Sponsored by Santander, the annual Canning House Lecture is traditionally delivered by a Latin American or Iberian head of state to a London audience of government and business leaders. This year it was delivered by H.E Michelle Bachelet, President of Chile – a country with a favourable view of British goods and services. Mauricio Munguia, Santander’s Head of Latin America Desk, sets out the case for UK trade with Chile.
Chile is not the obvious choice for UK companies thinking of exporting to Latin America, maybe for the first time. But perhaps it should be. While relatively small – its 17.6 million people make it only the sixth most populated in the region – Chile is a country that thinks and acts more like the UK than any of its neighbours.
Chile is, after all, a strong advocate of free trade – having signed agreements with 62 countries (a regional record) that give access to 85% of global GDP. This makes it one of the regions’ most globalised markets and therefore the perfect entrepôt for ambitious UK companies looking to expand into Latin America.
In fact, bilateral trade relations between the two countries are surprisingly healthy. Chile is the UK’s second largest export destination in Latin America, while the UK is the sixth largest inward investor to Chile – generating total trade worth £1.25 billion per annum.
Of course, this is just the tip of the iceberg with respect to the potential of bilateral trade between Chile and the UK. After all, Chile’s growth rate – averaging 5% over 30 years – has produced the highest level of GDP per capita in Latin America, generating consumption patterns that suit the UK’s export strengths.
Two factors set Chile apart – its macroeconomic stability and commitment to international trade. Both have guided Chile to its current status as one of Latin America’s most developed economies. Indeed, in 2010 Chile became the first South American country to join the Organisation for Economic and Development (OECD) – the association of fully-industrialised economies. In addition to this, Chile, along with Mexico, Columbia and Peru, is a founding member of the Pacific Alliance – a trade bloc representing 36% of Latin America’s GDP.
There is no question that Chile has a strong pro-business track record and is – under its current president Ms Bachelet – a major advocate for trade; something she was keen to emphasise during her Canning House Lecture. She pointed out the ease with which local and foreign entrepreneurs can establish themselves – with new-business incorporations taking just a single day in most cases. In fact, Chile is one of Latin America’s top-ranked countries in the World Bank’s “Ease of Doing Business" Index – a ranking the President was rightly proud of.
Of course, key to such ease is the low level of corruption, which – coupled with a high degree of bureaucratic and legal transparency and its commitment to economic freedom – should make Chile a first-thought for UK companies looking towards Latin America for growth.
Key export opportunities
But where are the specific opportunities – especially for small or midcap companies? At Santander, we have identified four key sectors where we believe there are strong opportunities.
Mining – both Chile and Latin America’s largest sector – accounts for 45% of global GDP, with Chile alone producing a third of the world’s copper. This, of course, provides opportunities for the UK, which has a mining supply chain of over 4,000 companies.
Furthermore the opportunities for British energy companies are also substantial. The 2050 Energy Plan, Chile’s long-term policy aimed at producing 70% of energy from renewable sources by mid-century, places a key focus on the sector. Already the region’s leading solar market, the country possesses enormous potential for renewable energy in marine, wind and geothermal energy generation and storage – with renewable technologies a particularly British forte.
The third key sector worth noting is education and science. As the top destination for post-graduate Chilean students, the educational links between the UK and Chile are strong. Collaboration between the two nations is further boosted by joint scientific efforts such as those between the University of Edinburgh and University of Chile, focused on improving the genetic resistant of salmon – one of Chile’s largest industries. Launched in 2014, the Newton-Picarte Fund promotes research and innovation between the two countries having funded forty-nine joint projects in its first year alone.
Finally, the opportunities for UK companies provided by Chile’s infrastructure sector are strong. Indeed, Chile is an advocate of public-private partnerships (PPPs) – innovated in Britain in the 1990’s – offering concessions for infrastructure projects that total US$4.1 billion. These initiatives cover areas such as motorways, airport terminals, dams and hospitals.
Yet there are other sectors also worth consideration. Chief among these is retail – a particularly British strong-suit. British food retailers such as Tesco, Waitrose, Twinings Tea and clothing retailers such as Topshop and Oasis are already enjoying success in the Chilean retail market. And with among the highest percentage of middle-class consumers of any Latin America country, other brands – especially high-end-British labels – should exploit the Chilean consumers’ favourable view of high-quality British goods.
Indeed, leaving aside the statistics, one of the fundamental advantages for British companies looking to export to Chile is that Chileans are, at heart, anglophiles. They tend to appreciate all things British – something UK exporters have been slow to profitably exploit despite the strong sentiment.
By a wide variety of indicators, therefore, the Chilean economy is something UK exporters should not ignore. Chile presents significant opportunities across a range of sectors that, with the right guidance, even smaller UK companies can exploit.
As President Bachelet concluded, there are many links between Chile and the UK, but there could be many more. And, as the country progresses towards that of a high-growth yet robust economy, ambitious British exporters should have Chile at the forefront of their mind when considering Latin America, and certainly not as an after-thought.
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