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Monthly Snapshots - June 2019: Chile Edition

Chile: The largest recipient of foreign direct investment among the Pacific Alliance countries

Chile has received the highest level of foreign direct investment (FDI) as a percentage of GDP among the members of the Pacific Alliance (Chile, Colombia, Mexico and Peru) in the last 18 years. At 102%, it is clearly far from the rest.

The Pacific Alliance is ranked as the eighth largest economy in the world. Seven years after its creation, the group of countries also records an average GDP per capita of over US $18,000 dollars, which represents 38% of the entire region's GDP. Moreover, they receive 41% of foreign direct investment entering Latin America.

In Chile, the relationship between FDI and GDP has developed quickly in recent years. In 2001, FDI was 58% of the GDP. In comparison, it grew to reach 88% in 2014 and last year it represented 102%, far from the other countries that make up the Pacific Alliance. Its GDP is also the highest in Latin America.

The arrival of important volumes of FDI has positioned Chile as one of the most effective economies in Latin America. It also demonstrates an improvement in the level of development and an increase in the size of its middle class, which in 11 years has risen from 43.2% to 65.4% of the population. Additionally, the total employment rose 1.4%.

After Chile, Colombia is in second place with a high level of FDI as a percentage of GDP (58%), followed by Mexico (48%) and Peru (46%).

Both foreign investment and economic progress are necessary drivers for the creation of more productive jobs and, above all, for expanding domestic demand. In this way, it is possible to make the beneficial effects of FDI felt in a large and diverse population, allowing for the achievement of progressive stages of economic and social development.

Acciona announces a multi-million dollar investment plan and seeks to be the largest renewable energy generator in Chile

The Spanish company Acciona, which is leading the renewable energy industry worldwide, has been in the electricity business in Chile for 10 years and wants to continue its expansion. Thus, it is planning to double its size in five years, becoming the largest green energy generator in the Latin American country.

At the moment, Acciona is generating 300 megawatts and building facilities to add another 400 megawatts to this total as part of its USD 600 million investment plan of 2018. Part of these investments has already been assigned to the Usya photovoltaic plant located in the Atacama region - a place well known for its high level of solar radiation. This large project is the fourth renewable infrastructure development of the USD 600 million investment plan.

The Usya photovoltaic plant will have a maximum power output of 64 megawatts and an annual generation of emission-free energy estimated at 146 gigawatt hours (GWh), which is equivalent to the electricity demand of 70,000 Chilean households. It is expected that this plant will start its operations in mid-2020.

Moreover, the South American Energy Manager of Acciona, Jose Ignacio Escobar, has recently revealed that by 2025 the company will invest USD 800 million, which is designed to lead to the production of a further 800 megawatts. Thus, with this keen interest in Chile, Acciona is demonstrating that the country is not only a great investment location but also that the projections of renewable energy consumption in the country will continue increasing in the coming years. The potential effects of this on other stakeholders are significant, such as for the big mining clients who are betting on a 100% renewable energy supply for their activities.

New markets for Chilean fruits

Chile is analyzing new opportunities for the export of its fruit. It has already begun to export to the Asian continent, specifically to China, where the first delivery of pears from Chile was made this very month , and entry for citrus fruits is already being negotiated.

However, Chile is not only concentrating on China; currently the focus for the Chilean fruit sector is also on markets such as India, Southeast Asia and the Middle East.

India is a huge market of more than 1.3 billion people, of which 10% are considered potential consumers - a figure that is only expected to increase. Other advantages of India in addition to the number of inhabitants is that it is an emerging market with a middle class that is growing very quickly as well as being a young society with Internet access and an interest in the consumption of new products. All this makes this country an important target for the fruit sector in Chile.

Dubai is considered another one of the main markets for the export of Chilean fruit, mainly due to its level of openness to the world and its interest in tasting high quality fruit, such as that which Chile produces.

Last, but not least, the Middle East market stands out as it is considered a place where historically a lot of fresh fruit has been consumed, especially apples.

Thus, it is expected that in the coming years Chile will increase and diversify the export destinations for its fresh fruit.

Chile is looking for investment from its neighbouring countries

With the aim of increasing investment flows from South America, the foreign investment promotion agency of the Chilean government, Investchile, seeks to attract companies from Peru, Colombia and Brazil. The goal is that these companies can start doing business within Chilean borders.The agency has traveled this week to Lima and Bogota with an event program called "Roadshow Latam" also made up of other Chilean Associations of local entrepreneurs. In August they will move to Brazil, in particular to Rio de Janeiro, Belo Horizonte and São Paulo to continue its promotion.

The visit to Colombia on the 25th of June was successful; there they met more than 30 Colombian companies who could be interested in investing in Chile. The event was organized together with the National Association of Businessmen of Colombia (Andi). It is important to mention that Colombia is currently a very important investor in Chile, which is highlighted by the fact that investment from Colombia reached USD 5.142 million in 2017.

The event in Lima took place on the 26th of June, with InvestChile and the National Confederation of Private Business Institutions in Peru carrying out a conference with more than 25 important investors of the country interested in Chile.

Although the number of Peruvian companies coming to Chile has increased in the past years, InvestChile wants to encourage its growth even more. In 2017, the investment of Peruvian companies in Chile was of USD 618 million - a lower amount than in Colombia.

However, Brazil remains the leading investor from South America in Chile with an investment of USD 10.038 billion in the country.

This sum is focused on sectors such as finance, the agri-food industry and technology. Brazilian companies see many business opportunities in Chile and, as such, the foreign investment promotion agency in Chile wants to transform those interests into concrete projects.

According to World Investment Report, Chile is the main investor in Latin America, investing more than USD 70 billion in the region.

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