Export promotion policies and programs in Chile

Dr. Francisca SilvaDepartment of Agricultural Economics

Outlook

Chile in figures

The agricultural export situation

Current export support policies

Final remarks

Chile

A long (4,329 km) and narrow (90-468 km) country

Population: 17 million

Per capita income: 23,556 US$ (2015)

Climate:

• North: Arid and dry conditions. Atacama desert

• Central region: Mediterranean climate with mild wet winters and long dry summers

• South: Cold and wet, with rainfall during almost the entire year, mainly in fall and winter.

An open economy…

Canada

Mexico

EuropeanUnion South

Korea

Central AmericaEl SalvadorCosta RicaGuatemalaHondurasNicaragua

New Zealand

SingaporeMalaysia

China

Japan

Brunei

Australia

Turkey

Peru

Panama

MercosurArgentina BrazilParaguayUruguay

India

Cuba

Colombia

EFTA IslandLiechtensteinNorwaySwitzerland

UnitedStates

Ecuador

Venezuela

Bolivia

P4Vietnam

Chilean exports value (US$ million)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mining Agriculture and Forestry Total

The food industry

It is the second largest exporter force in the country

Gather fruits, salmon, wines, processed foods, meats, annual crops and seafood

Agricultural primary sector is 2.6% of GDP

A labor intensive activity, becoming one of the sectors that generate more jobs

Agricultural and forestry trade (US$ million)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Imports

Exports

Food and forestry exports(2015: 14,739 US$ million FOB)

Fresh fruit

30%

Pulp and paper

18%Processed and raw

wood15%

Wines and spirits

12%

Processed F & V

10%

Meat

7%

Others

8%

Export destinations are diversified

North America

29%

Asia

32%

Europe

22%

South America

11%

Other

6%

Agricultural and forestry exports value (2015)

Current export support policies

ProChile is the country’s export promotion agency. It is

part of the Ministry of Foreign Affairs

It’s mission is to support Chilean business interests in the

global marketplace by assisting in the development of the

export process. The agency is responsible for establishing

international business relationships and for providing

market research, international trade data and sales leads

for the export industry. It emphasizes promotion of non-

traditional products.

The agricultural and forestry export promotion fund (FPESA)

It originates in 1995 under the dependence of the Ministry of

Agriculture (MINAGRI). This program is managed by ProChile with

funds transferred from MINAGRI.

The main objective of FPESA is to promote the growth and

diversification of nontraditional agricultural and forestry exports of

Chilean companies.

The Ministry of Agriculture establishes the FPESA priorities, focus,

and participates in the selection of the initiatives that will be funded.

Also it presides FPESA’s Council, which considers representatives of

ProChile, other State agencies and representatives of agricultural and

food trade associations. The Council plays a decisive role in the

analysis and approval of the programs that are supported by FPESA.

FPESA Components

1. Trade information generated and disseminated to the

exporting sector

2. Export training and capacity building

3. Export promotion strategies and actions

2015: 19,4 US$ million

Export grant

competition45%

Foreign markets

initiatives24%

Agricultural

attaches14%

Activities in Chile &

Small farmers7%

Others

10%

Export grant competition

Co-funds export promotion initiatives designed by

companies or groups of these. This fund is allocated

through public tenders.

Call for Project

proposals

Evaluation of eligible proposals

Approval and

contract establishing

Outcome and impact assessment

Donoso et al. (2013), using average export values for the

surveyed beneficiaries who have employed instruments between

2007 and 2011, reports that beneficiary’s export value and

export diversification increase with their participation in export

promotion initiatives.

The same author estimated the direct impact of Chile’s EEP

(FPESA) on the FOB value of exports between 1990 and 2011,

employing a spline regression, considering the implementation

of FPESA as the structural change.

The results show that FPESA has had a significant impact on the

FOB value of exports, that is, as of its implementation, the rate

of growth of the FOB value of exports significantly increased.

Final remarks (Donoso, 2015)

• It is positive that an export promotion policy (EEP) consider a Council with representatives of the public agency in charge and of the private sector (i.e. agricultural and food trade associations). This allows to establish effective and adequate objectives and strategies.

• The design of an EEP must consider periodic establishment of targets for each of the instruments. Without specific targets the program cannot evaluate is progress in its strategic plan. Also, the EEP must consider a well-designed performance and impact assessment program.

• Allocation of funds through a public tender system reduce potential selection bias. This systems requires the definition of clear operational rules to be used for the evaluation of proposals.