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The U.S. – Chile Partnership Presentation Kit

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  1. The U.S. – Chile Partnership Presentation Kit The U.S. – ChilePartnership Presentation Kit AmCham Chile Presentation Kit September, 2009 www.amchamchile.cl

  2. Presentation Kit Overview • Chile Geography & Demographics • Chilean Political & Economic System • U.S. – Chile Trade • Investing in Chile • Chile Rankings

  3. Presentation Kit Overview • Chile Geography & Demographics • Chilean Political & Economic System • U.S. – Chile Trade • Investing in Chile • Chile Rankings

  4. Geography of Chile Chile is a country on 3 continents: 1) Continental Chile (South America) 2) Chilean Antarctica 3) Easter Island (Oceania) Continental Chile is divided into four main geographical regions: 1) Northern Atacama Desert 2) Fertile Central Valley 3) Lakes Region 4) Islands and Fjords Total Area: 469,756 sq. miles 756,950 sq. km Capital: Santiago – Ranked 2nd out of 140 Latin American cities in the Economist Intelligence Unit´s 2009 Liveability Survey.

  5. Northern Chile

  6. Central Valley

  7. Lakes Region

  8. Southern Chile: Fjords

  9. Demographics • Population: 16.889 million (July 2011 est.) • Labor Force: 7.6 million (2010 est.) • Infant Mortality Rate: 7.34/1000 (2011 est.) • Language: Spanish • Religion: • - Catholic 70% • - Evangelical or other Christian 15% • - None 8% • - Other 5% Sources: CIA World Factbook (www.cia.gov)

  10. 2010 UN Human Development Index • The United Nations Human Development Index synthesizes four primary development statistics, which measure health, education, and income. • Some of the values for Chile are: • Life expectancy at birth: 78.8 years • Adult literacy rate: 96.9% • Combined primary, secondary and tertiary • education enrollment ratio: 82.5% Source: United Nations Development Program (www.hdr.undp.org)

  11. Presentation Kit Overview • Chile Geography & Demographics • Chilean Political & Economic System • U.S. – Chile Trade • Investing in Chile • Chile Rankings

  12. Chile’s Political System Judicial Executive Legislative A representative democracy, divided into three branches:

  13. Public Order and Safety in Chile Source: Ministry of the Interior and Public Security (www.seguridadpublica.gov.cl) Fundación Paz Ciudadana (www.pazciudadana.cl)

  14. Chile: A Strong Economy

  15. 2010 GDP Per Capitaat Purchasing Power Parity Purchasing Power Parity (PPP) calculates GDP so that it takes into account the relative cost of living and inflation rates of countries, rather than using currency exchange rates which may distort the real differences in income. Thus, PPP GDP provides a measure of relative purchasing power of per capita GDPs. These 2010 values are IMF estimates. Source: International Monetary Fund (www.imf.org)

  16. Poverty Reduction in Chile Chile considers an individual to be living in poverty if his or her income is below that needed to obtain basic necessities, and to be indigent if it is below that needed to obtain a minimal caloric intake level. In 2009, 3.7% of the population met this measure of indigence. Sources: Chile Ministry of Planning (www.mideplan.cl/casen/)

  17. Chile GDP Year Over Year Growth by % Source: Banco Central de Chile (www.bcentral.cl)

  18. Chile Unemployment & Inflation Source: Banco Central de Chile (www.bcentral.cl) *The data series use different methodologies over time and there is currently no official combination.

  19. Chile National Budget Surplus & Deficit The 2006 Fiscal Responsibility Law mandates that Chile maintain a 0.5% of GDP long-term structural budget surplus. 2005-2008 yearly surpluses were applied to Sovereign Wealth savings funds. Source: Chile Ministry of Finance, Budget Directorate (www.dipres.cl)

  20. Chilean Peso vs. US Dollar Source: Banco Central de Chile (www.bcentral.cl)

  21. Unidad de Fomento (UF) • The Unidad de Fomento is a monetary Unit of Account. The UF was created in 1967 to help track the over-all cost of international loans, and was later extended to domestic bank loans, private financing, and other investments or contracts. • The exchange rate between the UF and the Chilean peso is constantly indexed to inflation so that the value of the UF remains constant. (UF value as of May 27, 2011: CLP $21, 801) • The UF has become the predominant measure for determining the cost of construction, values of housing, and any secured loan. • A similar currency unit, generally used for the payment of taxes, fines, or customs duties, is the Unidad Tributaria Mensual • (UTM) – literally, monthly tax unit. (UTM value for May 2011: CLP $38,173)

  22. Chilean Pension System • Implemented in 1980, it was the first comprehensive retirement and welfare system managed primarily by the private sector. • Workers’ pension accounts are managed by Administradoras de Fondos de Pensiones (AFPs), which receive a mandatory 10% of monthly pre-tax earnings. The self-employed may contribute voluntarily, and salaried workers can add additional contributions. • Upon a worker’s retirement, their AFP finances their pension, either through gradual withdrawals or the purchase of an annuity. • AFP funds may gain or lose value depending on market conditions, but 2008 reforms enhanced the government safety net for • retirees outside the system, and for retirees whose fund • payments fail to meet minimum income standards.

