Chile: An OverviewChile: An Overview
Mr. Carlos Mladinic Mr. Carlos Mladinic New Dehli, November 2007New Dehli, November 2007
Chile at a Glance (2006)
Population: 16.3 MGDP: USD 145 BGDP per capita: USD 8.9 KIncome per capita (PPP): USD 12.9 KFDI (net inflow): $6.7 billionAnnual inflation: 2.6%Unemployment: 6% Adult literacy rate: 96% Corporate tax: 17%Remitted Profits Tax: 35% (corporate tax is credited towards remitted profits)
Tariffs • General 6%• Hardware 0%• 95% of imports pay no tax
(FTAs)
Time zone alignment
Overnight flights to the U.S.
Labor and Education• Total Labor Force : 6.1 million
• Labor Force in Santiago: 2.8 million
• Education:
- Primary: 98.6%
- Secondary: 90%
- Professional: 31.4%
Education Average (years)
Labor Force
National
10.59.2
8.57.5
20021992
Source: Ministry of Education of Chile (www.mineduc.cl), National Institute of Statistics (www.ine.cl ), 2006
More than 60 Universities
48 Professional Institutes
109 Technical Centers
21 MBA Programs
Chile, An Attractive Place to do Business
Chile is one of the most competitive countries in the world in terms of its positive business environment.
• Business Environment Rankings (Economist Intelligence
Unit)
• Ease of Doing Business (World Bank)
• Best Latin American Cities to do Business (America Economía)
The Best Places to Do BusinessRanking of the Best Places to Do Business in the Next Five Years (2006-2010)
(Out of 77 economies)
Source: Economist Intelligence Unit (www.eiu.com)
8
7
3
1
74
62
50
41
40
37
27
25
45
42
26
22
Denmark
Canada
United Kingdom
United States
Chile
Malaysia
Korea
Czech Republic
Poland
Thailand
South Africa
Mexico
Brazil
China
Russia
Pakistan
Developed countries Other emerging LATAM
Ease of Doing Business 2008(Out of 178 economies)
Source: World Bank (www.doingbusiness.org)
53
3837
31
138
31
8374
2415
172140
128109
10398
6658
44
33
Singapore
United States
Ireland
Finland
Thailand
Malaysia
France
Chile
Portugal
Spain
Mexico
Italy
Peru
Colombia
Poland
China
Uruguay
Paraguay
Argentina
Ecuador
Bolivia
Venezuela
Developed countries Other emerging LATAM
Best Latin American Cities to do Business(Out of 42 cities)
Source: America Economia (www.americaeconomia.com)
42
41
40
39
20
14
11
10
5
4
1Santiago (Chile)
Sao Paulo (Brazil)
Buenos Aires (Argentina)
Mexico City (Mexico)
Bogota (Colombia)
Lima (Peru)
Montevideo (Uruguay)
Quito (Ecuador)
Asuncion (Paraguay)
La Paz (Bolivia)
Caracas (Venezuela)
Success FactorsChile’s dynamic business environment is the result of a policy-driven strategy that has focused on:
• Building sound macroeconomic fundamentals through a rules-based policy framework (characterized by a floating exchange rate, inflation targeting and a structural fiscal surplus rule)
• Advancing democracy, political freedom and civil liberties
• Actively encouraging international integration through free trade agreements and FDI
• Implementing strong social policies to promote social cohesion so all citizens benefit from economic growth
The Chilean EconomyToday, the Chilean economy is very well positioned to weather global macro and market uncertainty thanks to its solid fundamentals, characterized by:
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
The Chilean Economy
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
Chile: GDP Growth (1990-2006)
3,7
8,0
12,3
7,0
5,7
10,6
7,4
6,6
3,3
-0,8
4,5
3,5
2,2
4,0
6,05,7
4,0
5,7
-2
0
2
4
6
8
10
12
14
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007*
GDP Growth (1990-2006)
6,5
4,5
3,2
3,12,9
2,7
2,5
2,4
2,21,8
1,6
1,4
9,8
6,1
4,6
1,5
5,5
3,33,2
2,3
0 1 2 3 4 5 6 7 8 9 10
ChinaIreland
IndiaChile
IndonesiaLuxembourg
ColombiaMexico
AustraliaSpain
United StatesNew Zealand
PortugalUnited Kingdom
BrazilDenmark
FranceJapan
RussiaItaly
Developed countries Other emerging LATAM
The Chilean Economy
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
Industrial Output (August 2006-August 2007, 12-monthly var.)
