Chile, trade relations with Spain and investment opportunities

Chile’s geography runs north to south along the Andes, which separate the country from Argentina and Bolivia over more than 4,200 kilometres, and it also shares a small border with Peru. To the west is an extensive coastline bathed by the Pacific Ocean, indented by numerous inlets and islands in the southern third. It is therefore a large country (756,945 km2) with the peculiarity of covering almost all possible climates and natural environments in South America, given its latitudinal range. Chile also claims sovereignty over a part of the Antarctic continent, where it has established several scientific bases. It also has sovereignty over the remote Easter Island. All these geographical factors give Chile an enormous wealth of natural resources of all kinds (water, mining, agriculture, fishing, forestry, etc.).

Demographically, Chile has a relatively small population for its large territorial area, with more than 19.4 million inhabitants, and it is highly concentrated in a few urban areas, especially the metropolitan area of Santiago, the capital city, where 42 per cent of the nation’s population lives. According to IMF estimates, Chile’s per-capita income, at current prices, was12,977 dollars in 2020. There is a strong concentration in income distribution.

Chile is a relatively small market, but one of the strongest and most open economies in Latin America. The structure of its GDP, which grew by 11.7% in 2021, is characterised by the major role of the primary sectors. Of those, the extractive sector plays a special role, accounting for 14.6% of national production that year, although this share has been falling in recent years. It should be recalled that Chile is the world’s leading copper producer.

Other significant primary activities are agriculture, fruit growing, forestry and aquaculture. Although the primary sector represent a large share of Chile’s income, its exposure to tensions in international commodity markets is a factor making its economy vulnerable. Nevertheless, the Chilean economy is gradually managing to diversify its exports, despite its remoteness from the main international economic centres, which impedes its integration into global value chains.

Spain-Chile relations

Bilateral relations between Spain and Chile are excellent, irrespective of the political changes in both countries, not only because of their historical and cultural closeness, but also because of the importance of the Chilean economy in a region as crucial for Spanish interests as Ibero-America. In the economic arena, relations are increasingly active and have been strengthened in recent years, favoured by the dynamism of the Chilean economy and the growing interest of Spanish companies in the business opportunities offered by this market. The EU-Chile Association Agreement has contributed to intensifying bilateral trade with Spanish exports increasing fourfold and imports more than doubling since 2003.

The volume of Spanish exports to Chile in 2021 was 1.7514 billion euros, a rise of 35% since the previous year. Chilean imports to Spain were worth 1.2993 billion euros, 22% higher than in 2020. Spanish imports in the same period rose 23.8%. The trade balance was 452.1 million euros in favour of Spain. Spain was Chile’s ninth-largest customer country and eighth-largest supplier in 2021, according to ICEX data.

In terms of the composition of recent bilateral trade, according to ICEX information, the main sectors of Spanish exports to Chile in recent months have been automobiles, electrical material, clothing, perfumery, electrical machinery and pharmaceuticals. Regarding imports from Chile, the sectors that are most in demand from Spain so far this year have focused on copper and copper alloy products, organic chemicals, canned fish and seafood, berries and small fruit, and frozen fish.

 Opportunities in Chile

Chile offers good opportunities for exporting mining machinery and services to this market. Other sectors with promising business opportunities are energy and water supply, which are crucial for mining, and the machinery sector for agriculture and the agri-food industry. In the latter sector, deserving of special attention are opportunities related to mechanisation, irrigation and improved productivity in the most export-oriented sub-sectors, such as fruit and vegetable, canning, fishing and wine.

On the other hands, there are projects to meet demand in areas such as water management, urban mobility, development of renewable energy, improving roads, public works and other transport infrastructure that are open to investment by foreign companies. In the tourism sector, the objective is to improve its infrastructure, as well as the construction of hotels, both in the capital and in other parts of the country.