2012A complete guide to investing in one of the worlds most dynamic economiesChiledoing business inContentsTop 10 reasons to invest in Chile ............ 4Chile country comparison ....................... 6 Prochile ................................................. ..8Promoting Chiles strengths .................. 10Foreign Investment Committee ............ 12Economic outlook ................................. 14Setting up a business ........................... 16 Taxation ................................................ 20Mining ................................................... 24Energy ................................................... 28Water resources .................................... 30Wine ...................................................... 32Sector Descriptions ........................ 36, 41Chiles Top 65 Companies .................... 38Fisheries ................................................ 42Agriculture ............................................. 44Capital markets ..................................... 46Banking ................................................. 48Insurance .............................................. 50Real estate ............................................ 52Retail ..................................................... 54Construction ......................................... 56Telecoms ............................................... 58Information technology ......................... 60Media .................................................... 62Tourism ................................................. 64Hotels .................................................... 66Astronomy .......................................... ..68Isabel Allende: Memoire ....................... 72Practical Information ............................. 74This publication was jointly produced by Mediaside SARL with various Chilean investment promotion agencies, including ProChile, CORFO and the Chilean Foreign Investment Committee. The publishers thank the OECD for their input.Unless otherwise specifed, all currencies are in US dollars.Publishers: Mediaside SARL andthe Chilean governmentEditorial director Christopher FodorEditors in chief Felix de Vincente and Matias MoriEditorial coordinator Robert GoldsmithArt directorRohit JunejaAdvertising sales Dany Laloum, Raquel VidalMediaside SARL77 rue du Faubourg St Denis 75010 Paris Tel +33 1 4483 9337 contact@mediaside.biz www.mediaside.bizProChile Teatinos 180, Santiago, Chile Contact:Felix de Vicente, Director T : +56 2 827 5100 www.prochile.clChilean Foreign Investment Committee Ahumada 11,Santiago, ChileContact:Matias Mori, Executive Vice President T: +56 2 698 4254 F: +56 2 698 9476 www.investchile.comCopyright 2011Mediaside SARL and the Chilean Investment Authorities (ProChile, Chilean Foreign Investment Committee).All efforts have been made to insure accuracy of information provided. The publishers are not held responsible for mistakes. The opinions expressed in the articles, including the sponsored statements, are those of the authors and interviewees and do not necessarily represent the opinion of ProChile, CORFO, Chilean Foreign Investment Committee or the OECD._EDF_1109010_LAOS_210X297_IEA_MAGAZINE_SR_EUROPE.indd 1 03/10/11 17:27Doing Business In Chile, 2012 EditionTalented Human ResourcesA highly educated and skilled workforce is one of Chiles main assets.Chile has 61 universities, 43 professional training institutes (giving four-year courses) and 11 technical training centers (giving two-year courses). It is home to three of Latin Americas 10 best business schools, according to a 2010 ranking by AmricaEconomia magazine. Two Chilean universities are classed among the 10 best in Latin America.6Highly CompetitiveChile is Latin Americas most competitive economy. It is ranked 28th among 139 countries worldwide and frst in Latin America in the Global Competitiveness Index calculated by the World Economic Forum, which also says Chile is at the forefront of market liberalization.Moreover, Chile is ranked 25th out of 59 economies and leads Latin America in competitiveness, according to the 2011 World Competitiveness Yearbook published by the Institute for Management Development (IMD).7Cutting-edge Connectivity Chile has made remarkable progress in connectivity with the involvement of the private sector.In its annual study ranking world innovators, The Global Innovation Index 2011, INSEAD Business School ranked Chile 38th internationally and frst in Latin America and the Caribbean, four places higher than 2010.Chile ranked frst in Latin America and 30th out of 70 countries globally in e-readiness, according to the Economist Intelligence Units Digital Economy Ranking 2010. 8Outstanding Quality of LifeChile offers a perfect mix of natural beauty, public safety, political stability and modern infrastructure.In a 2010 report, Newsweek magazine ranked Chile 30th worldwide and the best country to live in Latin America due to its economy, health system and political environment. International Living magazine ranked Chile third in South America and gave it top marks for safety in its 2010 Quality of Life Index.9A Regional PlatformChile is a good jumping off point for regional operations.Chiles tax system benefts enterprises that administer businesses in other Latin American countries. Companies that use Chile as a business platform (e.g. regional HQs) can administer investments in other countries without paying Chilean income taxes on profts the foreign investments generate.10Top 10 reasons to invest in ChileDynamic EconomyChile has the most dynamic economy in Latin America. In 2010, Chiles GDP expanded by 5.2% while per capita income reached its highest level in eight years, this despite Chile suffering the sixth largest earthquake ever recorded.The IMF estimates Chiles GDP will reach $222,788 million in 2011, a 6% increase over 2010. The World Bank anticipates that Chile will grow by 5.8% in 2011 and 5% in 2012. 1Attractive Business EnvironmentChile has an attractive and dynamic business climate. It is the frst country in Latin America and 10th among 179 countries worldwide for economic freedom, according to the Economic Freedom Index 2010.And Chile is frst in Latin America and 15th among 82 economies worldwide for its business friendly environment, according to the Business Environment Ranking 2010-2014.2Tax-friendly Taxes in Chile are the lowest in Latin America and well below many European countries. Chile has one of the lowest corporate income tax rates worldwide at 17% (temporarily increased to 20% in 2011 and 18.5% in 2012 as part of the countrys earthquake reconstruction program).Chile has bilateral agreements to avoid double taxation with 22 countries including Spain, the United Kingdom, France, Poland and Brazil, and tax treaties with the U.S., Russia and Australia.3Low RiskChile is a reliable and safe place to do business.It is the only nation in Latin America to receive the lowest political risk rating from Aon Corporation, a Chicago-based organization offering risk management services for corporations looking to invest overseas. Chiles report card for fnancial security boasts all As: Standard & Poors gave Chile an A+ credit rating; Moodys ranked economic stability an Aa3; and Fitch scored the country an A.4High TransparencyChile has a low level of corruption and government efforts are raising standards of administration.It ranks frst in Latin America and 21st among 178 countries worldwide in transparency, according to the Perceived Corruption Index.Eighty percent of the Chilean economy is free. Chile placed 11th out of 179 countries in the Index of Economic Freedom World Rankings by Heritage Foundation. 5Sernatur4 Doing Business in Chile | 2012 Edition 5 2012 Edition |Doing Business in ChileChile has a market-oriented economy characterized by a high level of foreign trade and a reputation for strong fnancial institutions and sound policy that havegivenitthestrongestsovereignbondrating inSouthAmerica.Exportsaccountformorethan one-fourthofGDP,withcommoditiesmakingup somethree-quartersoftotalexports.Copperalone providesone-thirdofgovernmentrevenue.Since 1999, growth has averaged 4% per year. Chile claims tohavemorebilateralorregionaltradeagreements thananyothercountry.Ithas57suchagreements (not all of them full free trade agreements), including withtheEuropeanUnion,Mercosur,China,India, SouthKorea,andMexico.Overthepastseven years,foreigndirectinvestment(FDI)infowshave quadrupled.FDIhaddroppedtoabout$7billionin 2009 in the face of diminished investment throughout the world. But in 2010, Chile received FDI worth $18.2 billion,up43.3%on2009.AsaresultChilehasthe third highest FDI growth rate in the region and is the third most important recipient. FDI in relation to GDP, at about 8%, is the highest in the region. The Chilean governmentconductsarule-basedcountercyclical fscalpolicy,accumulatingsurplusesinsovereign wealthfundsduringperiodsofhighcopperprices and economic growth, and allowing defcit spending only during periods of low copper prices and growth. Chile: Latin American leaderDiverse economy Percentage of GDP by sector of the economySource: CORFO, INE Chile Statistics Agriculture and Forestry3%Fishing1%MiningGDP $203 billion (2010)16%Manufacturing13%Electricity,Gas, Water5%Construction8% Retail, restaurants,hotels9%Transportation6%Communications2%Financial Services16%Real estate5%Personal services12%Public administration4%BrazilPopulation:203.4GDP 2010:2172GDP per cap. 2010:10,800Avg. GDP growth:4.4%FDI 2010:349ColombiaPopulation:44.7GDP 2010:435GDP per cap. 2010:9,800Avg. GDP growth:4.6%FDI 2010:85VenezuelaPopulation:27.6GDP 2010:345GDP per cap. 2010:12,700Avg. GDP growth:3.5%FDI 2010:38EcuadorPopulation: 5GDP 2010:115GDP per cap. 2010:7,800Avg. GDP growth:3.8%FDI 2010:12MexicoPopulation:113.7GDP 2010:1039GDP per cap. 2010:13,900 Avg. GDP growth:1.9%FDI 2010:328PeruPopulation:29.2GDP 2010:276GDP per cap. 2010:9,200Avg. GDP growth:7.2%FDI 2010:43ArgentinaPopulation:41.8 GDP 2010:596GDP per cap. 2010:14,700 Avg. GDP growth:6.8%FDI 2010:87Source: The World Bank*Population in Millions GDP 2010 in $ Billions GDP per capita 2010 in $Average GDP growth 2006-10 FDI Inbound 2010 $ BillionsBoliviaPopulation:10.1GDP 2010:48GDP per cap. 2010:4,800Avg. GDP growth:4.6%FDI 2010:7Chile *Population:16.9GDP 2010:258GDP per cap. 2010:15,400Avg. GDP growth:3.3%FDI 2010:136As of September 2008, those sovereign wealth funds amounted to more than $20 billion. Chile used $4 billion fromthisfundtofnanceafscalstimuluspackage tofendoffrecession.InMay2010Chilesignedthe OECD Convention, becoming the frst South American countrytojointheOECD.Theeconomystartedto show signs of a rebound in the fourth quarter of 2009, and GDP grew more than 5% in 2010. 