1,6%
-2,6%
4,5%
2,4%
1,2%
2,9%
4,6%5,2% 5,2%
3,0%
6,7%
4,0% 4,0%
-4%
-2%
0%
2%
4%
6%
8%
Ag
o-0
6
Sep
-06
Oct-
06
No
v-0
6
Dic
-06
En
e-0
7
Feb
-07
Mar-
07
Ab
r-07
May-0
7
Ju
n-0
7
Ju
l-07
Ag
o-0
7
The Chilean Economy
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
Investment at record levels (% of GDP)
20,0%20,3%
20,9%
21,7%
22,6%
23,5%
24,1% 24,3% 24,2% 24,2% 24,1% 24,3%24,7%
20,0%
17%
18%
19%
20%
21%
22%
23%
24%
25%
1tr
im-0
4
2tr
im-0
4
3tr
im-0
4
4tr
im-0
4
1tr
im-0
5
2tr
im-0
5
3tr
im-0
5
4tr
im-0
5
1tr
im-0
6
2tr
im-0
6
3tr
im-0
6
4tr
im-0
6
1tr
im-0
7
2tr
im-0
7
The Chilean Economy
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
Unemployment (% of labor force)
5,0
6,0
7,0
8,0
9,0
10,0
11,0
12,0
Unemployment Deseasoned Unemployment
The Chilean Economy
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
Low Inflation RateLow Inflation Rate
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Ene-03 Jul-03 Ene-04 Jul-04 Ene-05 Jul-05 Ene-06 Jul-06 Ene-07 Jul-07
The Chilean Economy
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
Fiscal balance pre- & post rule (% GDP)
Source: Ministry of Finance
2,4%1,6%
2,1%1,4% 1,5%
3,1%
2,2% 2,0%
0,4%
-2,1%
-0,7% -0,5%-1,2%
-0,4%
2,1%
4,6%
7,5%
4,8%
1,0%0,6% 0,7% 1,0% 1,0% 1,0% 1,0%
0,5%
7,7%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
(e
)
20
08
(p
)
Efectivo Estructural
Política Fiscal
The Chilean Economy
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
Exports represent 62% of Chile’s total exchange with the
world
Chile is a “global trader” as it is reflected in this chart (with an ascending tendency)
Chile’s Trade with the World 1990 - 2006Chile’s Trade with the World 1990 - 2006
Source: General Directorate for International Economic Affairs
9.049 9.927 9.414
90.634
69.192
53.914
38.291
33.43033.902
35.268
29.93731.841
35.12932.205
31.35722.794
19.95819.38317.405
16.602
58.995
8.580 11.64516.454 15.395 17.017 14.754 15.915
18.425 17.668 17.676 20.627
31.460
39.252
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
50.000
55.000
60.000
65.00070.000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Mill
ones
de U
S$
Exports represent 62% of Chile’s total exchange with the
world
Source: General Directorate for International Economic Affairs
LA13%
Europe29%
Nafta22%
Others3%
Asia33%
Chile’s Trade with the World (Exports, 2006)
China26%
Asean5%Others
10%
India8%
Japan33%
South Korea18%
Chile’s Trade with the World (Imports, 2006)
Source: General Directorate for International Economic Affairs
LA13%
Europe29%
Nafta22%
Others3%
Asia33%
China26%
Asean5%Others
10%
India8%
Japan33%
South Korea18%
The Chilean Economy
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels and rising wages• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
Recent sustained copper price rise risks appreciating the exchange rate
0
50
100
150
200
250
300
350
400
Jan/
99
Jul/9
9
Jan/
00
Jul/0
0
Jan/
01
Jul/0
1
Jan/
02
Jul/0
2
Jan/
03
Jul/0
3
Jan/
04
Jul/0
4
Jan/
05
Jul/0
5
Jan/
06
Jul/0
6
Jan/
07
Jul/0
7
A measure of the “real” copper price (deflated by US PPI) reveals strength of recent appreciation
Spot LME copper price deflated by the US PPI
Source: Cochilco & Central Bank of Chile
-
50
100
150
