Business and Economic Development in Chile

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Transcript Business and Economic Development in Chile

Prestige | Influence | Sustainabilty
Investing and developing business in Chile
General overview
Jorge Batarce T.
Commercial and Development Manager
February 2015
Britcham Business Services | British – Chilean Chamber of Commerce
What do you know about Chile?
Manuel Pellegrini
Manchester City
North
Atacama Desert
Alexis Sánchez
Arsenal
Central Region
Santiago
Miners’ Rescue
Dramatic Events
Alma Project
Observatory
South
Torres del Paine
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Concha y Toro
Vineyard
Moais
Easter Island
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Chile and its remarkable links with the UK
Cultural influence
Scottish born Lord Cochrane Chile’s first Vice Admiral under the Bernardo
O’Higgins administration. In command of the Chilean Navy in the war for
independence against Spain. Five Chilean Navy ships honour his name.
The Chilean Football Association was created by a British national in 1894
and the following year the Valparaíso Wanderers FC began competing in
national leagues and continues to this day.
Victorian-style houses became popular in Valparaíso at the end of the
XIX century, as British immigration and commercial trade between Chile and
the UK were steadily growing. Over 50,000 British immigrants settled in
Chile between 1840 and 1914.
The British Arch is a monument in Valparaíso donated in 1910 by
the local British community in order to commemorate the first centenary of
Chilean Independence. Seven years later the Chilean British Chamber of
Commerce was created.
Over 100 British companies have direct operations in Chile, with many more
exporting through local partners. In general, British brands have had a prosperous
devolpment in all economic sectors and are continually increasing their presence.
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Highlights of Chile
Growth, competitiveness & ease of doing business
Category
Number / Percentage
Population (2014 est.)
17,819,054
GDP (in USD PPP) per capita (IMF, 2013)
22,534
Poverty level by income (Casen, 2013)
14,4%
Unemployment rate (Central Bank, August 2014)
6.7%
Inflation rate (Central Bank, 2014)
4.6%
Literacy rate in adults (UNICEF)
99%
Economically active population (World Bank)
62%
International Indicators
Chile world rank
LatAm rank
Human Development Index 2014 (UN)
40
1
Global Competitiveness Report 2014-2015
33
1
GDP (PPP) per capita (2013, IMF)
53
1
Index of Economic Freedom 2014 (WSJ, HF)
7
1
Trade Opening 2014 (WEF)
8
1
Corruption Perceptions Index 2013 (TI)
22
2
Ease of Doing Business 2014 (World Bank)
41
4
Sources: listed above
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Existing commercial links
Success stories in Chile:
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Chile and its geographic advantages
Main areas and their economic activities
Mining
16% of GDP
Fishing
Agriculture
Manufacturing
Services
Agriculture 75% of GDP
Cattle Breeding
Antofagasta
11% of GDP
Santiago
49% of GDP
Concepción
7% of GDP
9% of
GDP
Forestry
Fishing
Agriculture
Mining
• North (Atacama Desert): mining - Chile is the
world’s largest Copper and Lithium producer. Other
products including Molybdenum and Iodine come from
this region. The weather in this region is similar to
Northern Africa.
• Central Valley, including Santiago (capital and seat
of government) and Valparaíso (seat of Congress):
home to the two main ports in South America. Also
leads in manufacturing, agriculture/agribusiness, wine
production, retail and financial services. The weather
in this region is similar to southern Europe.
•South: Forestry, salmon farming, fishing, agriculture
and, in Concepción, petrochemicals, pulpwood &
board and steel production. The weather in this region
is similar to the UK.
•Fjords and Tierra del Fuego: Tourism, agriculture,
aquaculture, fishing, gas & oil production and coal
mining. The weather in this region is similar to
Scandinavia.
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Why Chile?
Among other Latin American countries
Foreign direct investment in South America and
Mexico as a % of GDP in 2012
11%
6%
5%
4%
4%
3%
3%
1%
1%
1%
1%
Source ECLAC 2012, United Nations
Latin America key business development attributes comparison
chart
Source: IMF WEO October 2013
Source: The Global Competitiveness Report 2013-2014
Latin America GDP per capita comparison chart
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Source: IMF WEO - October, 2013
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About Chile…
Economic Profile
Unemployment and inflation rates 2009-2013
GDP per capita in US$
15000
12%
13000
10%
8%
11000
6%
9000
4%
2%
5000
0%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
7000
Chile
-2%
2009
2010
2011
2012
Unemployment at the end the year
Latin America
Source ECLAC, United Nations
2013
Annual Inflation
Source Central Bank of Chile
Credit rating comparison
Annual Probability of default
Credit rating
S&P
Moody’s
Fitch
Chile
AA-
Aa3
A+
Brazil
BBB-
Baa2
BBB
Colombia
BBB
Baa2
BBB
Mexico
BBB+
A3
BBB+
Estonia
AA-
A1
A+
Panama
BBB
Baa2
BBB
Portugal
BB
Ba1
BB+
3.6
2.1
0.3
0.7 0.9
1
1
2.5
2.8
1.1 1.3 1.3 1.3
Source: Deutsche Bank Research, 2014
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About Chile…
Trading overview
With reduced trade barriers, Chilean exports and imports have risen
significantly. Exports account for approximately one third of Chile’s GDP.