6 Doing Business in Chile | 2012 Edition 7 2012 Edition |Doing Business in ChileCountry overviewWine,copper,salmon.Chileisanexporting powerhouse.In2010,Chileanexportsstood atover$71billionandChina,theEuropeanUnion andtheUnitedStateswereChilesleadingtrading partners with 80 percent of all purchases. Thecountryhasanextensiveexportlineupthat includesthefoodindustry,miningsupplies, biotechnology,globalservices(offshoring),and industrial logistics. ProChileisresponsibleforimplementingand enhancingChilestradepolicy.Itprovidessupport tosmallandmedium-sizedChileanenterprises, helping to encourage and diversify exports of Chilean productsandservicesbyincreasingthenumberof export markets and companies.AspartoftheTradeCommissionofChileandthe General Directorate of International Economic Affairs of Chiles Ministry of Foreign Affairs, ProChile has 56 trade offces and agencies located in 43 countries. It is active in 90 percent of the destination markets for Chilean exports. What should you be importing from Chile?Chilean products and services are highly sought after worldwide. ProChile can help foreign buyers link up with Chiles top exporters.Beyond food and drinks, the Chilean industrial sector isacompetitiveglobalplayernotablyinforestry, agribusiness, fsheries, aquaculture and mining. The sectorlineupiscomplementedbyinnovativenew entrantsinfeldssuchascosmeticsandclothing accessories. In 2010, Chiles total industrial exports amounted to nearly $12.5 billion. In the forestry industry, Chile has enjoyed signifcant growth. The great strides abroad in this industry are refected by signifcant foreign sales growth in recent yearsandtheconstantdevelopmentofawide range of quality export products. In 2010, some 900 Chileanfrmsshippedover360differenttypesof forest and lumber products with various degrees of processing to some 118 markets worldwide.Mineral resourcesThesuccessoftheminingindustryisoneof thereasonsbehindthesustainedgrowthand developmenttheChileaneconomyinrecent decades. Chile owns vast mineral resources and is theworldslargestcopperproducerandexporter. Mining exports in 2010 alone exceeded $38 billion.Copperincathodeandconcentrateformisthe leadingminingproductsoldabroadbutChileis alsoamajoriron,molybdenum,manganese,lead, zinc, gold, and silver producer. The main customers for copper exports are mostly in Asia and Western Europebutthedemandforminingproductsis growing as well in emerging nations such as China. Withhighlyqualifedhumanresourcesandstate of-the-art technology infrastructure, Chiles service sector(engineering,technology,architectural, design and other services) exports grew 9 percent ayearintenyears.StudiesexpectChilesnon-traditionalserviceexportstobeworth$5billiona year in 2015 (IDC, 2010).Activities abroad56 trade offces and agencies worldwideRoles: Buyersupportforforeigncompaniesimportingfrom Chile Businessmatching:puttingaforeigncompanyincontact with Chilean partners, for import-export or investment purposes Marketanalysis:marketpotentialandentrystrategies for foreign companies interested in FDIActivities in Chile15 regional offcesActivities: AssistChileanmanufacturers/producers in fnding export markets and clients Provideadviceforexportfnancing (letters of credit, international banking, etc.) Adviseonlogisticsandsupplychainoptions OrganizestradeshowstoshowcaseChileangoods and servicesProChileTradeCommissionsaroundtheworldoffer no-costexpertadvicetopotentialinvestorsand buyers interested in Chilean products and services. ThefoodanddrinkindustryisapillaroftheChilean economy. In recent years the industry has become the second-largest currency earner, second only to mining. Withsalesofmorethan$12billionatpresentfood exports are expected to top $20 billion in 2015, placing Chile among the top-ten food-producing countries.Alcoholicandnonalcoholicdrinksrangingfrom wine,pisco(agrapebrandy)spiritandbeerto specialtywatersandfruitandvegetablejuicesare keycomponentsoftheChileanfoodindustry.They account for almost 15 percent of overall food industry exports.Annualdrinksandbeveragesexportsare worth more than $1.7 billion. WineisChilesmostemblematicexportandthe countryistheworldsffth-largestwineproducer. ChileswineindustryplanstopositionChileasthe leadingNewWorldproducerofpremiumwinesby 2020, increasing export revenues to $3 billion.ProChileFor more information:Teatinos 180, Santiago, Chile, Tel. +56 2 827 5300 www.prochile.cl/To contact the local ProChile trade offce in your country, please visit: www.prochile.cl/importadores/en/prochile-en-elmundo/prochile-en-el-mundo.phpInvestChile: www.investchile.comForeign Investment Committee: www.inversionextranjera.cl, www.foreigninvestment.clCentral Bank: www.bcentral.clChiles Tax Service: www.sii.clValparaiso is one of Chiles most important seaports.Max Donoso8 Doing Business in Chile | 2012 Edition 9 2012 Edition |Doing Business in ChileProchiles role in attractingforeign investmentIn addition to promoting the export of Chilean products and services, ProChile is also an international investment facilitator thus giving strategic support to anyone interested in investing in our country. We do this through ProChiles 55 trade commissions and trade ofces in 41 countries, Our staf worldwide can help you with these investment tools: PromotionandinvestmentseminarsinLatinAmerica,North America, Europe and Asia. InvestmentmissionsandbusinessmeetingswithChileancounterparts. Adviceandhelpgettingintouchwithpotentialcounterparts.Our extensive network of ofces hold the Interested in Investing forums and have all necessary information regarding orientation and advise on investment. Foreign investment has played a decisive role in our economic growth and development. Maintaining its upward trend, it has helped to increase our countrys competitiveness, not only through resources and new markets but also through technological development and specialized know-how.We cordially invite you to get to know our country and its products, as well as experience Chiles uniqueness that makes it like no other country on earth. And if you are considering investing in Chile we can provide you with detailed information about the benefts and incentives for foreign investors that make Chile a leading investment platforminLatinAmerica.Felix de Vicente Director of ProChile fdvincente@prochile.clEditorialProChileCreatedin2000InvestChileprovidesarange ofassistancetoforeigncompaniesinterested inlocatinginChile.InvestChilepromotesforeign investmentinspecifceconomicareas,including thefoodindustry,biotechnology,miningsupplies, offshoring, and manufacturing and assembly sectors. InvestChileoffersincentivestoindustriesinthese sectorsandgivesspecifcassistancetoforeign investors. InvestChile has offces in the US, Spain and Portugal, Germany, the Nordic countries, France and China to gatherbusinessopportunitiesofeverykind.Ithelps companies interested in building Chile-based projects serving Latin America, the US or European markets. InvestChilehasaspecializedteamofprofessionals tosupportforeigncompanieswithservicesand incentivestonationalandforeigninvestors,to enable the evaluation, installation and materialization ofinvestmentinChile.Itsclientsareinvestorsthat manufacture, integrate or provide services from Chile totheworld.InvestChileseekscompaniesthatadd value to Chile.Public fundingOne of the sectors with most development potential is the food sector which represents 23% of exports, Attracting industry InvestChile aims to attract high-impact investment in order to grow the Chilean economy and diversify its production and export base.Companies that chose ChileProject Jobs createdOracle Software development center 300McAfee Engineering center 70WorleyParsons Engineering center 600Jazzplat Help desk 1140Synthon Pharmaceutical plant 91Pioneer Experimental Agroindustrial Station96 permanent, 210 temporarySource: InvestChilestages of production with public funding and signifcant investment available for technology transfers.The Mining Suppliers investment program is set up to attract foreign investors that have an interest in settling in Chile. The country produces more than third of the copper in the world, as well as other minerals such as molybdenum,lithium,silverandgold.Itslegislation and the good business environment have made Chile the mineral capital in Latin America. Signifcant stepsElsewhere,Chilehastakensignifcantstepsto incorporate biotechnology into its economy including a series of initiatives aimed at biotechnology companies abroad,anewregulatoryframeworkandeconomic incentives.Meanwhile,manufacturingandassembly companies are supported with expert consultancy. InvestChilecanarrangemeetingswithChilean counterparts,visitstoindustrialparks,aswellas arrange contacts with trade associations and potential supply vendors. Step-by-stepHow InvestChile helps foreign investorsInvestChile approaches foreign companyForeign company approaches InvestChilePreliminarymarket evaluation - market size - competition - entry strategies - identify potential local partnersSchedule Chileexploratory trip - meetings with govt -meetings with potential partners - biz setup meetingsFeasibility plan/business plan-operational considerations- fnancial incentives- taxation benefts-proft & loss estimatesPhase 1implementation-legal advisors identifed-fnancing arrangements-real estate considerations17% of employment and almost 10% of the Chilean GDP. Chile is acknowledged worldwide by the quality ofitswines,freshfruitsandseaproducts,suchas salmon, being the second largest exporter of salmon around the world. Inlinewiththeimportanceofthefoodsector, InvestChilesFoodIndustryInvestmentAttraction Programsupportsfoodindustryentrepreneursinall For more information:Moneda, 921. Of. 520, Santiago, Chile Tel:+5626318526/6318539 www.investchile.comInvestChilewascreatedbyCORFO(fromthe Spanish Corporacin de Fomento de la Produccin) which was created in 1939 and played a major role inthedevelopmentofdomesticactivitiesessential tothedevelopmentofthecountry,includingthe mining,electrifcation,agriculture,commerceand transport sectors.ProChile helps foreign companies interested in locating in Chile.MOP10 Doing Business in Chile | 2012 Edition 11 2012 Edition |Doing Business in ChileInvestChilePromoting Chiles strengthsAs CORFOs InvestChile we are responsible for the promotion and attraction of direct foreign investment to Chile. In order to do so, we promote and communicate the competitive strengths of the country as a location for foreign investment and investment opportunities. We support and facilitate the process of assessment, decision and fulfllment of your company in the country, by providing specialized services and incentives to the investment. Since the beginning of its investment promotion in the year 2000, InvestChile has contributed to the materialization of over $2.4 billion in domestic and foreign investment, and the generation of more than 40,000 new direct jobs. It is estimated that on average, the foreign investment represents 43% of this total and in the specifc case of 2010, foreign investment was 40%, making up for a total of $143 million.This year, our goal is to contribute to the materialization of $155 million in direct foreign investment, and the capture of new foreign projects with a committed investment value that we estimate at $260 million. With these advantages, we have all the conditions for those thatseeLatinAmericaastheirnextstop,andspecifcallyChile, where we ofer the features of a developed country, but at the cost of a developing nation.As CORFOs InvestChile, we want to contribute to making Chile a regional pole for innovation and entrepreneurship. We