Chile/USA Trade and Investment 2024

Twenty years after signing the Free Trade Agreement, commercial ties between Chile and the U.S. are stronger than ever – and evolving

In December of last year, Chilean and American industry leaders, startup founders, and governmental officials met at the Hyatt Regency Hotel in Miami for “Partners for a Better Future.” Organized by Chile’s Export Promotion agency ProChile, the event marked 200 years of diplomatic relations between Chile and the U.S., and two decades since the U.S./Chile Free Trade Agreement (FTA) was signed. It was a fitting location given Miami’s significance as the site of the FTA signing.

“The signing of the treaty 20 years ago was of extraordinary importance because it has favored and benefited both countries in trade, attracting investment and companies, as well as facilitating the strategic access of Chilean companies to the U.S. market,” the Honorable Juan Gabriel Valdés, Chilean Ambassador to the U.S., said at the event. 

Honorable Juan Gabriel Valdés, Chilean Ambassador to the U.S., speaking at the 2023 ProChile event in Miami

Since the signing of the FTA, bilateral trade in goods and services between the U.S. and Chile has increased by fivefold, reaching nearly $49 billion last year. According to the American Embassy in Chile, the U.S. is now the number one export destination for Chile’s small and medium-sized companies. Conversely, the U.S. is the second largest source of foreign direct investment into Chile with an aggregate value of $25B (about 8 percent of Chile’s $301 billion GDP) according to the latest information published by Chile’s central bank (2022). Only Canada has a larger stake of FDI ($36B).

In the other direction, Chile is among the top 15 fastest-growing sources of FDI in the U.S. As of 2021, Chilean companies had invested more than $4 billion in the U.S. “But what is truly remarkable is that some Chilean firms investing in the United States are creating exports to other markets. This is a win-win for both of our economies,” says Bernadette M. Meehan, U.S. Ambassador to Chile. In 2020, Chilean firms established in the U.S. exported some $125 million in goods to other countries. 

Santiago, Chile’s capital is the 7th largest city in the Americas with a population over 5.5 million 

“The relationship between the two countries is great in terms of trade, investments, exchange, scholars, ideas, and culture. Chile is a country that has benefited greatly from the open borders of the United States, just as the US has benefited from access to the Chilean market,” says Carlos Singer, Chairman of the Board of Directors at International Finance Bank in Miami and the former CEO of the magazine America Economia. “Even though it’s a small market, it’s a significant country in terms of natural resources and is open to foreign investment. It’s open to the arrival of ideas and investment ideas from the United States – and the same in the United States.”

In a significant move to bolster bilateral business ventures, last June the U.S. Senate greenlit a U.S.-Chile Bilateral Tax Treaty which went into effect in January. The agreement aims to curb double taxation while streamlining investment processes, heralding a new era of enhanced economic collaboration between the U.S. and Chile. The treaty’s implications are particularly significant for Chile’s key industries, such as wine, salmon, and fruit, commodities that flow from Chile to the U.S. largely through the Miami Customs District. “The free trade agreement between the U.S. and Chile opened up one of the biggest markets for Chilean exports and an increased flow of goods to South Florida ports,” says Andres Bianchi, CEO of LATAM Airlines Cargo, which the tax treaty will only enhance. 

FUELING THE CHILEAN ECONOMY

Founded in 1929, LATAM Airlines was originally Chile’s national carrier until it was privatized in the ’90s. Today, the airline group’s main cargo hub is in Miami. “When you look at what we carry, it is significant for the countries we operate in. On one side, when you look at the exports from South America, they are focused on very relevant sectors for the local economies. In Chile’s case, we provide most of the lift necessary to bring Salmon from Chile to the U.S. – specifically through Miami” says the CEO.

LATAM Cargo in Miami

According to a report by the SeafoodWatch, nearly half of farmed salmon imported to the U.S. comes from Chile, the world’s second-largest producer and the largest single exporter to the U.S. In 2022, the value of Chilean salmon exported to the U.S. was $3 billion, with nearly two-thirds coming through Miami’s ports ($1.82B).

Another major export for Chile is wine. With its favorable climate, diverse terrain, and innovative winemaking techniques, Chile is now the world’s fourth largest wine producer, following only Italy, France, and Spain. According to recent statistics from the Chilean Ministry of Agriculture, wine exports accounted for over $2 billion in revenue in the past fiscal year, making it one of Chile’s top export commodities.

