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 for much of the last 30 years has averaged approximately 5% per year, the Chilean economy slowed in recent years, with average annual GDP growth hovering between 1.5-2.0% from 2014-2017. However, a sustained rebound in global copper prices and increased business confidence have buoyed the Chilean economy, which is forecast to grow by more than 3% in 2018.
As the United States - Chile Free Trade Agreement (FTA) concludes its fourteenth 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.
Overall, the U.S. enjoys a $3.0 billion trade surplus with Chile, exporting $13.6 billion in goods to Chile, while imports to the U.S. from Chile totaled US$10.5 billion in 2017. In addition to the US$13.6 billion in goods, the U.S. exported US$4.3 billion in services to Chile in 2016 (most recent year with data available). Overall, the U.S. is Chile’s #2 trading partner after China, which overtook the U.S. at the #1 trading partner four years ago. Chinese-Chilean bilateral trade has increased significantly in recent years; however, the United States maintains a broader and more dynamic and diverse trading relationship with Chile.
According to the United Nations Conference on Trade and Development (UNCTAD), global foreign direct investment (FDI) inflows to Chile in 2017 totaled just $6.7 billion – a sharp decline from $19.5 billion in 2015. Despite this slowed investment into Chile, the country maintains a total FDI stock in excess of its GDP, topping $275 billion in 2017. United States Government statistics report a total FDI stock from the U.S. in Chile of $29.4 billion in 2016 (last year of information available). However, Chilean sources list U.S. FDI stock at over $38 billion, making it the leading foreign direct investor in Chile.
Chile continues to have the highest credit rating in Latin America, despite being downgraded earlier this year from A+ to A by Fitch. Both macroeconomic stability and a relatively strong sovereign balance sheet have earned Chile this strong credit rating with a stable outlook.
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 low inflation, advanced financial market development, low levels of corruption and openness to foreign trade. According to the World Economic Forum’s Global Competitiveness Report 2017-2018, Chile maintained its ranking from the previous year as best in Latin America and 33rd in the world for competitiveness. Chile’s GDP per capita (PPP) topped $24,000 in 2017, reinforcing its incredible growth since 1990, when the figure was just $4,500.
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 and is the current chair of the Pacific Alliance. Chile is also an associate member of Mercosur, a full member of APEC, and an OECD member since 2010. Chile is a founding member and leader in the 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was signed in Santiago in March 2018.
Chile has successfully negotiated Free Trade Agreements with 62 countries around the world. As such, competition is fierce, and Chile has given its 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.
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. The treaty has not yet been ratified by the U.S. Senate. Chile’s 2014 Tax Reform increased the effective income tax rate on dividends or profits earned by taxpayer residents in other countries up to 44.45%. This change is only applied to residents from countries without a bilateral taxation treaty in force with Chile (such as the United States), while residents from the 32 countries with such a treaty will keep this tax burden at 35%. 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.