also know that by taking on this task, we are a key piece in the competitive boost of our country and that is where we are headed. Juan Antonio Figueroa, Head of Investment Promotion Division InvestChile jafgueroa@corfo.clEditorialForeign direct investment (FDI) has played a decisive role in Chiles economic growth and development. Maintaining its upward trend, it has helped to increase Chilescompetitiveness,notonlythroughresources andnewmarketsbutalsothroughtechnological development and specialized know-how.AccordingtotheWorldInvestmentReport2010, published by the United Nations Conference on Trade and Development (UNCTAD), the stock of FDI in Chile reached $121.6 billion in 2009, the second largest in Latin America after Brazil. In 2010, Chile received FDI for $18.2 billion, according to UNCTADs Global Investment Trends Monitor. This represented a percentage change of 43.3% between theyears2009and2010,wellabovetheaverage increase of 21.1% for the region as a whole. FDIhasplayedadecisiveroleinChileseconomic developmentand,inthethreeyearsbetween2008 Chile among top FDI recipientsA strong economy, attractive business climate and skilled workforce are some of the reasons Chile is a highly attractive destination for international businesses and foreign direct investment. since last year with its focus on Asian countries and particularly China. We are making a decided effort to increase investment in Chile by Asian countries which currently represent only 0.2% of total incoming FDI, said Mori. That is why we have translated our website and publications intoChineseandhavecreatedaChinaDesk,with Chinesestaff,tobetterattendtherequirementsof investors from that country in their own language.In addition, we have participated in eight visits to Asia -China,SouthKorea,MalaysiaandSingapore-to promote the opportunities Chile offers at investment seminars and in meetings with government authorities and businesspeople, presenting a portfolio of specifc publicandprivateinvestmentprojects,addedthe ExecutiveVice-PresidentoftheForeignInvestment Committee. Excellent resultsTheseactivitieshavealreadybeguntobearfruit, noted Mori. Inthefrsthalfofthisyear,theForeignInvestment Committeehasreceivedinvestmentapplications for$417millionfromAsiancountries,upfrom$294 million in the whole of last year. UNCTAD anticipates that, as Asian countries continue toadvanceintheirinternationalintegration,their outbound FDI will maintain its upward trend. PreliminaryWorldInvestmentReportdata,infact, showsthatinvestmentinChileandLatinAmerica hascontinuedtoincreasethisyear.UNCTADalso forecaststhat,in2011,globalFDIwillreturntoits pre-crisis level, reaching $1.4-1.6 trillion. and2010,averaged8%ofGDP,withpositive externalitiesthatincludeemploymentcreation, training, technology transfer and the development of new industries.According to report, Chile was the worlds 19th largest FDI recipient in 2010, up from 26th in 2009. This is the frst time that it has ranked among the worlds top 20 host countries. Theseexcellentresultsconfrmourcountrys successfultrackrecordintheattractionofforeign investmentandratifyitsstatusasoneofthemost attractive places in the region and the world in which todobusinesswhilealsoreinforcingthetrustthat foreigninvestorshaveplacedinit,pointedout Matas Mori, Executive Vice- President of the Foreign Investment Committee. According to the report, FDI fows into Latin America and the Caribbean rose by an average 13% in 2010 to$159billionbut,inSouthAmerica, the increase reached 56%. Most of this investmentcamefromAsiancountries where outgoing FDI is running at record levels. In2010,FDIoutofemergingAsian economies rose by 20% to $230 billion. Investmentabroadbycountrieslike China,MalaysiaandSouthKoreahas accountedforaround17%ofglobal FDI outfows over the last two years, up from less than 10% in 2008, and is led by Hong Kong and Continental China.This trend is in line with the investment attractionstrategyimplementedby theForeignInvestmentCommittee FDI at a glanceForeign direct investment realized2002-2010Source: Central BankFDI ($M)02,0004,0006,0008,00010,00012,00014,00016,0002002 2003 2004 2005 2006 2007 2008 2009 2010For more information:Ahumada 11, Piso 12, Santiago, Chile, Tel: +56 2 698 4254cie@foreigninvestment.cl,www.foreigninvestment.cl/FDI has played a decisive role in Chiles economic development.Codelco12 Doing Business in Chile | 2012 Edition 13 2012 Edition |Doing Business in ChileForeign Investment CommitteeUpdateIn 2010, the Foreign Investment Committee approved a total of more than $13 billion. This is the largest amount authorized in its history but FIC expects to surpass it in 2011. In times of global economic instability, Chile is seen as a reliable shelter for capital. Robust projections of growth and excellent business opportunities confrm that this is a good time to invest in Chile.FIC: Who we areThe government agency responsible for attracting Foreign Direct Investment into Chile is the Foreign Investment Committee (FIC or CIE in Spanish for Comite de Inversiones Extranjeras).The role of the FIC is to provide information about procedures and regulations for investors bringing FDI into Chile. It publishes an up-to-date and accurate statistical register of foreign investment under the Foreign Investment Statute by compiling information about contracts and fows under these contracts.Specifc investment opportunities in private and public projects are also published by the FIC and regular reports about Chiles business climate. Its outreach to foreign investors and potential investors involves coordinating business missions abroad, as well as seminars and conferences.The FIC also provides general information about Chile, its economic and social environment, legal framework and policies on foreign investment. And it gives specifc information on how to begin the process of setting up a business. FIC members include the ministers of Economy (who acts as president of the Committee), Finance, Foreign Relations and Planning, as well as the president of the Central Bank. Other ministers responsible for specifc economic sectors are invited to participate in meetings when necessary. It is headed and managed by an Executive Vice-President who is appointed by the President of the Republic.Since 1974, the majority of foreign investors have chosen to usetheDecreeLaw(DL)600mechanismfortheentryofcapital into Chile. Under this regime, whose use is optional, foreign investors bringing capital, physical goods or other forms of investment into Chile may ask to sign a foreign investment contract with the State of Chile. An online version of the Foreign Investment Application form is available.Matias Mori Executive VPEditorialOnce a relatively poor country, Chile has become prosperousthroughmacroeconomicpolicy, structuralreforms,tradeandinvestmentand regulation.Arichendowmentofcopperandother mineralreserveshasbeenusedcautiouslytofoster resilienceinthefaceofunexpectedheadwinds. Moreover,astabledemocracywithaneffectiverule oflawhasbeenestablished.Forsomegovernance indicatorsChilehascaughtupwith,oreven surpassed,OECDaverages.Nonetheless,thereis scope for further positive change.Incomepercapitaremainssignifcantlybelowthe OECD average making sustained and non-infationary growthanimportantgoal.Between1986and2007, Chilesincomepercapitagrewataroundtwicethe rate in the OECD area and the income gap with richer countrieswasreducedsubstantially.Nevertheless, convergenceslowedafter1998.Basedonrecent growth rates, it would take around 30 years to catch up with the current average OECD per capita income.Forthegovernmenttoachievefastgrowthwhile reducing income inequality, the main challenge will be to maintain the delicate balance between pursuing a strong recovery and preserving price stability. Strong domesticdemand,partlyrelatedtoreconstruction spending after the natural disasters of February 2010, andboominginternationalcommoditypricesrisk stoking infation. Oneofthenewgovernmentskeyobjectivesisto raise average GDP growth to 6% over 201014. This willrequirestructuralreforms.Themainreasonfor thepersistentincomegapwithhigh-incomeOECD countries is lower productivity; the under-utilization of labor resources explains a smaller part. Fastincreasesinproductivitywillthereforebekey to sustained economic growth in the long run. While Keeping up momentumChile has spectacularly transformed itself over the past decades. In spite of this progress, there is scope for further positive change.Chile has made substantive progress in upgrading its production structure to higher value-added activities, restrictionsinproductandlabormarketshave prevented full development. Competitioninsomeareasofproductmarkets, especiallyintheservicessector,remainsweakby OECDstandards.Reducingregulatoryredtapefor business start-ups and easing restrictions on entry in specifc services sectors, would strengthen competitive pressure. This would also encourage entrepreneurship andinnovation.Similarly,reformingtheburdensome bankruptcyprocedurewouldgivecreditorslegal certainty and remove the stigma of failure. Structuralreformsinlabormarketswouldraisethe participationrateofwomenandyouth,whichare amongthelowestintheOECD,andenhancelabor productivity. Despite substantive progress in childcare forworkingwomen,thereremainsscopetofurther expand these programs.Theminimumwage,whichishighfromanOECD perspective,particularlyhurtstheemployment prospectofyouth.Adifferentiatedminimumwage, withlowerratesforyoungworkers,couldhelp.To enhancelaborproductivity,theshareofinformal employment needs to be reduced. To assist employers, areductioninseverancepayandexpansionof unemployment insurance would improve the Chilean model of fexicurity.Opennesstotradeandforeigninvestmenthas intensifedcompetitionindomesticmarketsand facilitatedaccesstoimportedintermediategoods. Yet too much focus lies concentrated in the extractive sector.ProtectingChilesexceptionalbiodiversity throughappropriatemarket-basedandregulatory instruments would boost Chiles attractiveness as an eco-tourism destination. Inthemediumterm,higherproductivitygrowthwill besustainableonlywithawell-educatedandhighly skilledworkforce.Scoresonstandardizedtestsfor secondarystudentsremainappreciablybelowthe OECDaverage.Opportunitiesforfurthereducation and training for the existing workforce are limited. Access to quality education at all levels for all Chilean children is key to reducing income inequality.The real estate market is also helping consolidate the recoveryinconstruction.Duringthesecondhalfof 2010,lowlong-terminterestrates,improvementsin employment levels and higher incomes contributed to the recovery.Whiletheabundanceofoffcescreatedbythe excessiveproductionin2007ledtoadeclinein production2008-2009,theimprovementofmarket conditionsbeginningin2010allowedproductionof offces to return to normal levels.Accordingly, during the frst half of 2011, the number of building permits approved for offces increased twice in comparison with 2010, indicating the emergence of new projects in the center of Santiago after four years of inactivity.Diverse economy Percentage of GDP by sector of the economySource: CORFO, INE Chile Statistics Agriculture and Forestry3%Fishing1%MiningGDP $203 billion (2010)16%Manufacturing13%Electricity,Gas, Water5%Construction8% Retail, restaurants,hotels9%Transportation6%Communications2%Financial Services16%Real estate5%Personal services12%Public administration4%Benchmarking of South American countriesSource: LNE, Chile Statistical Oce,The EconomistNotes: GDP growth rate is based on CAGR for the 2004-2009 periodGDP per capita is at PPP for 2009.GDP Growth RateChileBrazilVenezuelaArgentinaPeruColombiaGDP/capita0$8,000$10,000$12,000$14,000$16,0000% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%For further information, contact Nicola Brandt at the OECD: nicola.brandt@oecd.orgThis article was condensed from the May 2011 OECD publication:Maintaining Momentum: OECD Perspectives on Policy Challenges in ChilePublication date: 14 April 2011Chile must balance its strong recovery with price stability.14 Doing Business in Chile | 2012 Edition 15 2012 Edition |Doing Business in ChileEconomic OutlookTheprocessforsettingupabusinessinChileis becomingoneofthesimplestinLatinAmerica. Thisisparticularlytruesincethepassageofalaw (number20.494)inMarch2011thatreducescosts andsimplifesrequirementsforthepublicationand registration of the articles of incorporation.Setting up a business in Chile used to be diffcult but with the new law its getting a lot easier, says Zandra Valenzuela, a lawyer with the Spencer Global law frm in southern Chile who specializes in setting up small, foreign-owned businesses.ThetotalprocessforsettingupabusinessinChile takes at least three weeks. This is much shorter than thesixweeksorsoittookbeforethereformbut longer than in the United States, for example, where a company can be set up in a matter of days. However, theChileanCongressiscurrentlyconsidering additional reforms to further simplify the process. We need further improvement because it is still a bit complicated,Valenzuelasays.Specifcallywhen foreigncompanieswanttosetupasmallbusiness thearticlesofincorporationandcertifcatesofgood standing take time. Reducing red tapeAnewChileanlawsimplifestheprocessofstarting abusiness.Itreducesthetimerequiredtogeta businesslicensetoonedayinsteadof14.Italso eliminatesthe16-dayprocesstoverifyactivitiesfor taxpurposesandliftsthe$150chargetopublish Fewer rules for business creationAlready one of the most businessfriendly countries in Latin America, Chile is moving forward on making business creation simpler and more affordable for foreign investors.an extract of the companys foundation in the Diario Ofcial (Offcial Gazette). And a new business that has all the corresponding permits can obtain its defnitive municipal license immediately.First steps Still,theprocessforsettingupabusinessinChile isoneofthesimplestinLatinAmerica.Thefrst stepistoobtainaTaxIdentifcationNumber.This isknowninChileasaRUT(RolUnicoTributario). This is obtained from the National Tax Service or SII (ServiciodeImpuestosInternos),whichhasoffces around the country. The next step is to defne the type of company to be created. In Chilean, there are three main types of company (see chart below).Whilethereisnominimumcapitalrequiredforany type of company, the SII requires that the capital on handissuffcientforthetypeofbusinesscreated. Service companies will need less capital, for example, than manufacturing companies.Thecostsofestablishingacompanyincludethe legalizationofitsdeed,itspublicationintheDiario Ofcial(OffcialGazette)anditsinscriptioninthe CompaniesRegister.Itisrecommendedtousean attorney for the drafting of the articles of incorporation foralltypesofcompanies.Attorneyfeesdepend onthecomplexityofthebusinessandthelocation sincefeesaresetbytheregionalBarAssociation. Standardincorporationcontractscostfromabout $250 to $5,000.WhileitisnotnecessarytospeakSpanishtoset upacompany,thearticlesofincorporationandthe publicationandregistrationofthearticlesmustbe written in Spanish. Onceacompanyhasbeenestablished,abusiness start-upstatementmustbesubmittedtotheSII stating that the taxpayer plans to undertake activities that may be liable to taxation. The company will also need to open a bank account with a Chilean bank. Some economic activities in Chile may be subject to special permits or requirements. These include health, environmentalandmunicipalpermits.Investors shouldobtainadviceaboutpermitsrequiredbefore starting their business. EmployeesIncompanieswithmorethan25employeesatleast 85percentmustbeofChileannationality.Thereare exemptionsforspecializedtechnicalpersonnelnot availablelocally,aswellasforforeignersmarriedto a Chilean. Foreigners who have been resident in the country for more than fve years are also exempt. The minimum working age is 18.Chilehasfourtypesofemploymentcontracts, includingindefnitecontracts;fxed-termcontracts thathaveamaximumdurationofoneyearor, exceptionally,twoyears;pieceworkcontractsare usedwhenaworkerishiredforaspecifctaskofa fnite duration; or professional services contracts.Business friendlier Simplifcation of processes to set up businesses2008 2009 2010 2011World rank n.a. n.a. 70 62Procedures (number) 9 9 9 8Time (days) 27 27 27 22Cost (% of income per capita)8.6 7.5 6.9 6.8Minimum capital 0 0 0 0Source:The World BankTypes of companiesCompany type Individual Limited Liability Company (E.I.R.L.) Limited Liability Company (L.L.C.)Stock Corporation (S.A.)Spanish name Empresa Individual de ResponsabilidadLimitadaSociedadResponsibilidadLimitada Sociedad Annima Minimum capital None None NoneConditions One person company. Designed for small business. Requires full legal residency or Chilean citizenship.Legalrepresentativeand partner must be the same person.Minimum 2, maximum 50 partners. Advantages include decreased reporting requirements and simplicity of corporate structure. Good for sales ofces, import or export companies. Partners may be Chilean or foreign, individuals or legal entities. A full company with shares, partners, and all the privileges of a company in Chile. Most complex in terms of organization and costs. Ofers greatest fexibility. Shareholders liabilities limited to amount of individual capital contribution. Governed by board of directors. Can be publicly traded or closely held.The process for setting up a business in Chile is simple.Max Donoso16 Doing Business in Chile | 2012 Edition 17 2012 Edition |Doing Business in ChileSetting up BusinessFor more information:Bank accounts see www.sii.cl and www.sbif.clLegal formalities and services for entrepreneurs and businesspeople see www.chileclic.clEmployment contracts see www.inspecciondeltrabajo.clVisas see www.extranjeria.gov.cl and www.minrel.gob.clEmployees must be paid at least the minimum monthly wage.Forworkersbetween18and65yearsofage this is 165,000 pesos (about $350). For those over 65 or under 18 it is 123,176 pesos (about $260).Employeeswithmorethanoneyearonthejobare entitled to 15 working days of vacation a year on full pay.WorkersintheChileanAntarcticaandcertain regions are entitled to 20 working days.ContributionsAll workers must contribute to a pension fund (AFP or Administradora de Fondos de Pensiones). The worker is free to choose the AFP. The employer deducts the contribution from the employees earnings and pays it to the AFP. The minimum total deduction is approximately 12.3 percent of the workers gross wage.Employeesalsocontributeatleast7percentfor healthcarecoverage,althoughtheycanpaymore. Theemployerpaysthisamountmonthlyintoeither theNationalHealthFund(FONASAorFondo Nacional de Salud) or to a Health Insurance Institution (ISAPREorInstitucindeSaludPrevisional)ofthe workers choice.ForeigninvestorsmustenterChileunderatourist visa.Theseareissuedonarrivalbytheimmigration authorities. After entering Chile as tourists, investors andbusinesspeoplecanapplyforaTemporaryVisa for Investors and Businesspeople which allows them toresideinthecountryforayear.Attheendofthe year, they may apply for permanent residence.Registering websitesAnorganizationcalledNicChileisresponsiblefor registering websites that operate under the .cl domain. To register a name under this domain, individuals must be legally domiciled in Chile. Public and private legal entities legally authorized to operate in Chile can also registerawebsitename.Individualsorlegalentities notresidentinChilemayapplytoregisterawebsite through a representative domiciled in the country.With a stunning location in the most relevant Business District in Chile, Ciudad Empresarial, superb connectivity, and a modern and spacious look; Mercure Santiago Ciudad Empresarial delivers a warm and innovative experience full of details that will delight you.Av. Santa Clara 354, Ciudad Empresarial Reservations at: h8390-re@accor.comPhone: 56.2.8986300 www.mercure.comwww.cib.bnpparibas.comHRS TO SHARING COMMON DRAMS.US$ 300,000,0006.25% Notes due 2019Joint Bookrunner June 2009 USD 300,000,000Senior Unsecured TermLoanJoint MandatedLeadArranger &BookrunnerMay 2009US$ 300,000,0003-years Interest Rate SwapJoint Bookrunner June 2009 US$ 30,000,000Equity Derivatives OptionMILLENIUM IndexJuly 2009 US$ 13,000,000Fixed Income OptionGALAXY WorldSeptember 2009 Valuation for theacquisition ofEDEGEL SAAJuly 2009US$ 500,000,0006.125% Notes 144A / RegSJoint BookrunnerOctober 2009 US$ 50,000,000Forward Starting Swap 4.5-yrLead Arranger November 2009 US$ 1,061,200,000Restructuring Facility Advisor & Lead Arranger December 2009 US$ 230,000,000EXIM Facility to purchase 3 Boeing B767Lead Arranger December 2009 US$ 1,000,000,000PTAX Index USD/BRL Spot TransactionSole Lead ArrangerDecember 2009 US$ 150,000,000Non- Revolving Bridge LoanSole Lead Arranger December 2009US$ 45,000,000PTAX Index USD/BRL Spot TransactionSole Lead ArrangerJanuary 2010US$ 90,000,000WTI index ThreeWay Collars1Q10US$ 88,500,000TermLoan Facility 5-yrMLA & AgentApril 2010 US$ 71,457,3003.348% due 2022Sole BookrunnerJune 2010 BNP Paribas is a diversied nancial services group operating under the tradename BNP Paribas and offering products through various afliated entities, including in the U.S., BNP Paribas SecuritiesCorp., a U.S. registered broker / dealer, a member of the NYSE and SIPC.10G005F1R2.indd 1 7/7/10 10:39:35 AMbecome subject to the income tax structure in effect at that time.DecreeLaw600alsoprovidestaxstabilitywith respect to VAT and customs duties applicable to the import of machinery and equipment not manufactured in the country. It also provides tax stability for mining investments of $50 million or more and an alternative method for calculating capital gains subject to tax in Chile when the investment is sold.Foreign investors who establish their business center inChiletoinvestinothercountriescanusespecial investmentvehiclescalledinvestmentplatforms, whichareconsideredasaforeignlegalentityfor taxpurposesandassucharesubjecttotaxationin ChileonlyontheirChileansourceincome,noton investments made outside Chile.Investmentplatformsarenotverypopularbecause moresignifcantadvantagescanbeachievedusing a regularly taxed company to invest outside of Chile, includingaccesstothelargesttaxtreatynetwork intheregionandtheinexistenceofanti-deferralor CFCtype legislation.Chile has one of the most extensive tax treaty networks in the region. As of October 2011, there were 24 double taxationtreaties.TreatieswiththeUS,Russiaand