Characterization of Chile’s commercial policy

Carolina Bonilla Ortiz

Yesica Mireya Baron Suarez

Institución Universitaria Politécnico Grancolombiano

 Characterization of Chile’s commercial policy

Commercial policy

In the economic sphere, although Chile has not been among the main drivers, it has been

part of the Latin American Integration Association (ALADI) since its inception, as an integration

proposal within the framework of the Latin American Free Trade Association (ALALC, 1960).

The institutional scenario of Chilean regional multilateralism has seen a multiplication of

organizations, as well as the expansion of political agendas, especially in the areas of

strengthening democratic principles and human rights. However, in terms of integration levels,

the results have lagged far behind expectations. The greatest advance since ALADI’s creation

has been the Pacific Alliance, whose promising start should demonstrate consolidation beyond

the strengthening of trade.

In the two organizations that may imply a certain degree of cessation of control,

Mercosur and CAN, Chile chose to maintain its participation at the associate member level,

being an atypical case in this regard.[ CITATION Jen18 \l 9226 ]

Indicators

According to the [ CITATION Min201 \l 9226 ] Chile was the fifth largest economy in

Latin America with a nominal GDP of US $ 252.8 billion in 2020, surpassed by Brazil, Mexico,

Argentina and Colombia. However, its current GDP per capita was US $ 12,990 in said year,

surpassing the record of these countries.

The primary sector of the economy represents about 13.7% of GDP. The dynamics of

fruit horticulture stands out (blueberries, cherries, apples, table and wine grapes, among others),
onions, asparagus, pulpwood. In the livestock part, the production of pork and poultry. Likewise,

all kinds of fish and shellfish, especially salmon. Mining is also an important part of Chile's

economy, it is the world's leading producer of copper. In addition, natural nitrates, iodine,

rhenium, lithium, molybdenum, gold and silver stand out.

The secondary sector participated in 21.1% of GDP. In the industrial part, agro-food

processing, chemicals, wood, textiles and activities related to mining are important. The tertiary

sector of the economy represents 65.3% of GDP. The main activities in this sector are tourism,

retail sales and financial services, among others.

Due to its economic structure, Chile was affected by the slowdown in the world economy

and the reduction in international prices of commodities, especially copper, its main export

product. At the beginning of the current decade, GDP grew at rates above 5% and changed to

variations of 1.7% and 1.2% in 2016 and 2017, respectively.

In 2018, the economy recovered slightly with an increase of 3.7%. However, a difficult

external environment and the social crisis manifested in public demonstrations, riots and loss of

institutional confidence, caused economic activity to suffer and GDP growth fell to 1% in 2019.

Affected by Covid-19, a negative variation of 5.8% was registered in 2020. The IMF expects a

rebound for 2021 (+6.2% growth).

Foreign trade policy trends

Chile is the forty-second largest export economy in the world. In 2018, Chilean exports

totaled US $ 75,482 million and imports reached US $ 74,189 million.[ CITATION Equ20 \l

9226 ]
Table 1: Main export products in Chile

Description Millions of USD FOB

2017 2018 2019
Copper ores and concentrates. 16,63
18,681 18,483
1
Refined copper and copper alloys, unwrought. 14,76
15,511 13,405
1
Fish fillets and other fish meat (whether or not minced), fresh, chilled or frozen. 2,608 2,744 2,751
Chemical wood pulp with soda or sulfate, except dissolving pulp 2,691 3,604 2,720
Wine of fresh grapes, including fortified wines; grape must, other than that of
2,019 1,999 1,929
heading 20.09.
Apricots (apricots, apricots), cherries, peaches (peaches) (including kidneys and
821 1,394 1,921
nectarines), plums and sloes, fresh.
Fish, frozen, excluding fillets and other fish meat of heading 03.04. 1,549 1,830 1,791
Unrefined copper; copper anodes for electrolytic refining 2,485 2,160 1,486
Grapes, fresh or dried, including raisins. 1,349 1,389 1,349
Molibdenum minerals and concentrates 1,006 1,469 1,335
Fresh or chilled fish, excluding fillets and other fish meat of heading 03.04 693 864 893
Carbonates; peroxocarbonates (percarbonates); commercial ammonium carbonate
695 949 83
containing ammonium carbamate
Wood sawn or chipped lengthwise, cut or peeled, whether or not planed, sanded or
802 945 811
butt joined, of a thickness greater than 6 mm
Apples, pears and quinces, fresh 809 832 756
Other fruit and nuts, fresh 714 874 749
Subtotal 49,63 55,246 51,217
4
Participation% 72.1% 73.2% 73.5%
Total 68,85 75,482 69,681
8
Fountain. Own elaboration. Information obtained from[ CITATION Min201 \l 9226 ]

Now, according to the report of [ CITATION Com19 \l 9226 ], Chile's foreign

merchandise trade in 2019, was highlighted by the following data:

Exports $69.7 Billions

Imports $69.6 Billions
Trade Balance $90.1 Millions
bilateral trade $139.3 Billlions

International trade agreements

The top five destination countries for Chile's exports in the second quarter of 2015 were,

in this order, the United States, China, Japan, South Korea and Brazil. The main countries of
origin of imports of the country were in the same period, in first place, China, followed by the

United States, Brazil, Argentina and South Korea.[ CITATION Ban15 \l 9226 ]

Chile exports more to China than to complete commercial blocs such as Mercosur, the

European Union and NAFTA. The above shows that the regional strategy may lack tangible

incentives.

Types of trade agreements can be classified, according to the classical theory of regional

integration, in four stages: first, the free trade area, then a customs union, a common market and,

finally, an economic union. In the free trade zone there are no trade or tariff barriers. In the

customs union, as for example in the original design of Mercosur, domestic products have no

trade barriers, while external products pay a common tariff, which privileges member states over

non-member states. The common market implies not only the free transit of goods, but also of

capital and people. Economic union consists of adding to the common market of goods, capital

and labor, a single currency and, therefore, a common monetary policy.[ CITATION Jen18 \l

9226 ]. As of now, Chile stands in the second phase of trade agreements with its regional

partners, still unwilling to compromise more, amid political and ideological differences with

Mercosur members.
 References

Central Bank of Chile. (2015). Foreign Trade Indicators. Second quarter 2015. Statistics.

Obtained from

http://si3.bcentral.cl/ESTADISTICAS/Principal1/Informes/SE/COMEX/Indicadores.html

Comtrade. (2019). UN Comtrade database. UN. Retrieved from https://dit-trade-

vis.azurewebsites.net/?reporter=152&type=C&year=2019&flow=2

Chile Legal Team. (2020). Import - Export In Chile. Bizlatin. Obtained from

https://www.bizlatinhub.com/es/importacion-exportacion-chile/

Jenne, N., & Razeto., SB (2018). Regional integration and the foreign policy of Chile. Paradox

or accommodation? International Studies, 9 (35), 22-23. Retrieved from

https://scielo.conicyt.cl/pdf/rei/v50n189/0719-3769-rei-50-189-00009.pdf

Ministry of Foreign Trade. (2020). Chile's commercial profile. Office of Economic Studies, 1.

Obtained from https://www.mincit.gov.co/getattachment/248d186e-70ab-4485-8913-

6b217c782238/Chile.aspx