Trade and
Investment
The Experience of
Chile
Rome, 2007
Foreign Direct Investment
in Chile (DL 600)
Total 1974-2006:
US$63,517 millions
Switzerland
2%
France
2%
Others
11%
USA
25%
Netherlands
2%
Italy
3%
Japan
3%
Foreign Direct
Investment from Chile
to other countries
Total 1990-2006:
US$38,300 millions
Uruguay
1%
Venezuela
1%
Cayman
Islands
3%
Spain
1%
Others
8%
Argentina
36%
Panama
3%
USA
4%
Australia
5%
UK
9%
Spain
22%
Canada
16%
Colombia
12%
Peru
14%
Source: Foreign Investment Committee (www.cinver.cl) and Direcon
(www.direcon.cl)
Brazil
17%
Foreign Trade Policy Elements
 Open economy
 Dependent on international trade
 Small country
 Transparent
Chile = 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
 Multilateralism
 Plurilateralism or regionalism
 Bilateralism
“All of them”
Multilateralism
 GATT (1948)/WTO
 Active participants
 Tokyo round
 Uruguay round
 Doha round (Round of the development)
Regionalism
 FTAA (“momentum”)
 APEC
Bilateralism- FTA
Canada
Mexico
C. America (5)
EU (27)
Korea
USA
EFTA (4)
Venezuela
Colombia*
Ecuador
Peru*
Mercosur (4)
Bolivia
Panama*
* Not in force
• N. Zealand, Singapore, Brunei
• India (partial trade agreement)
• China
• Japan
18 Agreements
56 countries
88% of actual trade
Chile and the World
30
27
25
EU
25
L.America
20
18
USA
15
10
Mx,Cnd, Kor
9
Japan
8
Rusia
5
0,2
0
Duties on International
Commerce
Year
Percentage of total tax revenue
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
11.9
10.9
10.3
9.2
8.3
7.0
5.7
3.9
2.9
2.6
Projected Fiscal income
1:
With Free Trade Agreements and VAT 19%
2003
2004
2005
2006
8,140.6
8,458.0
9,022.7
9,499.3
16.3%
16.5%
16.5%
Net
Revenue
Income
Tax burden
16.5%
Source: Budget and Tokman (2004)
Projected Fiscal income
2: Without Free Trade Agreements and VAT 18%
2003
2004
2005
2006
8,236.3
8,546.4
9,128.8
9,623.4
16.5%
16.7%
16.7%
Net
Revenue
Income
Tax burden
16.7%
Source: Budget and Tokman (2004)
Protection of Foreign Investment
Agreements
 5 Asia Pacific region
 20 in Europe
 14 in Americas
Investment regime
 National treatment
 DL 600
Chilean Double Taxation Treaties
In Force
Before Congress
Negotiation concluded
Argentina
Brazil
Ecuador
Mexico
Peru
Ireland
Malaysia
Portugal
Paraguay
South Africa
Colombia (signed)
Canada
Poland
Croatia
Spain
Denmark
Sweden
France
S. Korea
Norway
UK
New Zealand
Russia
Thailand
What are your objectives ?
 Investment
 In
 out
 Technology
Chile's future....
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