Australia have been signed but are not yet in force.Othertaxadvantagesareofferedforinvestments madeintheextremeregionsofthecountryaswell Chiles tax systemTax type Indicative rateFirst category tax (corporate income tax)120% 2Mining royalty From 0.5% to 5%Second category tax (employment tax) From 0% to 40% Global complementary tax (taxes on Chilean resident individuals)Up to 40% Value added tax (VAT) 19%Stamp taxNormal: from0.1%to 1.2% Donation and inheritanceFrom 0% to 25% Real estate tax1% to 1.2%Municipal licenseFrom 0.25 % to 0.5% with a cap of ca. $320K 31. Corporate tax is allowed as a tax credit against fnal taxes (Additional tax orGlobal complementary tax)2. The 17% corporate tax has been increased to 20% during 2011 and 18.5% for2012. The tax rate should return to 17% in 2013.3. The cap is 8,000 Unidades de Fomento.Source: KPMG Chile, CORFOAt just 20%, Chile has one of the lowest and most user-friendly corporate tax rates in Latin America. And Chiles tax structure recognizes several benefts and advantages for foreign investors.TheChileancorporatetaxratehasbeenincreased temporarily to 20% from 17% to fund reconstruction followingtheFebruary2010earthquake.Under currentlaw,thetaxratewillreturnto17%in2013 (18.5%in2012),butitislikelythe20%ratewillbe extended for additional.Ourtaxsystemutilizesalowcorporatetaxrateof 20%,aslongastheproftsarenotdistributedto Chilean individual residents, non-resident individuals or corporate owners, explains Francisco Lyon, Lead Tax and Legal Partner at KPMG Chile.Ifproftsaredistributedtonon-residententitiesor individualsthefnaltaxationapplicabletothose distributionswillbethewithholdingtax(called ImpuestoAdicional)withageneraltaxrateof35%, but allowing the corporate taxes paid as a credit.Ourtaxsystemallowsunlimitedcarry-backand carry-forward of tax losses, Lyon explains. Togetherwiththetax-freedistributionsofprofts ordividendsbetweenChileanentities,thisallowsa sort of tax consolidation when a group of companies isstructuredproperly,giventhepossibilityof recoveringthecorporatetaxpaidinpreviousyears on the undistributed profts through current or future losses,and to stop paying taxes until the company has returnedtoanetoperatingtaxproftinthefuture, Francisco Lyon says.AdvantagesChile offers several tax advantages to foreign investors. Forexample,foreigninvestorswhoareplanningto invest more than $5 million in the country can enter into an agreement with the Chilean government under the DecreeLaw600.Thisguaranteesnondiscrimination fortheforeigninvestorandtherighttorepatriate the amount of capital originally invested at least one year after the investment was made and to repatriate profts at any time.Theforeigninvestoralsocanelectforincometax stabilityforaten-yearperiod,althoughwithan aggregate42%rateofincometaxinsteadofthe normal 35% rate. In any case, at any time the foreign investorcanforfeittheirincometaxstabilityand Investor-friendly taxationCompared to other South American countries, Chile has an enviable and simple tax system that is investor-friendly.Santiagos dramatic skyline is just one of Chiles many irresistible attractions for businesspeople and tourists alike.For more information:Chilean Customs www.aduana.cl.Chilean Internal Revenue Service www.sii.cl.Direccin General de Relaciones EconmicasInternacionales www.direcon.clas to promote R&D. Chile offers a credit against the corporate income tax equal to 35% of the payments madeunderR&Dcontractssignedwithaneligible external R&D center with certain caps.Chilealsohasafat6%customsdutyandfree tradeagreementswith58countries.Regardlessof thecountryoforigin,capitalassetsmeetingcertain requirementsmaybeimportedintoChilewithno customs duties.Juan Ernesto Jaeger20 Doing Business in Chile | 2012 Edition 21 2012 Edition |Doing Business in ChileTaxationInvestors at the doorMany factors account for the recent growth in foreign direct investmentChile is experiencing a dramatic rise in foreign direct investment. Inbound FDI into Chile amounted to nearly $13 billion in 2009, illustrating the countrys ability to pull beyond its weight. Brazil, a country almost 10 times Chiles size in terms of GDP, attracts only about twice the FDI amount annually. Thereareseveralgrowthfactors,explainsLilianaMachiavello, head of Cinver, the Chilean investment agency. Joining the OECD is one factor since this sends a signal of stability, fnancial transparency, and orientation toward the global economies. Chiles tax advantages have also contributed to the growth inFDI,butaccordingtoFranciscoLyonofKPMG,thekeysuccess factor for foreign investors in Chile is good returns on investment.Repeat investors account for a large portion of investment, Lyonsays.OnceacompanyhashadatasteofChile,itwantsmore. The good returns can be explained by our stability, our good workforce and the overall growth in Chile.FDI growth also stems from the 2010 earthquake which created strong demand for infrastructure projects to replace residential and commercial real estate, transport infrastructure, etc.Another factor is mining, which is attracting signifcant foreign investment. For the 2009-2017 period we expect investments of roughly $45.4 billion, and much of this is from international mining giants, says Danilo Torres of Sonami, the Chliean mining association.analysisDuringthesecondquarterof 2010,theChileangovernment announcedananti-taxevasionplan thatseekstocollect$1.3billion overfouryearsfromincreasing taxaudits,ontheVATandincome tax.Inthissense,transferpricing becameoneofthemostimportant initiativesincludedwithinthe framework of the plan. As a part of this plan, the Chilean IRS (Servicio de Impuestos Internos orSII)hascreatedaspecializedunit(comprisedof economists, lawyers and accountants) that will be in charge of conducting transfer pricing audits.Additionally,fromthebeginningof2011,theSIIhas published in different forums and in the press a Draft Bill on Transfer Pricing. The authority has repeatedly indicatedthatthechangeinthelawisnotintended toprovideanewlookatthetopic.Onthecontrary, theessenceoftheregulation(tocomplywiththe arms length principle) is maintained. It solely intends toprovidecertaintyforlegalaspectsandclarifythe methodology for the taxpayer.Accordingtotheauthorities,theitemsthatwillbe contained in this new regulation are:Clarifcation of the accepted methodology: Both the methodology accepted and the selection of the method will be consistent with OECD Guidelines Transfer pricing reformCompared to other South American countries, Chile has a enviable and simple tax system that is investor-friendly.(Chapter2,OECDTransferPricingGuidelinesfor Multinational Enterprises and Tax Administrations, July 2010).Theacceptedmethodswillbe:Comparable Uncontrolled Price Method, Cost Plus Method, Resale Price Method, Transactional Net Margin Method, and Proft Split Method. In the selection of the method,no hierarchywillbeexpected.Themostappropriate methodmustbeselectedbasedontheunderlying transaction.Transfer pricing information return: Chilean taxpayers conducting transactions with foreign related entities will be required to fle an informational return,detailingtheircross-borderintercompany transactions. The details of the contents of this return areyettobedeterminedbytheSII.However,itis expected (based on other countries experience) that the return will require the following information: types andamountsofalltransactionswithrelatedparties; names,countriesandtaxIDnumbersofallrelated parties;thetransferpricingmethod(s)usedtotest each transaction; and the gross or operating margin earned by the taxpayer in each transaction.Advance Pricing Agreements:ThepossibilityofenteringintovoluntaryAdvance PricingAgreements(APAs)willbeallowed.The request for agreement will have to include a transfer pricing report.Contemporaneous transfer pricing documentation (Transfer Pricing Report): Asarule,transferpricinganalyseswillnotbean explicitrequirementfortaxpayers.Thesewillhave no value by themselves. Transfer pricing analysis will be background information which companies will be able to use to determine their transfer pricing policy. Notwithstanding the above, a well-performed transfer pricing analysis will simplify the audit process.Corresponding adjustments:Thelimitforthistypeofsequentialadjustmentis estimated to be fve retroactive years.Francisco LyonHead of Tax & Legal KPMG ChileSource: Chile Budget Oce05101520252000 01 02 03 04 05 06 07 08 09 2010Low-tax standoutChile tax revenues 2000-2010 %GDP22 Doing Business in Chile | 2012 Editioninthesector.InthistimeperiodChilehadoneof thefastest-growingeconomiesintheworldand miningaccountedfor8.5%oftheGDPand47%of exports. Over the past three decades, private copper production has been multiplied over 25-fold. Thestate-ownedfrmCODELCOisstilltheworlds single largest copper producing company but foreign private investment has developed several new mines and the private sector now produces more copper than CODELCO. Private mining now represents 72% of the countrys production. Foreign mining companies now in Chile include Australian giants BHP Billiton and Rio Tinto, and UK-linked Anglo-American and Xstrata. Theminingsectorcollectsabundantforeign investment.AccordingtoChilesForeignInvestment Committee, in 2006 mining was the countrys largest recipientsectorofFDI,receivingalmost$1.2billion in investments. Furthermore, future mining projects in Chileareexpectedtogenerateapproximately$18.5 billion in investments by 2015. This is not only due to the size and prestige of Chiles mining sector, but also to the legal environment surrounding the industry. The Business Monitor states that Chiles mining laws are perceived to be more investment friendly and globally aligned than most of its Latin American peers. Whatcompanyisthemoney-earningstarofthe Chilean economy? Escondida, a private mining company that operates the highest-producing copper mineintheworld.In2010,itsnetproftstotaled morethan$4.3billion,thehighestofanyChilean company.Likewise, the mining sector itself is the highest-earning industrial sector in Chile with nearly $18 billion in net proftsin2010.Thisisa53%increaseover2009 profts of $11.7 billion. Electricity, the second-highest earning sector, had net profts of less than $3 billion in 2010, down from more than $3.2 billion posted in 2009.Moreover,theminingsectorisChilesbiggest exporter accounting for 60% of all exports in 2008. Thestaroftheminingsectoriscopper,which represents 86% of mining sector exports. According toChilesCentralBank,Chilehasapproximately 24%oftheworldsknowncopperreservesandis theworldslargestcopperproducer.In2009,Chile produced 5,520 metric tons of copper accounting for 34% of world total. In 2010 it produced slightly less at 5,390 metric tons. Chilehasbeenverygoodatdevelopingitself, perhapsusingAustraliaorCanadaasmodels, explains Charlie Sartain, the Australia-based CEO of Xstrata Copper. We plan to open our South American projectdevelopmentdivisionhereinChile,with200 staffcoordinatingouractivitiesforChile,Peruand Argentina. But copper is not the only ace up Chiles sleeve. The country is also a leading producer of iodine, rhenium, lithium, arsenic, molybdenum, mined boron (ulexite), refned selenium and pumicite. It is