Country Analysis and an Economic Overview of Chile

1. Country Analysis and an Economic Overview of Chile 2006 Commercial Presentation A quick view of Today's Chilean Economy and its people

2. An Overview of Chile I. Solid Macroeconomic Fundamentals • Chile in the Global Context • Chile in the Local Context • Government, Politics & Recent Legislation • Appendix (Brief historical review & vital statistics) • Chile’s Outlook: Projections GLOBAL GUARDS CHILE Special Operations Services & Projects

3. Solid Macroeconomic Fundamentals Forecast for 2005 GDP growth Central Bank 5.25-6.25% Central Bank Monthly Survey 5.9% Libertad y Desarrollo 6.0% Chilean Chamber of Commerce 6.0% -2005 GDP growth has been primarily driven by internal demand. -Record copper prices have also contributed to growth. GLOBAL GUARDS CHILE Special Operations Services & Projects

4. In spite of strong GDP growth, unemployment rates remain high, in part due to a reduction in self-employment Projected 2006 Unemployment Forbes.com 8.0% Libertad y Desarrollo 7.5% Central Bank 7.5-8.4% Oct. 2005 Unemployment: 7.6% GLOBAL GUARDS CHILE Special Operations Services & Projects

5. Value of the U.S. Dollar A. Chilean peso floats freely against the U.S. dollar B. Peso appreciating in line with other world currencies, largely due to dollar’s depreciation C. Appreciation also reflects strength of trade balance and expectations of continued high copper prices for 2005 Exchange Rate by December 28, 2005: $514.84 2006 Projected Exchange Rate: Libertad y Desarrollo $560 Central Bank Monthly Poll $550 GLOBAL GUARDS CHILE Special Operations Services & Projects

6. Chile in the Global Context FACTS a. Today, Chile is widely perceived as the regional leader in terms of political and economic stability. b. Chile has a very low country-risk and is highly competitive in the international market. c. High GDP growth rates, especially as compared to the rest of Latin America GLOBAL GUARDS CHILE Special Operations Services & Projects

7. Looking into to the Future: INVESTMENT FRIENDLY ENVIRONMENT • Chile’s foreign investment builds upon the country’s political and economic stability turns Chile into a springboard into other markets around Latin America • Key features of the springboard strategy: • 1. Tax reform to facilitate international partnerships and investment management • 2. Exempt platform companies from Chilean tax on overseas earnings to address the problem of three-way taxation • 3. Prevents Chile’s use as a tax haven, and ensures transparency and proper use of new related laws • Results to date: • 1. Growers and manufacturers take advantage of Chile’s increasing network of trade agreements by supplying overseas markets from Chile • 2. Overseas companies have formed strategic alliances with Chilean partners • 3. Many multinational companies have decided to locate their corporate headquarters in Chile GLOBAL GUARDS CHILE Special Operations Services & Projects

8. Chile in the Local Context a. Chile held parliamentary elections on December 11, 2005. b. The ruling coalition, Concertación, received 51% of the votes, an increase of 3% over the previous elections in 2001 c. The opposition coalition, Alianza por Chile, received 39% of the votes, a decrease of 5% with respect to 2001 GLOBAL GUARDS CHILE Special Operations Services & Projects

9. Government, Politics & Recent Legislation POLITICAL STRUCTURE Parties and coalitions: Concertation (“Concertación”) - Left-wing governing coalition Christian Democrats (DC) Party for Democracy (PPD) Radical Social Democratic Party (PRSD) Socialist Party (PS) Alliance for Chile (“Alianza”) - Right-wing opposition coalition Independent Democratic Union (UDI) National Renovation (RN) Together We Can (“Junto Podemos”) Humanistic Party Communist Party Presidency: Ricardo Lagos (PPD) was elected in 2000 after defeating Joaquín Lavín (UDI) in a close second-round election Municipal elections for mayor on Oct. 31, 2004, detailed as follows: 44.79% Concertation 38.65% Alliance for Chile 5.91% Together We Can 9.70% Independents (not associated with coalitions) 0.92% Other Presidential and Parliamentary elections in Dec 2005 GLOBAL GUARDS CHILE Special Operations Services & Projects

10. Brief historical review & vital statistics Government: Republic (Executive, legislative and judicial branches) President Ricardo Lagos, Left-wing coalition government Country divided into 13 regions Population (2002): 15.1 million (Next census in 2012) Currency: Chilean Peso Exchange rate with U.S. dollar as of April 6, 2005: 585.19 Inflation-Indexed Currency: Unidad de Fomento (UF) As of April 6, 2005: 1 UF = 17,194.90 Chilean Pesos Geography: Isolated by natural barriers Atacama Desert in north; Andes Mountains to east; Pacific Ocean to west; lakes, volcanoes and fjords to south Territories include Easter Island, Juan Fernandez (Robinson Crusoe) Islands, Antarctic territory Major Cities Santiago (Capital)—Pop. 4,668,473 Concepción —Pop. 912,889 Viña del Mar & Valparaíso —Pop. 562,913 Antofagasta —Pop. 318,779 Puerto Montt —Pop. 175,938 Language: Spanish Religion: 77% Roman Catholic GLOBAL GUARDS CHILE Special Operations Services & Projects

11. 1970-1973: “The Chilean Road toSocialism” Brief historical review & vital statistics The Presidency of Mr. Salvador Allende • Plan to redistribute wealth: • -Nationalization of large copper mines • -Agrarian reform • -Expropriation of industry • -Nationalization of banking system • Economic consequences of the reforms • -Skyrocketing inflation and fiscal deficit • -Increase in black market activity • -Significant decrease in real wages, international reserves, production and investment. • -Collapse of the national industry • -Massive currency devaluation • -Political chaos, strikes and public unrest GLOBAL GUARDS CHILE Special Operations Services & Projects

12. Brief historical review & vital statistics 1973-1989: “Military Government” The Reforms of General Augusto Pinochet Plan to Return to a Market-Based Economy: Re-privatization of industry Reduce trade barriers Liberalize capital movement restrictions Debt management reforms Economic Results: Inflation and exchange rate stability Increased investor confidence High growth rates Increasingly unequal distribution of wealth GLOBAL GUARDS CHILE Special Operations Services & Projects

13. 1990-Present: Return to Democracy Brief historical review & vital statistics The Left-Wing Coalition Governments of Aylwin, Frei and Lagos • Since the end of the military regime, governments have essentially followed a two-pronged policy strategy: • 1. Maintain all market-based economic reforms implemented by General Pinochet. • 2. Shift from authoritarian to democratic-style government. • Upcoming reforms to eliminate “authoritarian enclaves” in the constitution, pending approval: • 1. Give President authority to fire armed forces’ commanders. • 2. Abolish nine unelected senators designated by the armed forces and other bodies GLOBAL GUARDS CHILE Special Operations Services & Projects

14. Chile’s Outlook: Projections ECONOMIC FORECASTS -GDP: 5-6% -Inflation: 3-4% -Interest Rates: 4.5-5.5% -Copper Prices: US$1.30-1.50 per pound -Unemployment: 7.5-8% -Current Account: Surplus -Exchange Rate: 540-580 Chilean Pesos per US$ GLOBAL GUARDS CHILE Special Operations Services & Projects

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