[Software] Chile: a strategic partner that leaves Argentina its greatest favorable balance

[Inkriql]

Chile is Argentina's fourth trading partner behind Brazil, China and the United States and is the country with the largest trade surplus, US$3.47 billion last year and US$376 million in March of this year (last INDEC measurement). It has other significant characteristics, it is the first country with which there is a state-of-the-art trade agreement (it includes aspects such as the environment and gender) and, in addition, it is key to exiting the Pacific (beyond the geographical, it integrates the Treaty Pacific Asia).

Despite having less than half of the Argentine po[CENSORED]tion -19.5 million as of 2020- it is a more developed market with more sophisticated consumption in certain areas; it has a GDP per capita in current dollars, US$12,993. As far as its international commercial flow is concerned, it has a surplus balance.

China, with a 38.9% share of the total, is the main destination for its exports and also for its imports (27.8%); the second place is for the United States in both cases with 13.2% and 17.8%, respectively, and the third is Japan with 8.7% for exports and Brazil, with 7.3% for imports. Argentina represents only 0.8% of foreign sales and 5.6% of its purchases (fourth place).

In the first quarter of this year, the latest data available, Argentina exported US$1.27 billion to that destination, which marks a year-on-year growth of 70%; the favorable balance reaches US$1,067 million, the largest among those registered with the different countries and economic blocs. Trade with Chile was equivalent to 6.6% of exports and 1.1% of total imports.

The main exported products are cereals; animal and vegetable fats and oils; mineral fuels and oils; vehicles, tractors and waste from the food industry. It imports copper and its manufactures; fish, crustaceans and molluscs; plastics and their manufactures; fruit and paper and cardboard.

For the automotive sector, in April of last year, the scheme that modified the origin regime of the agreement entered into force and the local content went from 60% to 50%, which favors the increase in bilateral trade. In 2021, the export of vehicles grew 136% year-on-year.

Rossana Surballes, Undersecretary of Mercosur and International Economic Negotiations of the Foreign Ministry, qualifies Chile as a "very relevant" trade partner. She states that the commercial exchange reflects a relationship that “has been built in a very complete way; It's a strategic relationship." The state-of-the-art agreement closed, she describes, in addition to the classic includes other disciplines such as services, electronic commerce, gender, environment, labor issues. "The focus is on inclusive and sustainable trade, going beyond tariff and trade guidelines and delving into many areas that were already being worked on, such as the productive integration of SMEs in value chains," she points out. .
Argentina is an exporter of dairy products to Chile and can expand its participation.
Argentina is an exporter of dairy products to Chile and can expand its participation.

Regarding the development of regional value chains, she maintains that it is in Argentina's interest to achieve a "balanced prioritization of possible production chains that allows value aggregation" for both parties. There are 19 projects identified in areas such as food, dressings and organic sauces; preserves, meat products, non-metalliferous minerals, personal care products and medical-hospital use, electrical industry products and aluminum products. They all work to promote the search for counterparts.

The former Argentine ambassador to Chile, José Octavio Bordón, incorporates the "integral" dimension of the relationship between the two countries and emphasizes that there are events that marked a "very important change, beyond the weaknesses and errors." He mentions the decision, in the administration of Raúl Alfonsín, to overcome border problems in what was "progressing to generate a regional space with great bioceanic projection."

Today there are joint investigations into environmental matters and security actions in the Beagle Channel area: "There are still some technical -more than political- border differences, but we have gone from the tension that almost led us to war, to a relationship that includes up to joint military brigades. There are also advances in the energy field that will allow us to deepen the integration”.

He agrees with Surballes on how significant it is to work in the organization of production chains. Along these lines, he points out that the Covid-19 pandemic revalued this issue of regional articulation and the possibility of generating new locations for world trade suppliers. The exit to the Pacific markets, with the creation of a "bi-oceanic zone" that serves the Atlantic countries, is another point that he emphasizes.
Opportunities for both sides

Graciela Forani, manager of the

The Chilean-Argentine Chamber of Commerce reviews that between 2018 and 2019 the trade flow between the two countries recovered the growth trend, which was interrupted in 2020 due to the pandemic. In 2021 it rebounded 42% year-on-year. The expectation of the entity is that it continues in this trend; estimates that one of the sectors that will push the most is services.

"One of the main characteristics of the Chilean market, compared to the Argentine - he adds -, is the greater simplicity in the tax regime and foreign trade regulations." According to Forani, services, energy and mining are the segments that present the greatest opportunities for Argentines.