the worlds sixth ranked producer of silver accounting for about 6% of global mine output. It also accounts for about 2% of the worlds mine production of gold. Chilecanbethankfulforitsundergroundwealth. Althoughminingrepresentsasmallershareofthe countrys overall economy (in terms of GDP) than ten years ago, that is not a refection on a dwindling mining sector,quitethecontrary.Miningisgrowinginsize as new mines open to exploitation and extensions of existing mines are planned. Exports of minerals grew almost four-fold in the past ten years reaching more than $38 billion by 2010.Investment friendlyChileanminershavebeendiggingforgoldsince 1530orearlier,butindustrialminingactivitygreatly expandedin1974whenDecreeLaw600gavethe privateminingsectorfreewing.The1990smarked thebeginningofaboominChilesminingindustry, especiallyincoppermining,principallyduetoFDI Underground wealthThe Chilean government strongly supports foreign investment in the mining sector and has modifed its mining industry laws and regulations to create a favorable investing environment for foreigners.We chose Chile because it is politically stable and with OECD membership we expect it will be easier to attract funds from investors for new projects.Charlie Sartain, CEO Xstrata CopperTop mining companies 2010Rank CompanyYear FoundedRevenues $MProfts$M CEO Website1 Codelco 1978 16,066 1,876 Diego Hernandez Cabrera codelco.cl2 Escondida 1893 9,212 4,338 Carlos Mesquita mineraescondida.cl3 Codelco Div. Chiquicamata n.a. 5,285 492 n.a. codelco.cl4 Antofagasta 1983 4,577 1,052 Jean-PaulLuksic antofagasta.co.uk5 Collahuasi 1880 3,929 2,048 Giancarlo Bruno collahuasi.cl6 LosPelambres 1983 3,286 1,647 Jean-PaulLuksic lospelambres.cl 7 Codelco Div. El TTenienten.a. 3,216 542 n.a. codelco.cl8 Codelco Div. Radomiro Tomic n.a. 2,204 496 n.a. codelco.cl9 Anglo American Sur 1980 2,123 900 John MacKenzie angloamerican-chile.cl10 Anglo American Norte 1980 2,010 551 John MacKenzie angloamerican.co.ukSource: AmericaEconomia, the Financial TimesNew growthInvestments in expansions and new projects over $1.5 billionStartup year Company Investment ($M)2015 CODELCOAndina 4,8002015 Kinross, Barrick 4,2002018 BHP Billiton 4,600post 2011Antofagasta Minerals 3,2002015 Teck Cominco 3,0002017 Teck Cominco 3,0002013 Barrick 3,0002014 New Gold (GolfCorp) 2,5002015 AngloAmerican, Xstrata 2,4502012 AngloAmerican 2,4002013 CODELCONorte 2,3332010 Antofagasta Minerals 2,3002013 Pan Pacifc Copper (LuminaCopper)2,0002015 BHP Billiton 2,0002018 CODELCO 2,0002014 Minera Quadra Mining Chile 1,9002017 CODELCO 1,533n.a. LundinMining 1,500Source: SONAMI, 2010The mining sector collects abundant foreign investment.24 Doing Business in Chile | 2012 Edition 25 2012 Edition |Doing Business in ChileMiningUpcoming projectsAccording to SONAMI, the National Mining Society, an agency that oversees mining in Chile, a total of $45.4 billion in mining investments is on the blackboard until 2017.Theseinvestmentscoveralllinksinthevalue chain. Some are for upstream geological exploration fornewsites.Othersareforexpansionofexisting mines. Yet others are for downstream infrastructure in smelting or in export facilities, namely harbors. Althoughthecopperpriceisthebarometerfornew investment,thestabilityoftheChileanmarket especiallycomparedtoitsneighborsmakesita long-term magnet for investment. But will Chile move down the value chain in mining? One of the issues we face is that important end-user marketssuchasChinaandIndiahavemadevery substantialinvestmentsincoppersmelters,andso they do not wish to import refned copper. For them copper concentrate is suffcient, since their low labor andenergycostsmakeiteffcienttosmeltlocally, explains Christian Thiele, General Manager of Minera Esperanza, part of the Antofagasta group.Still,SONAMIexpectsthatpotentialdoesexist intheresearchanddevelopmentareas,namely indevelopingbettertechnologyforfurnaces,for smeltingorforfne-grindingtechnologies.Thereare also projects underway with the Chilean government, CORFO and the Education Ministry to establish state-of-the-art research centers.For more information:National Mining Society (Sociedad Nacional de Minera) www.sonami.clNational Copper Corporation (Corporacin Nacional del Cobre de Chile) www.codelco.cl/englishOptimum EnvironmentIn 2006, Xstrata Copper acquired Canadas Falconbridge and became one of the top fve copper producers internationally. In Chile, the acquisition gave it control of two copper mines and a smelter. Xstrata Copper is the worlds fourth largest copper producer with total mined copper production in 2010 of 913,000 tons. In Chile Xstrata posted an operating proft of $195 million tha year. The company is also one of the worlds largest producers of smelter and refned copper, including from third party materials.Before acquiring Falconbridge in 2006 for $20 billion, Xstrata already had operations in southern Peru and soknew Chile well.Chile has the worlds most important copper reserves and, today, that is its principal potential, Charlie Sartain, Chief Executive of Xstrata Copper, notes. Also, the conditions it ofers for developing operations and projects within a framework of sustainable development and its economic, political and institutional stability help to create a transparent and optimum business environment.The Falconbridge copper operations established a strong center for Xstrata in northern Chile, with the Altonorte smelter, the Lomas Bayas mine and a 44% share of the giant Collahuasi mine. The acquisition also strengthened its position in Peru. Xstrata also has operations in Argentina as well as Australia, Canada, U.S., Philippines, Papua New Guinea.Although we have operations around the world, Chile plays an important role for Xstrata Copper precisely because of the conditions it ofers for the development of innovative and sustainable projects in which we hope to continue growing, says Sartain, who also chairs the International Copper Association and is a member of the senate of the Sustainable Minerals Institute at the University of Queensland, Australia. Santiago is the base of our South American Project Development Division and that allows us to create synergies with our other operations in the region, taking advantage of growth opportunities through our new copper projects and the expansions already underway at our existing operations in Chile and Peru.Chiles business-friendly envirornment allows Xstrata to maximize its shareholders investment. In Chile, we can work with institutions and the authorities as strategic allies, focusing on the management of sustainable development, which requires legal stability in terms of environmental, social and labor issues, and that is not a minor consideration when deciding where to invest, Sartain explains.After almost fve years in Chile, I can say that our experience has been very positive; we have found favorable conditions for the organic growth of our business as well as professionals who are very technically competent, which is a further encouragement.SucceSS Storyresponsibilityresponsibilityresponsibility*Chacun accordeune valeur diffrente ce qui lentoure.The more you look at the world, the more you recognise how people value things differently.www.hsbc.fr/entreprisesAvec 8000 chargs daffaires qui vous appuient et vous conseillent dans plus de 60 pays et territoires, nous navons jamais accompagn autant dentreprises travers le monde.Were doing business with more customers worlwide than ever before, with 8000 relationship managers providing support and advice in over 60 countries and territories.Publi par HSBC France - 103, avenue des Champs-Elyses - 75008 Paris - Socit Anonyme au capital de 337 189 100 euros - SIREN 775 670 284 RCS Paris - 11/09 - Getty Images* responsabilit26 Doing Business in Chile | 2012 EditionPotential powerhouseOver the last few years Chile has seen an important increase in the use of thermal energy. Last year for the frst time in its history more than 50% of the electricity supply was generated by non-renewable fuels. Chiles alternate energy resources could change that.Chile is a developing country with important annual growthprospects.Butitslimiteddomestic energyresourcesarenotenoughtomeetdemand. Energy consumption in Chile has grown fast in recent decades,especiallyelectricityconsumption,which hasincreasedatanannualrateof2.4%since2001 and 4.2% since 1990. ChilesprovencrudeoilreservesinJanuary2006 were estimated at 150 million barrels (equivalent to 20 million tons or Mt), which is insignifcant in comparison with annual domestic consumption of 11.7 Mt. Proven natural gas reserves varied between 42 and 98 billion cubicmeters(bcm)in2006comparedwithannual consumption of 7.8 bcm that year.Chile does have signifcant low- sulfur, sub-bituminous coal reserves, estimated at between 200 Mt and 500 Mt.Butdomesticproductionfallsfarshortwhatthe countryuses.In2007forexample,Chileproduced 0.8 Mt of coal compared to the 5 Mt it consumed. Similarly, Chile has abundant hydropowerpotentialbutits hydropowersupplyisnotas geographically diverse as that ofothercountriesmaking itvulnerabletohydropower supply disruptions caused by recurring droughts every two or three years.Filling the demandTomeetitsenergydemand, ChileturnedtoArgentina tosupplynaturalgasinthe 1990s and the share of natural gasinelectricitygeneration increased from 1% in 1997 to 33% by 2004. However, beginningin2005becauseofrestrictionsongas exportsbyArgentina,aswellaslowhydrology,the situation reversed in favor of coal and oil.Electricitycompaniesturnedtocoal-fredplants,an easysolutionsinceChileisnotrequiredtoreduce CO2emissionsbytheKyotoProtocol.Another solution was the construction of two liquefed natural gas (LNG) terminals. ThefrstprojectatQuinteroBay,located114km fromSantiago,cost$1.2billionandwasdeveloped byGNLQuinteroandprocesses2.5milliontons ofLNGannually.Asecondplant,GNLMejillones, ownedequallybySuezEnergyInternationaland CODELCO, is an on-shore LNG regasifcation terminal in Antofagasta. Thegovernmentisalsosupportingtheexploitation ofChilesvastbutmostlyundevelopedrenewable energy potential. Hydropower will remain a signifcant component of its energy mix with the construction of a major new complex in southern Chile.Chilestwolargestgenerators,EndesaandColbn, havecreatedajointventure,HidroAysen,tobuilda 2,750MWinstalledcapacitypowerhydroelectric plant and a 2,000 kilometer transmission line, with a total investment of almost $10 billion. Hydroelectricityisthemainsourceofrenewable energy there is in the world, says Colbn Chairman BernardoMatteLarrain.Anyotheralternativein Chileinvolvesimportingfuel.Aswedonthavegas, we have to bring it from far away. We have very little coal and its not enough, so we have to import it from Australia,Colombia,theU.S.andsoon.Soasan energy base, hydroelectric power is without a doubt the way forward for Chile.Wind has the potential to contribute to a large share ofadditionalrenewableenergycapacity.Asofend-March 2009, the list of wind projects under evaluation inChilesenvironmentalimpactassessmentsystem andthoseapprovedintheperiod2006-09totaled potentialnewcapacityofaround1,500MW.The countrycurrentlycountswithmorethan160MWof capacity, but nearly 500 MW of additional capacity is planned to start construction by 2020.Chilealsohas10%oftheworldsactivevolcanoes, highlightinganabundantpotentialforgeothermal energy. Since 2000, special legislation and subsidies promotethedevelopmentofgeothermalenergy, whichhasbeenoffciallydesignatedthecountrys strategic priority. Seven 40 MW geothermal generation projectsareplannedtobebuiltbetween2016and 2020. The north of the country is rich in solar energy, whichcouldbeusedbothforthermalenergyand electricityproduction.TheAtacamaDesertgetsup to 9.28 kilowatt-hours of sun daily per square meter, among the worlds highest. More than a dozen solar installations are planned here.Electricity generation by source40 00050 00060 00070 000010 00020 00030 00040 0001972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008GWhCoal/peatOilGasHydroComb.renew.