The influx of vino creates companies like Grocers Gateway Group, a South Florida firm launched by Chilean native Juan Nunez to help Chilean wine reach American supermarkets. Nunez and his two partners help wine distributors gain access to the U.S. market. “Wines from Chile are a huge part of our client base. They’re trying to get into the U.S. market but don’t know how,” says Nunez. “We’ll set them up with the right people, from FDA compliance to social media influencers.” 

Another sector fueling the nation’s economic engine is mining. Renowned for its mineral-rich deposits and robust mining infrastructure, especially in the north of the country, Chile commands global attention as a leading producer of copper, lithium, and other essential metals. According to the Chilean Ministry of Mining, the country exported approximately $40 billion worth of minerals last fiscal year, a substantial portion of Chile’s total export revenue of $97.4 billion.

Buoyed by its store of lithium, Chile is rapidly emerging as a player in the global transition to renewable energy, with immense potential for the development of clean energies, green hydrogen, and energy storage. There has been a notable uptick in interest in energy investments, with 44 projects from the energy sector being added to InvestChile’s portfolio last year alone. (InvestChile is the government agency responsible for promoting Chile in the global market as a destination for foreign direct investment, acting under a Ministerial Committee presided over by the Minister of Economy.)

THE U.S. PRESENCE

InvestChile concluded last year with a total of 50 American energy initiatives, with potential investments amounting to $6.4 billion. Beyond energy and the conventional sector of mining, where U.S. companies have established a strong foothold, American firms are driving innovation in sectors like telecommunications, technology, and logistics. “The value of U.S. investment is its diversity,” says the CEO of the Chilean American Chamber of Commerce, Paula Estévez.

InvestChile, which acts as a bridge between foreign investors and business opportunities in country, has provided support to 450 projects initiated by foreign companies, with a cumulative investment value of over $33.5 billion in 2023. According to Beatriz Herrera, Investment Commissioner, North America InvestChile, companies from the U.S. accounted for the highest share of that foreign investment, totaling $9.9 billion – closely followed by Canadian firms with $5.3 billion. “Beyond the monetary aspect, what holds significant importance is the active role of American companies within our business ecosystem,” says Herrera. “They contribute significantly due to the diversification of their operations across various sectors in our country, including banking, retail, energy, industry, transportation, and technology.”  

Beatriz Herrera, Investment Commissioner, North America InvestChile

Notably, both the United States and Canada witnessed significant increases in investments last year, with rises of 21 percent and 90 percent, respectively, compared to the previous year’s figures. “Right now, we have 16 [new] projects in advanced stages, which amount to $3.65 billion and almost 900 jobs,” stated Herrera.

Chile has historically been a favorable destination for foreign investment, thanks in part to its stable political institutions and rule of law. Despite its relatively small size it currently ranks third in the region for investment inflows globally, following Mexico and Brazil. Contributing to its lure for FDI is the establishment of FTAs with 33 countries, including major economies such as the United States, China, and the European Union, representing 88 percent of the world’s GDP. This not only enhanced Chile’s access to global markets but opened itself to other countries. 

In addition to providing incentives like tax credits, Chile provides an abundance of support to foreign investors through its economic organizations. “Chile is one of the most advanced and transformational countries in Latin America. They really embrace innovation, transparency, and transformation while having this open economy,” says Lorena Zicker, Regional Manager of Amazon Web Services’ Southern Cone Worldwide.

CHILE’S DIGITAL REVOLUTION

Adding to its appeal as a destination for FDI, Chile has become a hub for the southern cone in digital infrastructure. Data centers and cloud service providers have extensive operations in Chile, like American tech giants Oracle, Amazon Web Services (AWS), Microsoft, Edgeconnex, and Google. Currently, Google is set to build a new subsea cable connecting Chile with Australia, the first such cable directly connecting South America with Asia-Pacific.

InvestChile has also supported the expansion of Equifax’s software development center, making Chile its largest center in the world after the U.S. and Ireland, with over 350 engineers. Another example is Citi Group, which has a software development center in Chile with over 500 employees providing IT support. “Our leadership in digital connectivity in Latin America, characterized by pioneering 5G implementation, early adoption of new technologies, and the world’s fastest fixed internet speed, positions us as a digital hub in the region,” says Herrera.