200
250
300
350
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Exports by quantity: robust despite copper price appreciation
Source: Central Bank of Chile
80
90
100
110
120
130
140
150
160
170
1tr
im-0
4
2tr
im-0
4
3tr
im-0
4
4tr
im-0
4
1tr
im-0
5
2tr
im-0
5
3tr
im-0
5
4tr
im-0
5
1tr
im-0
6
2tr
im-0
6
3tr
im-0
6
4tr
im-0
6
1tr
im-0
7
2tr
im-0
7
Cobre No Cobre
The Chilean Economy
• Record of strong growth
• High growth of industrial output
• Record investment rates
• Record employment levels and rising wages• Low inflation rate
• Large fiscal surplus
• An export oriented economy
• Favorable outlook for the price of copper• Very low country risk
Very Low Country RiskSovereign Spread: EMBI Global Spread
(Monthly averages, in basis points over USTBs)
164 167
138 140
82
161165
129 134
80
160168
121129
80
189
203
152144
90
232
249
200
176
108
226
243
192
176
121
0
50
100
150
200
250
Abr-07 May-07 Jun-07 Jul-07 Ago-07 Sep-07
Global Latin America Asia Europe Chile
A Further Competitive Edge
As well as these sound macroeconomic indicators, Chile has the advantage of:
• A growing network of Free Trade Agreements • High levels of transparency • Strong institutions • Competitiveness• A Freedom Economy • High levels of connectivity and Internet use• Excellent quality of life
A Further Competitive Edge
• A growing network of Free Trade Agreements • High levels of transparency • Strong institutions • Competitiveness• A Freedom Economy • High levels of connectivity and Internet use• Excellent quality of life
USA
Mexico
EU
South Korea
El SalvadorCosta Rica
EFTA (European Free Trade Association,Iceland-Norway- Suitzerland- Liechtenstein)
New Zealand
Singapore
Malaysia
China
Japan
Vietnam
Brunei
Australia
Turkey
Chile has Preferential Market Access to 86% of world GDP
Peru
PanamaHonduras
UruguayParaguayArgentina BrazilBoliviaVenezuelaEcuador
India
Cuba
In ForceSignedUnder Negotiation
Guatemala
Colombia
CanadaChile’s Trade Agreements
USA
Mexico
SpainPortugalUKFranceSwitzerlandIrelandItaly South
Korea
NorwayDenmarkSweedenBelgiumHollandFinland
PolandCroatiaHungaryCzech Republic
Argentina BrazilEcuadorPeruParaguayColombiaVenezuela
In ForceSignedUnder Negotiation
Double_taxation Agreements
Cuba
Russia
MalaysiaChina
New Zealand
South Africa
Australia
India
Canada
A Further Competitive Edge
• A growing network of Free Trade Agreements • High levels of transparency • Strong institutions • Competitiveness• A Freedom Economy • High levels of connectivity and Internet use• Excellent quality of life
Corruption Perceptions Index 2007(Out of 180 countries; 1 = least corrupt)
Source: Transparency International (www.transparency.org)
43
41
28
25
20
12
11
1
143
72
64
105
22
New Zealand
Australia
United Kingdom
United States
Chile
Spain
Portugal
Italy
South Korea
Turkey
China
Argentina
Russia
Developed countries Other emerging LATAM
A Further Competitive Edge
• A growing network of Free Trade Agreements • High levels of transparency • Strong institutions • Competitiveness• A Freedom Economy • High levels of connectivity and Internet use• Excellent quality of life
Quality of Institutions(Out of 125 economies)
Source: World Economic Forum (www.weforum.org)
% of Pupulation
% of Pupulation
