FOREIGN INVESTMENT

Trade Agreements

The stimulus for foreign investments has been encouraged by various trade agreements. These agreements have achieved the following international alliances:

Free Trade Agreements
The Free Trade Agreements that Chile has signed with other nations have been vital in encouraging businesses to adopt a positive approach. In 1991, Chile signed a free trade agreement with Mexico and in 1996 proceeded to finalise an FTA with Canada and become an associate member of the MERCOSUR commercial bloc formed by Argentina, Brazil, Uruguay and Paraguay. Furthermore, Chile has bilateral economic and trade agreements with: the European Union, the USA, South Korea, the EFTA bloc (formed by Norway, Iceland, Liechenstein, Switzerland, Singapore, New Zealand and Brunei (that along with Chile form the denominated P4 bloc.) China, Japan and Australia. It is currently in negotiations with India. It also has signed free trade agreements with Colombia and Peru.

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Confidence in Investors
Thanks to these agreements, Chilean businesses now enjoy privileged access and in many cases 0% customs fee to a market of more than a one thousand million consumers worldwide. In response to this, an increasing number of companies such as the British-Dutch Unilever, the Swiss Nestlé, the German Baiersdorf Ag and Packard-Bell, controlled by Japanese capital, are using installations in Chile to export to neighbouring markets and, indeed, the rest of the world

In many cases such as that of Packard-Bell, foreign businesses have formed strategic alliances with Chilean partners to access local knowledge. In the 1990s Chilean businesses, using their experience in a domestic, competitive and unregulated market, started to expand to neighbouring countries in favour of applying their acquired expertise. For foreign investors this is a significant advantage; as well as knowledge of export markets-Chilean entrepreneurs and executives have practical experience of operating in other countries

A number of foreign investors were attracted by the world-class telecommunication infrastructure in Chile, given that they are already using Chile as a launching base. Delta Airlines, Air France and Hewlett Packard are just three of these companies which have adopted this strategy. They all chose Chile as the centre of support and contact to: sell tickets, reply to clients queries and provide other services around the region

A similar phenomenon can be observed in the banking sector. The Spanish banking group SCH uses Chile to maintain and develop systems processing for its operations around Latin America, whilst the US Citigroup has decided to locate its new regional software development centre in Santiago

Many international companies have started to look towards "shared services", that is the centralisation of internal services, such as accounting and financial administration for subsidiaries in different countries, as a way of reducing their operational costs. And thanks to Chile´s trustworthy telecommunications and wide range of highly-qualified professionals, our country has emerged as an attractive business alternative.

Agreements of Double-Taxation Elimination
These are legal international agreements between two states, which are incorporated into the internal legal regulations of each nation, with the aim of eliminating or reducing the duplication of international taxes which affects or restricts the exchange of: goods and services, capital transfers, technology and people. This exclusively benefits people of both countries who are legal nationals or residents of either country.

In general these agreements are applied to taxes which burden earnings or ownership. The following alternatives exist to counteract problems of this nature

· The taxation jurisdiction is conceded exclusively to one of the states involved, to be imposed on earnings and estates in the country where the business has its headquarters or the country which is the source of revenue.
· Taxation jurisdiction is conceded to both nations but a limit is given , from which the nation of origin can impose a determined levy (interest, royalties)
· A norm where the countries concerned agree to avoid double taxation is envisaged in the cases where revenue is taxed in both countries. Rebates and exemptions exist based on how much tax has been paid in the other country.

Export/Import Policies
As world trade is rapidly growing, free trade agreements have become commonplace. The WTO endeavours to regulate every aspect of this. Countries continue to implement measures that protect their industries.

The following are some of the most consequential measures adopted by Chile.

Imports Policy
This refers to general procedures, mainly administrative for carrying out imports. Amongst those are licences, norms in the valuation of excise duty on merchandise and inspections prior to shipments. Matters of customs/tariffs are also included.

Technical Regulations and Sanitary Measures
These consist of specifications with regards to the characteristics of some products must have such as: packaging requirements, labelling, including sanitary measures (also relating to plants and animals)

Intellectual Property
Norms which regulate commerce and investments with a view to protect author´s rights, manufacturing and commercial brands and denominations of origin amongst others.

Subsidies
This refers to the economic support which the state grants, allowing a reduction in costs and generating a distortion in sales prices

Export of Services
Services are not affected by customs duties, which means that the barriers concerning these are in: laws, norms and regulations which discriminate against this sector or the suppliers of foreign services. In this area transport, telecommunications and financial services are included.

Commercial Safeguards
These are temporary measures a country adopts to protect a national industry faced with an increase of imports or disloyal business practice (dumping). Or when there is a financial contribution from a government or any other public organisation granting subsidies, applying excessive excise duty and anti-dumping right or compensation, respectively, on the import of a product.