Trade and Investment

The Experience of Chile

Rome, 2007

Foreign Direct Investment in Chile (DL 600)Total 1974-2006: US$63,517 millions

Foreign Direct Investment from Chile to other countriesTotal 1990-2006: US$38,300 millions

Others8%

Peru14%

Colombia12%

USA4%

Panama3%

Cayman Islands

3%

Spain1%

Argentina36%

Brazil17%

Uruguay1%

Venezuela1%

Netherlands2%

France2%

Spain22%

USA25%

Switzerland2%

Italy3%

Japan3%

Australia5%

UK9% Canada

16%

Others11%

Source: Foreign Investment Committee (www.cinver.cl) and Direcon (www.direcon.cl)

Foreign Trade Policy ElementsForeign Trade Policy Elements

Open economy

Dependent on international trade

Small country

Transparent

Chile = Free TradeChile = Free Trade

Domestics policies

• Sound distribution of resources

• No subsidies• Simple tax

system• State

– Subsidiary role– Regulator, not

owner• Independent

Central Bank

Foreign trade policy• Looking outward

(exports)• Unilateral openness

(6%)• Welcome to Foreign

Investment:– Open pre & post– Strong protection

Options Options

Multilateralism

Plurilateralism or

regionalism

Bilateralism

“All of them”

MultilateralismMultilateralism

GATT (1948)/WTO

Active participants

Tokyo round

Uruguay round

Doha round (Round of the

development)

RegionalismRegionalism

FTAA (“momentum”)

APEC

Bilateralism- FTABilateralism- FTACanadaMexicoC. America (5)EU (27)KoreaUSA EFTA (4)VenezuelaColombia*EcuadorPeru* Mercosur (4)BoliviaPanama* * Not in force

• N. Zealand, Singapore,

Brunei

• India (partial trade

agreement)

• China

• Japan

18 Agreements

56 countries

88% of actual trade

Chile and the WorldChile and the World

27

18

9 8

25

0,20

5

10

15

20

25

30

EU

L.America

USA

Mx,Cnd, Kor

Japan

Rusia

Duties on International Commerce

Duties on International Commerce

Year Percentage of total tax revenue

1996 11.91997 10.91998 10.31999 9.22000 8.32001 7.02002 5.72003 3.92004 2.92005 2.6

Projected Fiscal incomeProjected Fiscal income

1: With Free Trade Agreements and VAT 19%

2003 2004 20052006

Net

Revenue

Income8,140.6 8,458.0 9,022.7 9,499.3

Tax burden 16.5% 16.3% 16.5% 16.5%

Source: Budget and Tokman (2004)

Projected Fiscal incomeProjected Fiscal income

2: Without Free Trade Agreements and VAT 18%

2003 2004 20052006

Net

Revenue

Income8,236.3 8,546.4 9,128.8 9,623.4

Tax burden 16.7% 16.5% 16.7% 16.7%

Source: Budget and Tokman (2004)

Protection of Foreign Investment Agreements

Protection of Foreign Investment Agreements

5 Asia Pacific region

20 in Europe

14 in Americas

Investment regimeInvestment regime

National treatment

DL 600

South AfricaColombia (signed)

IrelandMalaysiaPortugalParaguayRussiaThailand

ArgentinaBrazilEcuadorMexicoPeru

Canada PolandCroatia SpainDenmark Sweden France S. KoreaNorway UKNew Zealand

Negotiation concluded

Before Congress

In Force

Chilean Double Taxation TreatiesChilean Double Taxation Treaties

What are your objectives ?What are your objectives ?

Investment

In

out

Technology

Chile's future....Chile's future....

RR