71
47
36
27
17
8
7
4
1
80
91
69
25
Finland
Singapore
Germany
New Zealand
Ireland
Chile
United States
Spain
Korea
Mexico
Italy
China
Brazil
Developed countries Other emerging LATAM
A Further Competitive Edge
• A growing network of Free Trade Agreements • High levels of transparency • Strong institutions • Competitiveness• A Freedom Economy • High levels of connectivity and Internet use• Excellent quality of life
World Competitiveness Scoreboard (IMD)
Source: IMD, 2007
(Out of 66 economies)
30
20
12
1
53
52
43
27
55
49
47
26
USA
Australia
United Kingdom
Chile
India
Spain
Russia
Mexico
Brazil
Poland
Croatia
Venezuela
Developed countries Other emerging LATAM
Global Competitiveness Index 2006 (WEF)
Source: World Economic Forum, 2007
(Out of 125 countries)
42
28
10
7
6
1
78
62
54
48
43
65
27
Switzerland
USA
Japan
United Kingdom
Chile
Spain
Italy
India
Poland
China
Russia
Colombia
UkraineDeveloped countries Other emerging LATAM
A Further Competitive Edge
• A growing network of Free Trade Agreements • High levels of transparency • Strong institutions • Competitiveness• A Freedom Economy • High levels of connectivity and Internet use• Excellent quality of life
Economic Freedom Index(Out of 157 economies)
Source: Heritage Foundation (www.heritage.org)
60
45
43
27
19
18
6
4
1
119
110
52
11
Honk Kong
United States
United Kingdom
Chile
Japan
Germany
Spain
Portugal
France
South Africa
Italy
Indonesia
China
Developed countries Other emerging LATAM
A Further Competitive Edge
• A growing network of Free Trade Agreements • High levels of transparency • Strong institutions • Competitiveness• A Freedom Economy • High levels of connectivity and Internet use• Excellent quality of life
The Networked Readiness Index 2006–07(Out of 122 economies)
Source: World Economic Forum (www.weforum.org)
15
79
23
32
38
34
44
47
52
5859
70
31
49
5356
63
DenmarkSwitzerland
United StatesUnited
FranceChile
SpainCzech
ItalyIndia
South AfricaMexicoTurkey
BrazilCosta Rica
PolandChina
ArgentinaRussia
Developed countries Other emerging LATAM
A Further Competitive Edge
• A growing network of Free Trade Agreements • High levels of transparency • Strong institutions • Competitiveness• A Freedom Economy • High levels of connectivity and Internet use• Excellent quality of life
Human Development Index(Out of 177 countries)
Source: United Nations Development Programme
18
1
121
108
92
81
74
65
61
44
69
53
38
South Africa
Indonesia
Turkey
China
Thailand
Brazil
Russia
Malaysia
Mexico
Croatia
Chile
United Kingdom
Norway
Developed countries Other emerging LATAM
Why all these economic indicators are important?
Reduction of Poverty (1990-2006)38,6
25,6
13,0
23,2
17,5
5,7
20,2
14,6
5,6
13,7
10,5
3,2
0
5
10
15
20
25
30
35
40
1990 1996 2000 2006
Total Poverty Non Extreme Poverty Extreme Poverty
Economic Growth, Trade and PovertyEconomic Growth, Trade and Poverty (1990-2006) (1990-2006)
-
20
40
60
80
100
120
1990 1992 1994 1996 1998 2000 2003 2006
US
$ B
illi
on
s
0
5
10
15
20
25
30
35
40
45
% o
f P
op
ula
tio
n
PIB TRADE POVERTY
Chile: An OverviewChile: An Overview
Mr. Carlos Mladinic Mr. Carlos Mladinic New Dehli, November 2007New Dehli, November 2007
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