Closer trade link develops with Chile

It is touted as the most competitive economy and also the most favorable destination for foreign companies in the Latin-American region, but China's investment in Chile has been surprisingly small.

This, however, is probably set to change as China and Chile wrapped up a free trade agreement on investment, and a growing number of Chinese companies turn their eyes on a nation that has led the Latin-American region in terms of economic expansion and that is committed to spurring investment in a wide range of sectors, including infrastructure and energy.

Although China has hurled huge investment at some Latin-American nations including Brazil, it has been slow in entering Chile.

China's investment in Chile is quite small, said Shao Yingjun, economic counselor of the Chinese Embassy to Chile.

Figures from the Chilean government showed that from 1974 to 2011, China's cumulative investment in the country reached $94.7 million, accounting for 0.12 percent of Chile's total foreign direct investment during the same period.

"Politically, the country is very stable, with a well-developed legal system and social welfare mechanism," said Yang Wanming, China's ambassador to Chile.

But at the same time, "Chile is a market that is highly market-oriented, very active and strictly supervised and managed. But Chinese investors have limited information about the market", added Yang.

A recent survey by the World Bank showed Chile continued to be the most appealing Latin American nation for foreign businesses in 2013 for three consecutive years.

Chile is the second-largest nation in the Latin-American region in terms of the volume of foreign direct investment, next to Brazil.

According to statistics from the Economic Commission of the UN for Latin America and the Caribbean, Chile attracted FDI worth $12.28 billion during the first half of 2012, up 80 percent from a year earlier.

Despite the drop in FDI worldwide since the financial crisis, China's outbound investment has witnessed a fast growth, reaching $60 billion in 2011.

The Latin-American region has led that growth.

That year, the region became the second-largest destination for Chinese outbound direct investment, accounting for 16.8 percent of the nation's total outbound investment, according to the Ministry of Commerce.

Although China's ODI flowing into Latin America was $54 billion by the end of 2011, its investment in Chile was merely $250 million.

But while China and Chile further strengthen bilateral economic and trade relations, "we could see a big increase (in Chinese investment into Chile) in the future. Industries including mining, tourism, infrastructure and agriculture are the most potential," said Shao.

Early in 2010, State Grid Corp agreed to spend at least $900 million to develop a large copper deposit in Chile in partnership with Vancouver-based Quadra Mining.

A report by Diego Portales University Chile said China's investment in Chile's mining sector will reach $10 billion by 2017.

In November 2005, China and Chile signed a two-way FTA, which came into force in October 2006. In April 2008, President Hu Jintao and his Chilean counterpart Michelle Bachelet witnessed the signing of the Supplementary Agreement on Trade in Services of the Free Trade Agreement between the two sides.

"The FTA and the recent additional agreements on investment are set to stimulate Chinese investment here," said Yang Wanming.

Sky Solar Holdings Co Ltd, a giant renewable energy developer from China, just announced the kickoff of an 18 mW solar power plant in Chile's northern Arica province this month. The plant will be completed before the end of the third quarter of 2013.

With other planned solar projects included, the investment will amount to $900 million.

COFCO Wine and Spirits, the wine unit of the State-owned food company COFCO, also completed its acquisition of Chilean winery Bisquert for $18 million.

Chile is the sixth-largest economy in the Latin-American region, but it is ranked as the freest economy in the region by Washington-based think tank Heritage Foundation.

Chile's economy has registered growth of more than 6 percent during the past decade. A report by the Organization for Economic Cooperation and Development predicted that Chile would outperform other OECD member nations in economic growth from 2012 to 2014.

"Chile is a very free market, and domestic consumption is big and growing steadily. Chile is the right market for Chinese companies," said Marco Salazar, general manager of FAW Chile.