& wasteSource: OECD/IEAChiles primary energy mix 2008(in teracalories )Production ImportsConsumptionCrude oil 1,397 108,806 110,420Natural gas 19,695 7,287 24,795Coal 2,765 43,400 43,695Hydroelectric21,496 0 20,865Wind energy 33 0 33Wood and other sources 51,170 0 51,170Total 96,556 159,493 250,977Source: Chilean National Energy Commission For more information Chilean National Energy Commission: www.cne.clCentral Energia: centralenergia.clHow do you say fjord in Chilean?With a strategic vision about clean power in emerging markets, Norwegian company SN Power is busy developing renewable and low-CO2 energy projects in Chile and Peru. Based in Oslo, Norway, SN Power is a joint venture between Statkraft and Norfund. Founded in 2002, the company had 2010 revenues of $114 million, from eleven countries on three continents. SN Power frst decided to invest in Chile in 2004, after several months of evaluation period and feasibility study.Convinced of the potential in the country, SN Power frst committed to invest about $800 million in two hydroelectric projects, La Higuera and La Confuencia, about 250 kilometers south of Santiago. Both hydropower plants will each produce around 750 GWh annually.Completed in 2009, SN Powers wind farm at Totoral, about 300 kilometers north of Santiago, was the companys third investment in Chile. The wind farms 23 turbines produce almost 110 GWh every year, supplying energy for about 36,000 people (or 12.000 households).What makes Chile all the more interesting for us, explains Torger Lien, CEO of SN Power (Norway), is that we can start using Chile as a regional platform for our other South American operations, namely our twin projects in Peru and our developments in Brazil.SucceSS StoryHydroelectricity is Chiles main source of renewable energy.Endesa28 Doing Business in Chile | 2012 Edition 29 2012 Edition |Doing Business in ChileEnergyChilehasoneofthebestcoverageandquality levelsinLatinAmericaforwatersupplyand sanitation,especiallyintheurbanareaswhere85% of the countrys population lives. In 2010, 99.9% of the population of Chiles urban areas had access to potable water and 95.9% had access to sanitation, according to SISS (Superintendencia de ServiciosSanitarios)theChileanregulatoryagency forurbanareas.Nationally,91.3%hadwatersupply access and 82.5% had access to sanitation, according to the Casen Survey 2006.Thatsahugeimprovementsincethe1970swhen Chile began extending and developing its water and sanitation infrastructure.Thesituationinthelate1970swasabittricky, explains Gonzalo Cordua, General Manager of Nuevo Sur,thefourthlargestwateroperatorinChile.We relyonfruitandagricultureexportsforasubstantial partofoureconomy,yetsomeofthesetreesand vineyardsweredrinkingwaterfromriversthatdid not necessarily pass through waste treatment plants. Itwouldhavebeenamatteroftimebeforehealth concerns arose and alarms went off.Asaresultoftheinfrastructuredevelopment,water access increased from 78% in 1976 to 98% in 1988, and sanitation access increased from 52% in 1976 to 82% in 1988.Inthe1990s,mostutilitieswerepartiallyhanded over to the private sector. Investment in Chiles water and sanitation sector reached $5.7 billion during the 19932005period,accordingtotheWorldBanks Private Participation in Infrastructure database. Asaresultofpublicoutcryovertheprivatizationof water utilities, in 2001 the government stopped selling Cool, clean waterChile is the only country in Latin America that has privatized its entire urban water supply and sanitation sector.utilitiesandstartedgranting30-yearconcession contractsinsteadviabuild-operate-transfer(BOT) agreements.Theoutcryagainstprivatizationcontinuesassome Chileans object to price increases and private control oftheresource.Forexample,in2009theSpanish electricitycompanyEndesaboughtup80%of thewaterrightsinabigregioninthesouth.Inthe north,agriculturalproducerscompetewithmining companies for scarce water supplies.Wehavecomealongway,andeventhough94% ofChileanwaterproductionisinprivatehands,we havemadegreatenvironmentalprogress,says MagalyEspinosa,SSIDirector.Ournextstepswill betoexpandourruralwaterprogramandconfront challengesinfndingnewgroundwatersourcesand new water desalination investments, mainly in the dry northern areas of the country.Morethan80%ofChilesfreshwaterisusedfor irrigation,followedbyindustry(8%),mining(7%) anddrinking(4%).Manyofthewaterdevelopment projectsnowunderwayaretosupplywatertothe countrys mining sector.About$7.7billionisplannedincurrentprojectsto augment water supply for the mining industry. Copper productionisexpectedtoreach7.3milliontonsin 2020 which means a 45% increase in water use. That poses a problem since the mining industry is in one of the driest regions on the planet.Some mining companies have water rights but in some casestheaquiferstheydrawfromwillbedepleted withinafewyears.Unlessalternativesourcesof wateraredeveloped,someoftheplannedmining expansionwonthappen,saysSantiagoGonzlez Larrain, Chiles mining minister.Wemustmotivatetheconstructionofdesalination plants as an alternative, Gonzlez says.Theprivatesectoragrees.AguasAntofagasta, aChileanwaterutility,isbuildinga$120million desalination plant in the northern city of Antofagasta. The plant will produce 1,000 liters a second of potable water and is expected to be completed by late 2013.AndaSpanishsustainabledevelopmentcompany, Acciona, recently won a $65 million contract to build andoperateadesalinationplantneartheAtacama desert which will produce 17 million liters (4.5 million gallons) of fresh water a day.For more information:SISS (Superintendencia de Servicios Sanitarios) www.siss.gob.clWater headsTop fve private water and sanitation companies (2010)Rank Name Client base (1000s)Ownership1 Aguas Andinas S.A. 1,577 Agbar-Suez2 Essbo S.A. 681 Ontario Pension Fund3 Esval S.A. 542 Ontario Pension Fund4 Nuevo Sur 225 Ontario Pension Fund5 Aguas Araucana 201 Marubeni Corp and Innovation Corp of JapanWorld-class hygienePercentage of Chileans who now have access toclean drinking water and sanitation facilities Source: WHO/UNICEF78808284868890929496981001990Sanitation1995 2000 2005 2008Clean drinking waterChile has made great progress in its water and sanitation standards.30 Doing Business in Chile | 2012 Edition 31 2012 Edition |Doing Business in ChileWater ResourcesNo water, no miningChiles mining industry is located in the arid north of the country. But the scarcity of water in the region is a serious problem, not just to the mining industry but to the economy as a whole since mining accounts for about a ffth of Chiles GDP.Finding new sources of water for industries like mining is an issue because the overexploitation of limited groundwater resources in the north puts into question the sustainability of existing and planned mines. Many people are convinced that alternative sources of water, particularly desalination plants, are the solution.Chiles Minister for Mining, Santiago Gonzlez Larrain, says that without additional sources of water, some planned mining developments will not be brought online. We must motivate the construction of desalination plants as an alternative, says Gonzlez.This concern is driving a new wave of desalination projects in Chiles north, such as in the Atacama region where copper mining, which consumes the vast majority of the water used by the mining industry, consumes 105,000 m3 of water a day, which is in excess of the industrys allocated water rights. In a recent report, the Chilean copper commission, Cochilco, states that after peaking in 2017, copper production will reach 7.3 million tons in 2020. To meet this demand, the industrys water usage will need to increase by 45%. In the Atacama region alone water consumption will more than double by 2020 .AnAlySiSWine grapes are not native to the Americas. They arrived in the 1500s with the Spanish missionaries whoneededwinetocelebratetheCatholicmass. Today Chile is the worlds eighth-largest wine producer and ffth-largest exporter, selling to 150 markets and reaching a market share of 8% by volume of the global international wine market at the close of 2010. But Chile is planning to conquer an even bigger share of the market.We want to play a key role in Chiles progress, says RenMerino,PresidentofWinesofChile,apublic-private organization created to promote Chilean wine exports. We are convinced of the enormous potential ofChileswineindustry,itsimportanceattheglobal levelasaworld-classproducer,anditsmultiplying effect on the image of Chile.Industry plans are to position Chile as the leading New World producer of premium, diverse and sustainable wines by the year 2020, increasing the value of bottled wine exports to $3 billion within a decade. Withanestimated8,000producersofwinegrapes, thecountrysplantedareaofvinesforwinehas increased over 70 percent during the last eight years andisnowestimatedtobe119,000hectares.Out ofthetotalplantedarea,around76percentarered varieties. Also, close to 75 percent of all planted area is under irrigation. Due to low domestic consumption, Chile exports 70% ofthewineitproducesmakingittheworldsmost globalizedwineindustry.In2011,wineproduction reached an all time record level of 1,046 million liters, a 14% increase over 2010. This exceeds the previous production record of 1,009 million liters in 2009. Export champion Wine is one of Chiles most emblematic exports, recognized worldwide for its quality and variety. With the growing popularity for Chilean wine around the world, the industry aims to grow even more.Improvements in quality and low prices help to keep or increase exports levels. Chile traditionally exports bothbottledandbulkwine.Bottledwineexports expandedmorethanbulkwineexportsin2010and so a large number of wineries are making a big effort to increase premium-bottled wine exports. Currently, there are more than 70 Chilean wineries that export. ChilesmainexportmarketsareEuropefollowedby the U.S. and China. The industry continues its focus ontheAsianmarkets,however,lessthan10%of totalexportsgotothatmarket,accordingtoWines of Chile. Wine takes offAfter centuries of obscurity, Chilean wines experienced anaggressivegrowthspurtinthe1980s.Thiswas due partly to foreign investment from Spain, France, ItalyandtheU.S.thatprovidedChileanvineyards withupgradedtechnologyandfacilities.Many wellknownforeignvintnershavealsodeveloped wineriesinChile,includingsuchprestigiouslabels