Trade with the UK
UK exports to Chile in 2013 totaled £1.503bn, breaking the £1bn barrier for
the first time. This is comprised of goods exports of £1.159bn (up 83%) and
services exports of £344m (up 48%)
Chile is the UK’s third largest export market in Latin America, after Brazil
and Mexico. Exports to Chile are more than those of the next two largest
countries (Argentina, Colombia) combined
Key UK exports to Chile include crude oil, cars and replacement parts,
machinery, whisky, pharmaceuticals and clothes
Chile has signed 23 Free Trade Agreements with over 60 countries,
UK imports of Chilean goods are mainly fruit, wine and frozen meat
including the EU, the USA and China.
accounting for up to £610m in 2013
93% of Chile’s exports get preferential treatment
Main Export Destinations Countries
Main Import Supplier Countries
(in millions of US$)
18,601
(in millions of US$)
15,092
9,047
9,009
4,490
12,696
6,225
4,448
3,813
2,671
4,740
725
3,120 2,958 2,730
1,358
Source: ProChile, Business Intelligence
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New Government (2014 – 2017)
Changes and challenges ahead
In September 2014, with approval from Congress, President Michelle Bachelet promulgated a tax reform that
was a key part of her election campaign. Its objective is to gradually increase tax revenues in order to finance
new fiscal spending, mainly on education, whilst also improving income distribution. This in order to level the
Chilean tax legislation to the standards that developed countries have.
The main areas of change are the following:
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Corporate tax: from 2014 to 2017, the tax rate will rise gradually from 20% to 25%.
Immediate depreciation: will allow small and medium sized businesses to deduct all investments in fixed
assets from the year’s taxable income.
Green taxes: a new tax on CO2, NOx, and particulate matter (PM) from fixed sources will be introduced,
as well as a tax on new light vehicles that use diesel fuel.
Tax avoidance & evasion: the bill will increase the budget and inspection powers of the National Tax
Service (SII) in order to tighten controls on avoidance and evasion.
The new government proposal will focus on the following main targets:
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Education reform: focus on educational quality, improving social inclusion and making the entire education
system universally free.
Tax reform: mainly to leverage taxes (among developed countries) for growth initiatives.
New Constitution: main topics are related to human rights protection, guarantees on sustainable
development and the political doctrine as a socially democratic system.
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Exporting to Chile
Procedures and Taxes
Costs
Chile
In Transit
UK
FOB
CIF= FOB + 2%FOB (Insurance)
+ Delivery Costs
Fixed Cost: ~400USD
AdValorem: 6%CIF*
VAT= (CIF+ AdV)*19%
Taxes
Example
650
650 =
+ 200
-350
+ 800
800 =
*Ad Valorem Tax is 0 For UK products
by FTA with EU, Effective Tariff 0,7%
(average)
**Tax Reform will replace for 25%
***With tax reform, with or without
dividends payment, companies will be
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charged 35% AT tax
-200
+1000
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Business Culture
Corporate culture
• Chileans are straightforward in negotiations and normally get written confirmation of agreements
• English language isn’t widely used
• Face-to-face contact is usually crucial in order to do business in Chile
• Punctuality is highly valued
• While formality is respected, a light initial conversation and a bit of humor are appreciated
• Family and friendship play a big role in business connections
• Be prepared to go through a personal assistant before getting to the manager
• Interruptions are normal and not considered rude, but rather a way of showing interest and enthusiasm
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Chile and its markets
Main sectorial challenges & opportunities
Retail
Energy
Mining
Food Industry
Transport
• E-Commerce platforms
• Losses management & control
• Portfolio management: new brands & products
• Design: improvements in layout of stores and shopping malls
• Energy efficiency initiatives for households (PV and Thermal) and large scale projects 100x MW
• Energy storage for 24/7 supply of energy
• Huge demand for clean energy in order to reduce pollution in the largest cities
• Good natural conditions exist for the development of non-conventional renewable energy
•There are remaining challenges in the area of ​transmission
• Equipment and parts
• Engineering and consulting
• Construction
• Production efficiency measures for: fruits: berries, cherries, nuts and for the Wine Industry
• Organic and cost related issues Functional food
• Disease and production challenges in the Salmon Industry. Production in farming ponds
• Salmon and trout feeding systems and caging services
• Chile is set to become a distribution hub for the region with its maritime ports in the north
• Huge challenges in public transport and pollution of greater cities
Infrastructure
• Chile has an investment portfolio amounting to US$ 7 bn. in public tenders including roads, airports,
hospitals, ports and urban infrastructure among others
Tourism
• Opportunities and tourist attractions in all regions of the country. Ability to develop hotels and
recreational projects in areas of interest
• Sustainable tourism development in protected areas through state grants
Across all markets, key success drivers are environmental compliance, business sustainability, corporate social
responsibility and human resources utilizing best practices.
