trade makes up 56% of the Chilean Gross Domestic
A New
Imperialism?
The Dangers of a Limited Chilean
Trade Policy
Executive Summary
Chile is known for its robust economy and strong busi-
ness and financial sectors. Trade from Chile to China
is consistent, and based mostly on China’s immense
appetite for resources. While having a reliable trading
partner in one of the largest economies in the world is
obviously an asset to the Chilean’s economy, this close
relationship can be perilous if not treated carefully. A
more diverse portfolio would improve Chile’s standing
in the global marketplace and secure its economic fu-
ture.
Introduction
Chile has the largest and most robust economy in Latin
America. Markets in Chile are considered very open
to rest of the world, which has resulted in consistent
GDP growth over the course of the past forty years.
However, the products and methods used to achieve
that growth have failed to diversify. As a result, a vast
majority of Chile’s international trade is wrapped up in
a limited number of products that go to a limited num-
ber of recipients. Continuing along this current path
could easily lead Chile to become far too reliant on a
small number of actors for economic prosperity, cre-
ating an unnecessary dependency model that will even-
tually damage, rather than continue the growth of the
Chilean economy and country. Chile must diversify its
trading partners, as well as increase sources of revenue
in order to maintain its seat as the top economy in
Latin America.
Chile Trade
Chile’s strong economy is ranked 41st globally in terms
of exports and 44th overall for imports. International
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Product, or GDP (WTO, 2017), worth approximately
$120 billion USD annually. (Simoes & Hidalgo, 2011)
This means that over half of the Chilean economy is
dependent on imports and exports in order to func-
tion. As a result, Chile can be vulnerable to the whims
of its trading partners and the vast fluctuations of
global markets.
In an attempt to reduce this vulnerability, Chile has 26
trade agreements with reach into 64 different markets.
(DIRECON, 2018) At first glance, this extensive
amount of diversity appears to be a major strength,
which would serve to help Chile weather the afore-
mentioned challenges. Unfortunately, upon further in-
spection, the health of Chilean foreign trade does not
appear quite as robust as someone invested in the suc-
cess of the country would hope.
Almost a third of Chile’s exports, and just under a
quarter of the country’s imports, come from trade
with China. This accounts for 26.5% of Chile’s inter-
national trade, totaling $31.4 billion. (Simoes &
Hidalgo, 2011) As seen below, China is far and away
Chile’s largest trading partner. Trade with Chile’s next
two largest trading partners, the United States (14.4%)
and the European Union (12.7%), combined do not
equal the amount of capital and products flowing from
Chile to China.
The only country, or group of countries rather, that
can compete in terms of scale between Chile and
China is the portion of the graph labeled “Other”. Ac-
counting for the 28 states of the European Union and
the other four countries listed individually, this means
that Chile’s trade with up to, but not necessarily all,
161 other UN recognized nations barely surpasses that
of trade with China.
 A New Imperialism?
This China heavy trade has the ability to continue to
bring prosperity to Chile, but only if China continues
to consume at the rate it has been. Additionally, as
seen in other countries around the globe, overdepend-
ence on China can lead to problems. Examples such
as Ecuador, where almost 100% of oil exports are now
earmarked for China, or Sri Lanka directly handing
over some of its territory to China as a part of a loan
forgiveness program. These debt trap issues followed
a standard pattern of behavior from China, originating
with trade agreements, leading to infrastructure lend-
ing, and lastly reworking agreements to substantially
favor the Chinese.
In addition to Chile’s main partner problem, the coun-
try also has a problem in terms of export diversifica-
tion. The largest portion of Chile’s exports (51.1%), is
in fuels and mining products. This categorization co-
vers a deceivingly long list of possible products. The
reality in Chile is that this is almost entirely composed
of copper and copper related items. In 2016, refined
copper accounted for $12.6 billion of exports and cop-
per ore for the same amount. (Simoes & Hidalgo,
2011) As such, in 2016 copper alone was $25.2 billion
of the $62.1 billion Chile exported. Put another way,
copper was worth a quarter of Chile’s entire export
market that year.
But not all is doom and gloom for the future of the
Chilean economy. There are multiple paths forward
for the country to end reliance on one major trading
partner and to diversify its export portfolio.
According to the U.S. Geological Survey, copper and
copper alloy products are used in building construc-
tion, electrical and electronic products, transportation
equipment, and industrial machinery. These are all
products and applications of copper that have use
throughout the world, not only in China. Chile can use
the wide array of industries and products that rely on
copper to its advantage, using some of those free trade
agreements and growing the percentage of trade with
“Other” countries. This in turn can reduce the per-
centage of trade directly with China.
Agricultural and food products already constitute
33.7% of Chile’s export economy. (WTO, 2017) Nev-
ertheless, this large percentage is not nearly as danger-
ous as the country’s heavy reliance on copper. Chile’s
reverse growing season and high-quality produce give
the country a large advantage in agricultural exports.
