements is not the same thing as submitting them for review, which would generate uncertainty regarding Chile as a trade partner.”  

By Rodrigo Yáñez, Undersecretary for International Economic Relations, and InvestChile Director Andrés Rodríguez . 

Chile’s network of 30 free trade agreements (FTA) is the broadest in the world, and it is an important part of our competitiveness. It gives us access to 65 economies that represent 88% of the world’s wealth (GDP). Chile’s participation in the global economy has been the cornerstone of our growth and development strategy.  

As such, over the past three decades, Chile's trade has grown at an annual rate of 7.3%, increasing from US$16 billion in 1990 to US$133 billion in 2020. In other words, our trade has increased eight-fold over the past 30 years. Chile’s foreign trade was equivalent to 60% of the country’s GDP in 2020.  

As a small economy, Chile needs to diversify its exportable offering of goods and services as well as its destination markets. Trade agreements give us this preferential access. Of course, these can always be improved when the parties reach a consensus, but updating and expanding our international agreements is not the same thing as submitting them for review, which would generate uncertainty regarding Chile as a trade partner.  

Over the past few years, we have constantly updated Chile’s trade policies, which allows us to address new topics in global commerce, such as services, SMEs, gender, the environment and the digital economy.  

Thus far, we have updated the FTAs between Chile and Canada and between Chile and China. We are in the process of renegotiating our FTAs with South Korea, the European Union and the European Free Trade Association (EFTA), as well as the Partial Scope Agreement with India. Chile is also updating its agreements with Uruguay, Brazil and Argentina.  

While one of the fundamental components of the trade agreements that our country has signed is negotiation to reduce customs tariffs, the positive externalities that FTAs deliver are not limited to direct exporters. High-level and specialized supplier networks have developed under the auspices of these industries and have successfully sustained sectors such as mining, aquaculture, fruit farming, banking and the pharmaceutical industry, just to name a few. Supplier networks also have facilitated the process of transitioning our export basket towards an intensive phase of added value and services that generate innovation.  

But that’s not all. Our network of trade agreements has made Chile an investment hub for Latin America, positioning it as an unbeatable platform for countries seeking to reach the rest of the region and the world.   

Proof of this is that, according to InvestChile data, 65% of the Chilean companies that export goods and 85% of those that export services have foreign capital. The impact of our openness to the world and foreign investment is crucial for understanding how Chile has developed over the past few decades. Today, 40% of the investment with production purposes made each year in the country comes from foreign firms. The tax contributions of these companies is key: 51.4% of all taxes collected in Chile come from foreign companies even though they represent just 10% of the taxpaying entities in the country. They also create jobs, generating nearly 25% of formal employment in our economy.  

There is no question that our openness to the world and respect for our agreements has decisively impacted Chileans’ wellbeing, providing new and better business opportunities on practically every continent for our entrepreneurial spirit, talent and the work of our people. All of this creates jobs and contributes to Chile’s image as an innovative, modern and efficient country. We must maintain the path that we have built and improve it for new generations in order to achieve our goal of living in a country in which sustainable, inclusive development that is open to the world benefits everyone.  

To learn more about investment opportunities in Chile, see the following article.   

Source: El Mercurio