Since October 2019 billions of dollars have been lost due to protests and riots. Despite the turmoil, Chile’s economy is slowly making a comeback in 2020, with an expected growth rate of 1.2% by the end of the year.
By Sandeep Wasnik
Chile is traditionally considered as a model in Latin America in terms of political and financial transparency. It has also been one of the fastest-growing economies in Latin America over the last decade, enabling the country to significantly reduce poverty. The country ranked 59th among 190 economies in the ease of doing business index 2020, right after Mexico, that was ranked 60th. In “Across Borders Trading” Chile holds the ranks (73), Peru (102), Brazil (108), and Argentina (119).
Chile’s economy relies heavily on exports of copper (48 per cent of total sales) and the state-owned firm CODELCO (Spanish: Corporación Nacional del Cobre), which is the world’s largest copper producer, but exports from Chile fell by 0.7 per cent over a year earlier to USD 6,702 million in January 2020, Manufactured products account for 38 percent of total exports, due to lower sales of manufactured products (-7.9 per cent), in particular food (-3.9 per cent) and chemicals (-3 per cent) and agricultural, forestry & fishing goods (-6.4 per cent), of which grape (-13.6 per cent) and cherry (-4 percent). Meanwhile, mining products increased by 8.9 per cent, boosted by copper (8.4 per cent).
A silent earthquake in Chile (Protests and riots)
Chile was traditionally considered an oasis in Latin America due to its political stability and prosperous economy. However, since October 2019 billions of dollars have been lost due to protests and riots. Despite the turmoil, Chile’s economy is slowly making a comeback in 2020, with an expected growth rate of 1.2% by the end of the year.
Chile’s economic recovery after years of low commodity prices relied on higher consumption and private investment, increasing wages, lower interest rates, private-sector confidence, higher copper prices, growing mining production, and to a lesser extent on increased wholesale trade and commercial services. The Chilean peso has fluctuated since demonstrations began, becoming one of the worst-performing emerging markets currencies since the start of the year 2020.
India – Chile Bilateral Trade Relation
India and Chile signed a preferential trade agreement (PTA) on March 8, 2006, and it came into force from August 2007. India’s offer list to Chile consisted of 178 Products at the tariff lines the Margin of Preference (MoP) ranging from 10%-50% at 8-digit level HS Code and Chile’s offer list to India consisted of 296 tariff lines with MoP ranging from 10% – 100% at 8-digit level HS Code. Under the expanded PTA, Chile has offered concessions to India on 1798 Products at the tariff lines with Margin of Preference (MoP) ranging from 30%-100% and India has offered concessions to Chile on 1031 Products at the tariff lines at 8-digit level HS Code with MoP ranging from 10%-100%. The two countries have again initiated talks for second expansion. In a PTA, two trading partners significantly reduce or eliminate import duties on certain goods traded between them.
In the financial year 2018-19, India-Chile total Bilateral trade was recorded $ 2.23 Billion, where India exports $0.98 Billion and imports in India from Chile was recorded $1.23 Billion. Infographics show the 5 topmost commodities (In 2 Digit HS Code) Import-Export of India with Chile in the financial year 2018-19.
India needs to focus on Chilecon Valley:
India needs to focus on the technology and innovation industries in Chile since 72 per cent of Chileans have internet access, the number of digital banking, payment, and remittance applications continues to skyrocket and focus on creating an excellent ecosystem to the creation of Start-ups. Today, Chile has replaced Mexico as the regional leader in the tech world which ranked 30th global.
In 2010, the Chilean government created a program called StartUp Chile, it provides equity-free investment for qualified StartUps with an aim to make the country as a hub for innovations in Latin America and this program and managed by CORFO (Spanish: Corporación de Fomento de la Producción). StartUp Chile was the first governmental accelerator of its kind, supporting over 1,600 start-ups, with more than 4,500 entrepreneurs from 85 countries and a survival rate of 54.5%. The government also launched Visa Tech; an initiative that helps tech companies obtain a work visa in fewer than 15 working days.
Nearly 62 per cent of adult Chileans (ages between 18 – 64 years old) consider there to be plausible entrepreneurship opportunities within the next six months within their communities. This number is impressive, especially compared to Mexico’s 36.4 per cent.
In spite of its size and geographic isolation from the rest of Latin America, Chile, nicknamed “Chilecon Valley” ranks among the top startup hubs in the region, and in 2019, it was considered Latin America’s most innovative country. Moreover, the Chilean capital of Santiago ranked 59th in the global ranking of cities followed by Viña del Mar (351st) and Valparaiso (457th). Chile’s position in the first place isn’t surprising based on the success of accelerators such as Startup in Chile. The accelerator program not only welcomed global entrepreneurs to set up their businesses in Chile but also built Chile’s FinTech ecosystem in the process. The latest figure from December 2017 says around 75 fintech startups operate in this Andean country. payment and remittances are the leading segments among Chilean fintech with 31.1 per cent. The financial management segment accounts for 17 per cent and, enterprise technologies for financial institutions takes 11.6 per cent. Chilean fintech are turning to Mexico, Colombia, Peru, and Argentina as their main destinations to offer their solutions beyond their country of origin.
(The author is Latin America and the Caribbean Countries Market Expert. Views are personal.)