Chile is in the unique position of having produce ready
at the exact time it cannot be grown in the Northern
Hemisphere. Combined with abundant coastline for
fishing industry, Chile is poised to export more and
more food to feed a growing global population. Reli-
ance more on renewable resources such as agriculture
and food rather than on the limited resource of copper
can give Chile a stronger footing in the global market-
place.
Lastly, exploring options in the services sector rather
than merchandise can put Chile in a better place eco-
nomically in the future. Chile’s unique geography make
it a remarkably biodiverse country, with landscapes
and scenery that cannot be matched anywhere else in
the world. This leaves ample opportunity to continue
to expand the tourism sector of the Chilean economy.
Chile is already routinely listed as one of the best
places to visit in the world in multiple English language
publications, and the country needs to capitalize on
that popularity.
The global middle class is expected to grow from 3.2
billion people in 2016 to approximately 5.2 billion by
2028. (Kharas, 2017) This 2-billion-person expansion
is going to have plenty of spending power and the de-
sire to use that capital. Approximately 700 million of
those people will be from China, giving Chile the op-
portunity to continue to take in money from China,
without the obligation to provide resources in return.
Analysis
Chile’s strengths, in addition to an already vibrant
economy, consist mostly of its geography and location
in the southern hemisphere. As mentioned above, this
puts Chile in opposite growing season for produce.
The global demand for year-round access to fruits and
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vegetables, rather than acceptance of seasonal availa-
bility remains strong. Chile is one of the few places in
the world with the climate and infrastructure already
in place to continue supplying produce “off-season” to
the northern hemisphere. This fact should continue to
be taken advantage of and consumer demand will not
decline in the near future. The largest weakness pre-
sent today in Chile’s economy is the overdependence
on trade with China and in one major sector, as
demonstrated throughout this paper. In order to rem-
edy this, Chile must diversify its trade products and
partners. Opportunities available to Chile consist of
the global demand for travel, and an overall focus on
experiences rather than goods seen in the newest gen-
eration. This can easily lead to more tourism revenue
for Chile with increased spending on advertising glob-
ally. Finally, threats to the Chilean economy and trade
are found in the commodities market and heavy reli-
ance on a non-renewable resource. Chile cannot af-
ford to wait until this resource is expired to look for
other opportunities to keep its economy strong. The
search for alternative sources of capital must start
now. Additionally, heavy reliance on China as a trade
partner is a threat to Chilean autonomy. As seen in
the cases of Venezuela and Sri Lanka, China does not
have the best interest of its trade partners in mind
when making deals. While Chile has not found itself in
the same situation as these countries, there exists a
slippery slope of trade, investment, and finally interven-
tion from China.
Recommendations
 Explore additional trade partners, around
the globe, especially in the northern hemi-
sphere, to shift the balance of exports to
other countries.
 Work closely with developing countries in
Latin America who will need copper for
building and infrastructure products.
 Continue to promote trade in Chilean agri-
cultural products, specifically fruits, vegeta-
bles, seafood, and wine.
 Advertise tourism opportunities in Chile to
an international audience in order to take
advantage of a growing global middle class
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 A New Imperialism?
with the economic means to travel. Particu-
lar attention should be payed to major
worldwide sporting events.
Conclusion
Overall, Chile stands to remain a major global player
and the top economy in Latin America. That does
not mean the country is without risk. Overreliance
on trade with China, although tempting, is a potential
trap leading to overdependence. Chile must continue
to diversify in terms of trading strategies and partners
if the country wants to maintain its dominant posi-
tion. By following the above recommendations, Chile
can get out from under the thumb of a country
known for aggressive and occasionally unfair trade
practices, and back into a more advantageous position
of self-determination.
References
DIRECON. (2018). Acuerdos Comerciales. Retrieved
from DIRECON Web Site:
https://www.direcon.gob.cl/modulo-de-
acuerdos-comerciales/
Kharas, H. (2017, February 28). The Unprecedented
Expansion of the Global Middle Class.
Washington, DC: Brookings Institue.
Retrieved from
https://www.brookings.edu/research/the-
unprecedented-expansion-of-the-global-
middle-class-2/
Simoes, A., & Hidalgo, C. (2011). The Economic
Complexity Observatory: An Analytical Tool
for Understanding the Dynamics of
Economic Development. Workshops at the
Twenty-Fifth AAAI Conference on Artificial
Intelligence. Retrieved from Observatory of
Economic Complexity:
https://atlas.media.mit.edu/en/profile/country
/chl/
WTO. (2017). Chile and the WTO. Retrieved from
World Trade Organization:
https://www.wto.org/english/res_e/statis_e/d
aily_update_e/trade_profiles/CL_e.pdf
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