AWS has expanded its presence in Chile since establishing offices in the country in 2017. In 2019, AWS opened a CloudFront edge location, enhancing the speed and reliability of content delivery for businesses and consumers across Chile. A year later, AWS was selected as a founding member of the Data Observatory Foundation, a public-private partnership with the Chilean government, which hosts a large-scale public dataset. A virtual library stored in the AWS cloud, the Data Observatory holds vast quantities of information that scientists, businesses, and the public can use for research, analysis, or decision-making. AWS has provided technology and support worth around $12.59 million over the past five years to help create and run this virtual library. In 2021, AWS also launched a ground station antenna in Punta Arenas, improving satellite communication for industries like agriculture and telecommunications. In 2022, they opened their Chilean headquarters in the iconic Costanera Center building in Santiago.

Helping to accelerate the adoption of digital solutions is the national government. “The government really transformed and realized that they didn’t have the infrastructure necessary to manage things like communication, so the government accelerated the adoption of cloud,” explained Zicker. Beginning in 2016, Chile’s Electoral Service (SERVEL) started updating its services, going digital with the help of AWS. During peak times, like the 2022 elections (when over 13 million people voted), the SERVEL website handled some 12 million queries for information. Thanks to cloud computing, SERVEL could quickly adjust resources as needed, saving time and money while boosting innovation. Today SERVEL is one of the most respected institutions in Chile.

Collaborating with local universities, Amazon is also actively contributing to talent development in Chile by integrating cloud skills training into its mission to train 29 million people globally by 2025. For its part of this initiative, Chile has embraced the agenda of upskilling its workforce, especially in light of the rapidly evolving pace of technology. “They have a startup ecosystem, and they are willing to work,” says Zicker.

On the flip side, Chilean companies are eyeing the U.S. market, particularly Miami, as a gateway for technology exports. Some notable industries actively setting up shop include Climatech and Fintech companies. With organizations like Climatech Chile, a trade association that helps climate change technology companies expand overseas, Chile has become a leader in sustainable solutions to combat climate change.

Entrepreneurs see great potential in offering solutions to the U.S. to combat climate change, leveraging Chile’s strengths in lithium, hydrogen, and ocean solutions. For instance, companies like Kran, which specializes in nano bubble technology to conserve water, have successfully exported their innovations to the U.S. market. “Miami has a couple of important qualities that encourage climatech companies to expand, like a shared language,” says Florencia Mesa Fernández, Executive Director of Climatech Chile. “Chileans feel more comfortable in Miami.” (Some 60 percent of Miami residents are Hispanic.) 

Florencia Mesa Fernández, executive director of Climatech Chile

The fast-growing fintech sector in Chile is also eager to tap international markets through Miami. Fintech Chile, a facilitator of overseas expansion for Chilean companies, began with only ten firms. Now, they have more than 135 member companies, out of 378 in Chile overall. “Seventy percent of the fintech companies in Chile recognize that the government has made a really important contribution to open competition and to boost the industry,” says Ángel Sierra, Executive Director of Fintech Chile. “Of the fintech companies, eight out of ten of them are looking to expand their operations abroad. And Miami is the gateway.” 

Ángel Sierra, executive director of Fintech Chile

Assisting the entry to the U.S. market by Chilean startups and scale-ups, Endeavor Chile and AmCham Chile collaborated last November to launch “Hazte Local en Miami,” a trade mission for Chilean entrepreneurs and small and mid-sized enterprises (SMEs) to gain valuable insights into the local business ecosystem and establish connections. The mission, attended by 21 delegates from 16 companies, introduced them to influential organizations such as the Greater Miami Chamber of Commerce, BCI Miami, and Microsoft. These meetings provided valuable networking opportunities and insights into operating and expanding in the region. Immediate outcomes included the appointment of a country manager for OK to Shop, a Chilean e-commerce company, and the opening of an office by Ingesum, a manufacturer of solar panels and other industrial products. 

The mission organized by AmCham Chile and Endeavor Chile underscores the growing interest and opportunities for Chilean small businesses in Miami, reflecting a broader trend of cross-border collaboration for tech innovation. “Chile has been the birthplace of renowned unicorns and start-ups, and we will continue to see more innovative Chilean entrepreneurship in Miami,” says Paula Estévez.

The burgeoning Chilean start-up scene in Miami represents just the latest chapter in the evolving connections between Chile and the U.S., one of the most enduring trade and investment relationships in the Western Hemisphere. “Chileans are finding that investing in the US and obtaining an investment visa is relatively easy to do. Same thing for Americans opening a company in Chile,” says IFB’s Singer. “So the relationship between the two countries is a highly successful one.” Says Claudia Serrer, ProChile’s Trade Commissioner in Miami: “I look forward to seeing what we are going to do in the next 20 years. We want Chile to remain a strategic partner for the U.S. and to keep being part of the changes that are taking place.”

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