as Bodegas Torres, the Rothschilds, Pernod Ricard, Kendall-Jackson,FranciscanStateandBrunoPrat and others.Inlessthantenyears,Chilebegantoproducefrst-classwinesthatwerebecomingrecognizedaround theworldfortheirqualityandstyle,anddemand abroadforChileanwinebegantogrow.Tomeet theincreaseindemand,Chilevastlyincreasedthe amount of land for planting. Between 1996 and 2006, the amount doubled from 56,000 to 117,000 hectares. Later, other regions were added including for the frst time the north and south of the country. The newest vineyardsareplantedalongthecoastandinthe Andes Mountains at altitudes up to 2,000 meters. ButitisChilesCentralValleythatisitswinemaking treasure.Sprawlingover1,200kilometersnorthto south, the valley benefts from an ideal Mediterranean Growth spurtChiles wine exports have grown rapidly since the 1980s Source: National Agricultural Society (SNA) and Central Bank0200400600800100012001400160018002000198219901992199419961998200020022004200620072008200920102011Export value ($M)International tasteTop Chilean wine exporters and quantity exportedin 2010 (bottles and bulk) Rank Winery Liters exported (millions)Export value ($M)Avg. price/L1 Vina Concha y Toro 107 280 2.632 Vina Cono Sur 37 94 2.563 Vina San Pedro 45 94 2.094 Vina Santa Rita13 56 4.185 Vina Sta. Carolina 20 42 2.07Source: Vinos de Chileclimate and wide diversity of soils. The Andes on the east and the Pacifc on the west provide cool breezes that regulate temperatures and result in a higher range of terroirs. The prime wine growing regions are the Elqui, Limar, Choapa,Aconcagua,Casablanca,SanAntonio, Maipo,Cachapoal,Colchagua,Curic,Maule,Itata, Bo-BoandMallecovalleys.Theseareasgrowa widerangeofpremiumgrapes,notablyCabernet Sauvignon,Merlot,Smillon,Shiraz,Chardonnay, Sauvignon Blanc, Riesling, Pinot Noir, Gewrztraminer, and Carmenre.Chiles wine conquestThe spark for the Chilean wine company Concha y Toros extraordinary growth was ignited in the early 1990s, when the father of the current CEO had a vision of grandeur. With an unwavering confdence in the quality of Chiles wine potential what oenologists might call the terroir Eduardo Guilisasti set about constructing the company into what is now the worlds 8th largest wine producer. Concha y Toro is now listed in New York and sells over 28 million cases, of which 67% abroad, representing 2009 revenues of $643 million. The strategy behind this success, explains Thomas Domeyko, export director, was part Chilean and part Harvard Business School (which has published a case). The Chilean portion is our true gift of fantastic wine country: beautiful valleys with abundant water; a coastal mountain range that protects us from the cold Paciic currents; vast longitude suitable to diferent cpages (grape varieties). As for the business vision, Concha y Toro has skilfully expanded along four dimensions. We are double-branded, explains Domeyko. We have six winery brands, including the original Concha y Toro, and Almaviva, our venture with Baron Philippe de Rothschild. Then, within each winery, we produce wines under diferent labels. Our investment in global wine brands such as Casillero del Diablo has been instrumental to our success. The third dimension is geographical, with vineyards in nine diferent valleys in Chile and Argentina. Our fourth dimension is our export scope, adds Domeyko. We sell in 135 countries and have our own distribution in the UK, Brazil and Scandinavia. From 10 export employees in 2000 we are now up to 100 people. Their understanding of these markets is key to our success.SucceSS StoryChile is one of the worlds largest wine producers and exporters.Felipe Cantillana32 Doing Business in Chile | 2012 Edition 33 2012 Edition |Doing Business in ChileWineA unique facet of Chilean wine-growing environment is that because of the countrys geographic isolation, littleornopesticidesareusedtowardoffgrape-eating predators.As a result, Chile, along with Argentina, is one of only two countries in the world not afficted by the lethal phylloxera pest, an insect that devastated European vineyards in the late-19th Century and decimated the vineyards of California in the 20th. Currentlynosignifcantexpansioninproductionis expected as more than 95% of the planted area is in fullproduction.Anyproductionincreasesthatoccur will be because of the weather, vineyard management improvements and on future expansion or replacement of existing but low-producing vineyards. Thegovernmentprovidesnodirectsubsidiesto supportwineproductionorsubsidizeexports. AlthoughChiledoeshaveasuccessfulmarket promotioncampaigncalledTastesofChilethat includeswine.Thegovernmentcontributes15%of the total promotion costs through its export promotion agencyProChile. GDF_MixEnergetique UK 210x297.indd 1 04/10/2011 17:19Saved from Extinction Carmenere was one of the most widely planted varieties in Bordeaux until the 1860s when the deadly phylloxera louse arrived in Europe. Carmenere vines are particularly defenseless to phylloxera and so the variety was abandoned when phylloxera-resistant American rootstocks were introduced in France.Prior to the phylloxera crisis, Chilean vignerons took cuttings from Bordeaux vineyards thinking they were Merlot, which is similar-looking to Carmenere. In doing so they unwittingly saved Carmenere from extinction.The mistaken variety came to be known as Chilean Merlot. The error was not discovered until 1994 when DNA research carried out in Montpellier, France, confrmed that it was Carmenere. Since then Carmenere plantings have grown rapidly, from 330 hectares in 1997 to 8,411 hectares in 2008, representing 7% of Chiles total vineyard plantings. For more information Wines of Chile: www.winesofchile.orgMOVI (Vintners Independent Movement) is a group of independent vintners: www.movi.clYour bi-monthly source of comprehensive information and analysis on the financing of infrastructure in Africa.More growth. Better returns.Launching March 2012.In association with OECD/NEPAD and the African Development Bank (AfDB), leading business schools and international fnancial institutions.www.mediaside.biz/africangrowth.htmlTaxation andinvestment:Nigerian transparency in reviewCountry Focus:South Africa after the soccerextravaganzaTransport infrastructure:Zambiaspublic private partnershipsAfricanGrowthIssue 2 March/April 2012 5.00 / 6.00 / US$ 7.50 37 2012 Edition |Doing Business in ChileLatinAmericahasshowngreat resilienceinthefaceofthe economicrecessionandpresented thefastest-growingfowsofboth inwardandoutwardforeigndirect investment.Thevolumereceived in2010exceededtheaverageof previousyears,refectingtheregion as a new solid investment destination for transnational companies.Also,itisimportanttohighlighttheriseoftrans-Latins.AsignifcantproportionofLatinAmerican investments are made within the region. According to deals reported by Bloomberg, 47% of M&A concluded byLatinAmericancompaniesin2010tookplacein aneighboringcountry.Moreover,asstatedbythe EconomicCommissionforLatinAmerica(ECLAC), greenfeld investments also are mainly directed within the region itself (59% of the total in 2010).Giventhissituation,theimportanceoftrans-Latins asagentsofregionalintegrationisgrowingfast. Investments made by Chilean frms reached a record $8.7 billion, 58% of which was directed to other Latin Americancountries,mostlytofnancial,retailand FDI and M&A activity in Latin AmericaWhile much of the global economy has experienced a sharp reduction in foreign direct investment and M&A deal-making as a result of the fnancial crisis, Chile and other Latin American countries are holding their own.Alejandro CerdaHead of Advisory KPMG Chilemanufacturing sectors. The most dynamic sectors for M&A activity in 2010 were basic materials, consumer goodsandfnancialservices,reachingavolumeof $3.8 billion, according to Bloomberg.Thereasonsbehindthisincreaseintransaction volumearethehigheconomicgrowthofemerging economies,highcommodityprices,lowercostsof capital,restructuringandsaleofdistressedassets, and the overall trend towards consolidation.In 2011, Latin American M&A activity has been mainly concentratedinsuchsectorsasenergyandnatural resources,telecomandmaterials.Thesesectors along with consumer goods and fnancial services will mostlikelydominateM&AactivitybothinChileand in the region.Duetoreducedinfationlevels,capitalaccessand investmentreforms,LatinAmericancountriesare becoming more hospitable to M&A especially in light of the current economic and political situation in the USanddebtcrisesinEurope.Thereisreasonto believe that this trend will continue in coming years, causinganincreaseinoveralldealsandinmarket confdence in Latin America.Source: UNCTAD (www.unctad.org)BrasilAnnual ow amount ($M) Annual growth25,90030,200 16.60%52.80%43.30%20.80%4.00%43.70%25,90019,10012,70018,2007,2008,7004,9005,1004,8006,900MxicoChileColombiaArgentinaPer2009 2010FDI in Latin America 2009-2010 (Total in 2010 = $88,200 million)Good InvestmentsTrends in miningMining sector investment in 2011 is expected to exceed $460 million. Chiles mining association (Sociedad Nacional de Minera) projected investment in the industry for 2011-2018 would reach $70 billion. The main source of investment is copper, for which production levels are expected to increase by 48% by 2018. Investment in gold mining is expected to triple the current level of production (from 40 to 120 tons by 2018). For its part, the Chilean Copper Commission (Cochilco) projects copper mining will be at a level close to $54 billion by 2020.Benedicto Vasquez Head of Mining Industries, KPMG Chile(, r c ( GP ,ca. l C, ' a, 2O5. v o ] r; o ] ,rac a ,v a (` GP G v Pcwww.kpmg.cl 2011 KPMG AudiIores CohsulIores LIda., a Chileah limiIed liabiliIy parIhership ahd a member rmoI Ihe KPMG heIwork oI ihdepehdehI memberrms aIliaIed wiIh KPMG hIerhaIiohal CooperaIive (KPMG hIerhaIiohal), a Swiss ehIiIy. Member rms oI Ihe KPMG heIwork oI ihdepehdehI rms are aIliaIed wiIh KPMG hIerhaIiohal. KPMG hIerhaIiohal provides ho cliehI services. No member rmhas ahy auIhoriIy Io obligaIe or bihd KPMG hIerhaIiohal or ahy oIher member rmvis--vis Ihird parIies, hor does KPMG hIerhaIiohal have ahy such auIhoriIy Io obligaIe or bihd ahy member rm. KPMG ahd Ihe KPMG logo are regisIered Irademarks oI KPMG hIerhaIiohal CooperaIive (KPMG hIerhaIiohal), a Swiss ehIiIy. All righIs reserved.TRUST CREDIBILITY ACCURACY COMMITMENTVALUE ADDI NG TRUST WE LEAD BY EXAMPLE STEADI NESSCOMMITMENT QUALITY CREDIBILITYSERVICE CULTURE CREDIBILITY CREATIVITY QUALITY WE WORK TOGETHER TRUSTGLOBAL MINDSET COMMITMENT CAPABILITYTRUSTWEWORKTOGETHERSTEADINESSKNOWLEDGECREDIBILITYACCURACYQUALITY1"44*0/"5&&91&354&37*$&$6-563&26"-*5:53645130'&44*0/"-453645$3&%*#*-*5:$0..*5.&/5ACCURACY KNOWLEDGE ASSESSMENT CAPABILITY QUALITYSERVICE CULTURE CREDIBILITY45&"%* /&44 $"1"#* -* 5: 8& 803, 50(&5)&3 $3&"5* 7* 5: $0..* 5.&/5WELEADBYEXAMPLE $3&%*#*-*5: "$$63"$: 45&"%*/&44 53645KNOWLEDGE CAPABILITY COMMITMENTS E R V I C EC U LT U R EC R E D I B I L I T YC A PA B I L I T YQUALITYWEWORKTOGETHERTRUST53645 WEWORKTOGETHER 45&"%*/&44 ,/08-&%(& 53645 $3&%*#*-*5: $3&"5*7*5: $0..*5.&/5CLOSENESS ACCURACY'038"3% 5)*/,*/( $3&%*#*-*5: 26"-*5: "$$63"$:(-0#"- .*/%4&5 $"1"#*-*5: ,/08-&am