  23. Chilean Labor Supply Chile balances strong protection for workers’ rights with market flexibility for management. Source: World Bank: Group (www.doingbusiness.org), International Labour Organization (www.ilo.org)

  24. Innovation & Entrepreneurship Chile invests in its future by encouraging public and private business innovation and creativity. • The InnovaChile program from the Chilean Economic Development Agency (CORFO), which provides: • Subsidies to support and encourage innovation in new and existing companies • Programs to enhance technical research and training in a wide variety of sectors, including high-tech manufacturing, energy and environment, food production, telecom, and tourism • The Innovation Forum (“Foro Innovación”) • A nonprofit business-university partnership encouraging innovation through high-impact public initiatives • Many other nonprofit groups...like AmCham Chile

  25. Energy Production • Public electricity production and transmission is 100% owned and operated by the private sector, with the Chilean government offering cash incentives for new investment. • Heavy reliance on renewable energy: 38% of electrical production capacity comes from hydroelectrical sources, as of December 2008. • Renewable Energy Act of 2008 mandates that 10% of all energy sold by 2024 come from Nonconventional Renewable Energy (NCRE), like biomass, mini-hydro, geothermal, wind, and solar. • Right to sell to the national power market is guaranteed for all renewable energy projects, and limited-size NCRE projects • are exempted from transmission tolls. Source: Chile National Energy Comission (www.cne.cl)

  26. Chile Joins the OECD • In January, 2010, Chile joined the Organization for Economic Cooperation & Development – one of only 7 countries to join since 1973, and the first in South America. • Recognition of the economic, financial, regulatory, and environmental gains made by Chile over the past 15 years. • Provides higher international prestige and lower perception of country risk, leading to greater international investment and lower borrowing costs. • Gives Chile an “equal voice” at the table with regard to macroeconomic policymaking, and access to innovative new ideas on education, job creation, and many others.

  27. Presentation Kit Overview • Chile Geography & Demographics • Chilean Political & Economic System • U.S. – Chile Trade • Investing in Chile • Chile Rankings

  28. Trade Agreements Chile has 21 trade agreements with 58 nations with 87% of World GDP 12 Free Trade Agreements • United States • China • South Korea • Mexico • Australia • European Free Trade Assn. (4 nations) • Central America (4 nations) • Canada • Panama • Colombia • Peru • Turkey 9 Other Trade Agreements • European Union (27 members) • P4 (3 nations) • Mercosur (4 full members) • Cuba • Ecuador • Venezuela • Bolivia • India • Japan • Nicaragua (P.I.) • Vietnam (under negotiation) • Malaysia (P.I.) Source: Govt. of Chile General Directorate for International Economic Affairs (www.direcon.cl)

  29. U.S. – Chile Free Trade Agreement (FTA) • Signed in 2003 and entered into force on January 1, 2004. • Eliminated tariffs on 87 percent of bilateral trade immediately, with100% duty-free trade within a maximum of 12 years (2016). • Includes committments by both countries on non-tariff issues, such as intellectual property rights, services, investment, temporary entry of business/ technical workers, and telecommunications. • Result: Bilateral trade tripled in the first five years.

  30. Bilateral Trade Chile-U.S. 1997-2010 FTA Source: Govt. of Chile General Directorate for Export Promotion (www.prochile.cl)

  31. Bilateral Trade Chile-U.S. 2003-2010 FTA Source: Govt. of Chile General Directorate for Export Promotion (www.prochile.cl)

  32. 2010 Chilean Export Destinations Source: Lexis-Nexis (www.legalpublishing.cl)

  33. Top 10 Exports to the U.S.2010 Source: Lexis-Nexis (www.legalpublishing.cl)

  34. Chilean Imports by Country2010 Source: Lexis-Nexis (www.legalpublishing.cl)

  35. Top 10 Imports From the U.S.2009 vs 2010 Source: Lexis-Nexis (www.legalpublishing.cl)

  36. Top 5 Exporters and ImportersChile - U.S. 2010 Top Chilean Exporters (% value of exports) 1) Codelco (19.22%) 2) Minera Spence (4.60%) 3) Molibdenos y Metales (2.90%) 4) Anglo American (2.30%) 5) Panales Arauco (2.10%) Top Chilean Importers (% value of imports) 1) Copec (12.42%) 2) Enap (9.98%) 3) Finning (7.77%) 4) Codelco (1.70%) 5)Komatsu (1.60%) Source: Lexis-Nexis (www.legalpublishing.cl)