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Examples of services provided
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Peelports is one of UK’s leading ports in
container shipping
Located in Liverpool
The objective was to obtain an overview of the
commodity trade Chile- UK and to identify key
players
BBS provided a complete market background
per sector and a list of 46 key companies
Peel ports is evaluating next trip to Chile
Powder Systems Limited is a manufacturer of
filtration and drying solutions for pharmaceutical
laboratories.
The objective was to find potential distributors a
specific new product line
BBS identified 17 potential companies of which 3
showed interest in representing PSL in Chile
Following a country visit ,PSL selected 1 of them
as distributor
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Yanco is an innovative insecticide and mosquitoes
repellent manufacturer
Located in Liverpool
The objective was to find potential distribution
partners in Chile
BBS identified 19 potential companies of which 5
showed interest in representing Yanco brand in
Chile
Following a round of teleconferences, , Yanco is
under negotiations with 3 of them
Brain International offers IAB´s accreditation in
Accountancy for bookkeepers around the world
The objective was to find potential partners for its
certification
BBS identified 32 potential educational institutions of
which 10 showed interest in providing the
certification
Following a country visit , IAB is currently in
conversations with three of them
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About US
British Chilean Chamber of Commerce (Britcham)
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Established June 25th, 1917
•
Britcham is a non profit organization which strives to inform & create networks among its members
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180 members, across 40 sectors including: Banking, Construction, Engineering, HR, Law, Mining and Retail
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Britcham makes its own business publications and carries out its own events focused to specific audiences
Patrons 2014
Sponsors 2014
Britcham Business Services (BBS)
•
BBS was initiated by a UK government request with the objective to promote business in order to double UK
exports worldwide by 2020.
If you would like to know more about Chile and its economic situation, please read our latest Economic Report:
http://britcham.cl/wp-content/uploads/2014/04/22-04-2014.pdf
For further more information about the British Chilean Chamber of Commerce, please visit:
http://www2.britcham.cl/en/
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Our Services
For UK companies
BRITCHAM BUSINESS SERVICES (BBS)
We develop different levels of support packages to suit different sectors and budgets of UK
exporters. We offer tailored professional advice on market entry, setting up shop and meeting
the right people.
– Some services (*) that will be offered through our business partners are:
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Office accommodation
IT Support
Legal support
Financial Outsourcing
Translation services
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Business Process Outsourcing
Communications
HR/Recruitment
Import/Export services
Transport outsourcing / Inventory management
– Other services (**) provided primarily by BBS, in order to develop leads and stay
involved for as long as necessary, include:
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Market research
Industry cost structure
Distribution channels
Key success factors
Pricing analysis
Brand analysis
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Competitive interactions analysis
Any financial analysis
Due diligence
Meeting with key partners
Inbound / Outbound missions
Business consultancy
(*) This services may have a fixed or variable cost involved.
(**) Depending on the complexity and time required for analysis, there may be an additional fee.
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Who we are
Greg Holland – Managing Director
Greg is a CEng, CMarEng, FIMarEST, MCIWEM, with vast experience in managing
position across the world. In 2003 arrives at Chile as MD of Thames Water. He has been
involved in projects related to Energy, Water and operation management.
Jorge Batarce – Commercial and Development Manager
Jorge is a qualified civil engineer, and holds an MSc in engineering, a Masters in Finance,
and an MBA. He has experience working in transnational companies managing projects
with values exceeding USD $250m in investment for the last 10 years.
Marcia Gattoni – Trade & Promotion Manager
Marcia is an administration and customer care professional with more than 10 years
experience working for international companies in Chile and the UK, including 5 years
experience in Market Intelligence.
Andrés González – Market Specialist
Andrés has a Bachelor with distinction in Business Administration and Economics and a
Bachelor degree in Social Sciences. He has 3 years of experience in market expansion
endeavours as well as business & public planning in both the public and private sectors.
Francisco Macaya – Market Specialist
Francisco has a Bachelor of Business. During that time he spent a semester abroad in
Germany working as a pre-Master of Marketing student. He has 2 years of experience in
Research Studies & Management Control and specializes in Quantitative methods.
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