Because of sound economic policy choices that have been made over the last several decades, Chile has managed to consolidate a stable macroeconomic climate and a favorable environment for business. This has positioned the country as one of the most attractive nations in the region for the export of goods and services. As a result, Chilean exports are sold globally.
Chile is a global trading partner
A recent report by Allianz Trade predicts that foreign direct investment will continue to be Chile’s primary external financing source in the medium term. In addition, Chile’s access to international markets will continue to be solid thanks to the facilities that the country offers through its many free trade agreements (FTAs). Among the FTAs that Chile is currently a party to are the following:
Pacific Alliance: Chile is a member of the Pacific Alliance, which is a trade bloc made up of four Latin American countries – Chile, Colombia, Mexico, and Peru. The bloc has eliminated tariffs on 92% of goods traded among member countries.
Free Trade Agreements with other Latin American countries: Chile has also signed Free Trade Agreements (FTAs) with other Latin American countries such as Argentina, Bolivia, Brazil, Ecuador, and Uruguay.
FTAs with North American countries: Chile has FTAs with North American countries such as the United States and Canada.
FTAs with Asia-Pacific countries: Chile has FTAs with Asia-Pacific countries such as China, Japan, South Korea, Australia, and New Zealand.
FTAs with Europe: Chile has FTAs with European countries such as the European Union (EU), Switzerland, and Norway.
Chile export environment: a stable macroeconomy
Chile’s record of prudent macroeconomic and fiscal management “has underpinned stability and resilience to shocks,” according to the Allianz Trae report. A rule-based fiscal policy helped contain budgetary deficits, which averaged 2.2% between 2014 and 2019, and public debt levels, which stood at 28% of GDP in 2019.
Real GDP growth was moderate in the last five years leading up to the coronavirus pandemic, with an average year-on-year increase of +2.0%. However, Chile’s robust macroeconomic policy framework has contributed to the country’s resilience to shocks, including the 2019 social unrest. Moreover, due to the adoption of prudent policy, sales of Chilean exports have thrived.
The business climate is one of the best in the region: Chile ranked 59th in the World Bank’s Doing Business 2020 survey, scoring high in minority investor protection, contract enforcement, insolvency resolution, company creation, and processing of building permits.
In addition, the country boasts a very open economy: it is currently subscribed to 31 free trade agreements that facilitate Chilean exports and sustain clear competitive advantages over other, much more restrictive countries.
According to data from the World Bank, it is highly dependent on international trade, representing 57.8% of the country’s GDP in 2020.
Chilean exports: advantages
Chile has critical competitive advantages that increase its attractiveness as an exporter:
- Plentiful natural resource base: Chile is the world’s largest copper producer but also benefits from other minerals, forestry, and agriculture.
- Strong growth is expected in the medium term.
- Business-friendly environment.
- Solid macroeconomic policy framework.
- A widely accepted democratic political system with successive peaceful transfers of power.
- It is classified as a high-income economy by the OECD.
What are Chile’s main exports?
As mentioned above, Chile is rich in natural resources, although it has also learned to position itself in other industries.
The main Chilean exports are:
- Metalliferous minerals (mainly copper): 30.1%.
- Non-ferrous metals: 25.6%.
- Fruits and vegetables: 9.8%.
- Fish, shellfish, and derivatives: 7.6%.
- Cellulose pulp and paper for recycling: 4.5%.
To which countries does Chile export the most?
The main destinations for Chilean exports are America and Asia. However, China and the United States are the big players in Chile’s trade balance and place first and second (respectively) in the ranking of export destination countries and leading importers.
This is the ranking of destination countries for Chilean exports:
- China: 39%
- United States: 13.2%
- Japan: 8.7%
- South Korea: 5.7%
- Brazil: 4.2%
Although the outlook for Chilean exports is positive, it depends on several factors, including global demand for its products, changes in trade policies of key trading partners, and domestic economic conditions. In addition, Chile has been working to diversify its export base and move up the value chain, which could help it weather any potential disruptions in its traditional markets for Chilean exports.
