Exporting to Chile - Market OverviewChile - Market Overview
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Chile continues to be a strong trading partner and export market for U.S. companies, largely due to its open market policies, zero tariffs, stable democratic government, solid business practices, and low corruption. While GDP growth over the last 30 years has averaged approximately 5% per year, the Chilean economy has slowed in recent years, with just 1.9% growth in 2014, 2.1% in 2015, and 1.6% in 2016. Forecasted 2017 GDP growth is still weak, at 1-2%.
As the United States - Chile Free Trade Agreement (FTA) concludes its thirteenth year, trade of products and services continues to be a resounding success. As of January 1, 2004, duties were reduced to zero on 90% of U.S. exports to Chile, and in January 2015, all remaining tariffs were phased out, such that all U.S.-origin products now enter Chile tariff free. U.S. exports reached $17.5 billion at their highest post-FTA year in 2013, representing a 545% increase in exports when compared to pre-FTA figures. While bilateral trade has decreased in recent years, bilateral trade is still 2-3 times 2004 levels.
In 2015, bilateral trade in goods between the United States and Chile totaled US$24.0 billion, down slightly from previous years. The decline is largely attributable to a slowing Chilean economy and the sharp decline in global copper prices. Overall, the U.S. enjoys a US$6.7 billion trade surplus with Chile, exporting US$12.9 billion in goods to Chile, while imports to the U.S. from Chile totaled US$8.7 billion in 2016. In addition to the US$12.9 billion in goods, the U.S. exports US$4 billion in services to Chile. Overall, the U.S. is Chile’s #2 trading partner after China, which overtook the U.S. at the #1 trading partner three years ago. Chinese-Chilean bilateral trade has increased significantly in recent years; however, the United States maintains a broader, more dynamic and diverse trading relationship with Chile.
Per the United Nations Conference on Trade and Development (UNCTAD), global foreign direct investment (FDI) inflows to Chile in 2015 (most recent year with data available) reached US$20.2 billion – a slight decline from US$21.2 billion in 2014. FDI stock inflows to Chile from the U.S. amounted to US$730 million in 2014. Total FDI stock from the U.S. in Chile stood at US$27.6 billion at the end of 2014 (last year of information available), representing the largest source of FDI in Chile. Both macroeconomic stability and growing integration with international capital markets have earned Chile an A+ credit rating from Fitch. Although Fitch modified Chile’s outlook from stable to negative in December 2016, Chile continues to have the highest credit rating in Latin America.
Chile is stable, prosperous, and consistently ranks high on international indices relating to economic freedom, transparency, and competitiveness. The Chilean peso floats freely on international markets. Chile also performs well in terms of government efficiency, low levels of corruption, and openness to foreign trade and is consistently the highest ranked country in Latin America in terms of economic competitiveness. Per the World Economic Forum’s Global Competitiveness Report 2016-2017, Chile moved up two slots from the previous year to rank 33rd in the world for competitiveness. Chile’s GDP per capita (PPP) remains historically high at over $23,000 in 2015 and 2016.
Chile continues to pursue market-oriented strategies, expand global commercial ties, and actively participate in international issues and hemispheric free trade. Chile is a member of the Pacific Alliance, the Rio Group, an associate member of Mercosur, a full member of APEC, and a founding member of the Trans-Pacific Partnership and UNASUR. In 2010, Chile became the 31st member of the OECD, only the second Latin American country to join after Mexico.
Chile has successfully negotiated Free Trade Agreements with 62 countries around the world, notably with Europe, China, India, and North America, among many others. As such, competition is fierce and Chile has given its nearly 18 million citizens unprecedented access to the world’s products and services. This offers a unique opportunity for U.S. exporters interested in expanding their businesses in arguably the most open and stable market in Latin America.
On September 10, 2014, the Chilean congress passed a major tax reform, aimed to collect additional revenue equal to 3% of Chile’s current GDP. The main changes affect income taxes, and were phased in over four years, entering force completely at the beginning of 2017. The maximum marginal rate for personal income tax decreased from 40% to 35%, and corporate tax rate rose from 20% to 27%. Most companies now pay taxes on a partially integrated basis, under which shareholders can use 65% of corporate tax payments against their personal income. Taxes on alcoholic beverages also rose from 15% to 20.5% for beers and wines, and from 27% to 31.5% for distilled beverages.
Other new taxes that were also introduced include a “green tax” on sales of new diesel vehicles and a capital gains tax on real estate sales. New provisions on tax compliance aim to limit evasion and strengthen the capabilities of the Chilean Internal Tax Service, or Servicio de Impuestos Internos (SII). A value-added tax (VAT) of 19%, which remained unchanged under the tax reform, is applied to all goods and services, imported and domestic. The mining royalties and fuel tax, which together account for more than half of the country’s tax revenue, were also unchanged.
In 2010, the United States and Chile concluded the negotiations of a bilateral tax treaty, which was ratified by the Chilean Congress in September 2015. It has not yet been ratified by the U.S. Senate. Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
Chile Trade Development and Promotion