  37. Presentation Kit Overview • Chile Geography & Demographics • Chilean Political & Economic System • U.S. – Chile Trade • Investing in Chile • Chile Rankings

  38. General Investment Environmentas measured by the World Economic Forum The General Investment Environment is a component of the World Economic Forum’s Infrastructure Private Investment Attractiveness Index for Latin America, most recently published in 2007. Chile is also ranked highest in the overall Index. Source: World Economic Forum (www.weforum.org)

  39. A Springboard into Latin America • Chile offers the best business environment and infrastructure in the region. The government aggressively promotes offshoring and Foreign Direct Investment (FDI). • AT Kearney ranks Chile 10th worldwide for offshoring attractiveness (2011 Global Services Location Index). • Over 4000 companies from 64 countries have investments in Chile (300+ U.S. companies in Chile) • Business clusters in Chile: shared services, corporate headquarters, IT development & support, call centers • 45+ companies use Chile as a platform for services • in the region Sources: Chile Foreign Investment Committee (www.inversionextranjera.cl), AT Kearney (www.atkearney.com)

  40. Multinationals with RegionalOperations in Chile Many multinationals use Chile as their platformto enter Latin America: • Altec • Citigroup (software development) • Delta (call center) • General Electric • IBM (on demand solution Center) • International Paper • James Hardie • BHP Billiton (shared business center) • Kodak • Miller-Heiman Consulting • Motorola • Nestlé • Packard Bell (assembly plant) • RR Donnelley • Sodexho • Unilever • Oracle

  41. Double Taxation Agreements Bilateral tax treaties limit the double taxation that would otherwise occur on international business and personal income. 24 Implemented Tax Treaties • Argentina • Belgium • Brazil • Canada • Colombia • Croatia • Denmark • Ecuador • France • Ireland • Malaysia • Mexico • New Zealand • Norway • Paraguay • Peru • Poland • Portugal • South Korea • Spain • Sweden • Switzerland • Thailand • United Kingdom 8 Tax Treaties Under Negotiation • United States * • Uruguay • Australia * • Austria* • Germany • India • Italy • Russia * * Signed, pending implementation Source: Govt. of Chile General Directorate for International Economic Affairs (www.direcon.cl)

  42. A Liberal Investment Environment Outside investors have a choice of 2 main regulatory mechanisms: • The Foreign Investment Statute, or Decree Law 600 (DL600). • Investors sign a formal contract with the State of Chile which guarantees extensive contractual rights. • Allows 100% foreign ownership, with profit remittance any time, and capital remittance after one year. • Minimum investment of US$2.5 to 5 million • Of the total US$103.7 billion in FDI between 1974 and 2008, 67% (US$69.9 billion) was made under a DL600 contract. • Chapter XIV of the Compendium of International Exchange Regulations (CFER). Investment is made under a looser regulatory framework, with fewer specified contractual rights. Minimum investment is $10,000.

  43. FDI as Percentage of GDP Avg. 2006-2009 Source: World Investment Report, United Nations Conference on Trade and Development (www.unctad.org)

  44. FDI in Chile by Country 1974-2009(Under DL600) Source: Chile Foreign Investment Committee (www.foreigninvestment.cl)

  45. FDI in Chile 1998-2009(Under DL600) Source: Chile Foreign Investment Committee (www.foreigninvestment.cl)

  46. 2009 U.S. FDI in Latin America Source: U.S. Bureau of Economic Analysis (www.bea.gov)

  47. 1974-2009 Worldwide Materialized FDIin Chile by Sector (Under DL600) * Services include financial, commerce, hospitality,business services, insurance Source: Chile Foreign Investment Committee (www.foreigninvestment.cl)

  48. 1974-2009 U.S. Materialized FDIin Chile by Sector (Under DL600) * Services include financial, commerce, hospitality,business services, insurance Source: Chile Foreign Investment Committee (www.foreigninvestment.cl)

  49. 2009 U.S. Materialized FDIin Chile by Sector (Under DL600) 0 20.000 40.000 60.000 80.000 100.000 120.000 2.640.000 2.680.000 2.700.000 Source: Chile Foreign Investment Committee (www.foreigninvestment.cl)

  50. 1990-2010 Chile Outbound FDI Destinations Total Invested: US $56.8 billion Source: Govt. of Chile General Directorate for International Economic Affairs (www.direcon.cl)