Although Argentina was traditionally the first destination for Chile's investments abroad, in recent years it has lost ground. In the accumulated between 1990 and December 2020, according to official Chilean numbers, Brazil ranks first with US$37,915 million, followed by Argentina with US$22,512 million. The third place is from Peru with US$20,048 million. For Forani, the main opportunity for Chilean companies entering Argentina is the size of the market.
The strength of the Chilean export is copper.
The strength of Chilean exports is copper.Ivan Alvarado - X01744

This year there is one trade mission per month from the Ministry of Foreign Affairs to Chile: food in June and the rest of the year for machinery for the food industry; nanotechnology; oil and energy and technology-based companies and clothing and footwear. The Undersecretary for Trade and Investment Promotion of the Foreign Ministry, Pablo Sívori, explains that in all cases the companies that join go with “agreed agendas” based on the task carried out by the embassies to try to find counterparts.

From the next one, 51 firms will participate; 19 dedicated to organic foods -a sample of the type of consumption to which the Chilean market tends-, in addition to other dairy products (Argentina already exports); craft beers; pasta and pet food. Sívori highlights, among the advantages that Chile has as a destination, the lower logistics costs at a time when this item has a strong weight due to the increases triggered by the pandemic.

He also highlights the possibilities that are opening up for SMEs, which already have a significant share in exports to that destination: “It is a developed market, more mature than the Argentine market in some segments. The work agendas are federal, they contemplate the regional economies”.

Due to what has been done by the Public-Private Council and by the Argentine embassy in Santiago de Chile, the sectors with the most potential for operations are the food industry (including the dairy complex, food preparations, pet food and the blueberry, citrus and herbalist); White line; industrial machinery and equipment; Farm Equipment; vehicles; diagnostic or laboratory reagents; ozone therapy devices, oxygen therapy, resuscitation respiratory devices and other respiratory therapy devices.

In the case of services, there are possibilities for computer software and services, especially those related to finance, government and health; digital transformation and industry 4.0; technologies applied to agricultural production (big data, precision agriculture and biotechnology); satellite services and video game development.
various experiences

Promedon, a medical technology company, began exporting to Chile in the 1990s and, since 1994, has had a subsidiary with 160 workers who are in charge of distributing its own products and other complementary ones. Today in money, the volume of these operations exceeds that of Argentina. It is a “very competitive” market; It is a country with free trade agreements with the whole world and they buy if the products are the best or the cheapest. They have less tax pressure and more predictability”, describes Marcelo Olmedo, head of the firm.

Geminus Qhom is dedicated to the manufacture of software five years ago they landed in Chile thinking of that country as a springboard for the rest of the world. Since then they work for the salmon industry. "We designed a tool for the management of salmon production -explains Ricardo Ruival, CEO of the company-. Each supplier offered services separately, we developed a platform that centralizes all the information and, with the same scheme, we advanced to the aquaculture industry”. 60% is standard and the rest is made "tailor-made" for the client. "We do not sell development hours but added value," he adds. The company will participate in the next salmon industry fair in Norway in search of expansion.

In 1998 José Guma SA, a manufacturer of toiletries and household hygiene products, made its first shipments of toilet and laundry soaps to Chile. In addition to that, it currently markets toilet soap shavings/

washing, cleaners, softeners and dishwashers and we develop our own brands for supermarket chains and other industries. The Chilean market represents 4% of the turnover and between 18% and 35% of its exports

From the firm, Sebastián Guma indicates that Chile has incorporated the use of liquid soap (70% compared to 30% of the bar), a unique characteristic in South America: "We position ourselves very well as regional manufacturers of the leading international brands with our standards of certified quality -he adds-. Argentina's permanent macroeconomic instability prevents it from sustaining a stable commercial policy and conditions over time; Chile's trade agreements position us to compete with the world, mainly with products from Southeast Asia”.

Gerardo Seidel, Vice President of Plásticos Dise, recounts the experience of having started by exporting plastic films until now having a subsidiary in alliance with a manufacturer of vacuum food packaging: “It is a developed market, it has grown a lot. The challenge is our competitiveness; In Chile, access to credit is faster and simpler, there is also less tax pressure. These are important differences."

The pharmaceutical laboratory Savant Pharm has been operating in Chile for just over a decade, where its business model has changed. At the beginning they produced for a company there and now they market their own brands. The person in charge of Comex, Juan Ignacio Martín, confirms that the "extremely competitive" nature of the market forces them, "permanently, to improve the competitiveness of prices, of products. It is very open, there are income from India and China and the Argentine costs make it difficult”.

16 years ago Helacor -manufacturer of Grido ice cream and frozen food Frizata- entered Chile with the same model that it applies in Argentina, a scheme that "cost" them, according to Gonzalo Santiago, manager of Comex. Ice cream consumption is 8 kilos per person per year and frozen food is the highest in Latin America, making it an important destination for the company.

“Four years ago we began to test our model of ice cream parlors in the neighborhoods and not only in the malls as they are used to -reviews Santiago-. In the last season we added 27 franchises and we have already reached 75; sales in kilos grew 70%. The objective is to reach 18 million kilos per year, multiply by ten what is current”.