Chile country brief

Overview

Australia and Chile have a strong bilateral relationship, based on many shared interests and cooperation in a range of international fora. Both countries are major mining and agricultural economies, and share an Asia-Pacific trade focus. A free trade agreement, double taxation agreement and social security agreement underpin a growing trade and investment relationship.

Australia and Chile have embassies in their respective capitals. The Chilean government had consular representation in Australia as early as 1899 in Newcastle. Diplomatic ties were established when the first Chilean chargé d'affaires en titre presented credentials in Canberra on 5 July 1945. After several periods of suspension, the mission was upgraded to an Embassy with an Ambassador in September 1969. Similarly, an Australian Legation in Chile was established in August 1946 and after a period of suspension, Australia announced the decision to re-establish the mission in the form of an embassy in Santiago in June 1968.

Chile is a long and narrow country along South America’s southern Pacific Coast and a number of islands in the Pacific (including Easter Island), spanning from the Strait of Magellan which separates South America from Antarctica, to the dry arid north dominated by the Atacama desert. Chile is slightly smaller than New South Wales. The high, snow-capped Andes mountain range with peaks reaching over 6,000 metres runs the length of Chile, creating a natural 6,691 km border between it and Argentina to the east, as well as a 942km border with Bolivia in the far north-east. Chile also shares a short 168km land border with Peru. Chile’s climate ranges from arid desert in the north, temperate agricultural in the central regions, to cold, glacial ice fields in southern Patagonian region. The etymology of the word ‘Chile’ is subject to many theories, including but not limited to: the name of a bird in a local indigenous language; the name of a local chieftain, ‘Tili’, which was pronounced ‘Chili’ by the Inca; or a local word for the ‘end of the world’. The Capital of Chile is Santiago.

Chile’s population is approximately 17.6 million (2013 est). The main ethnic groups are European (89 per cent) and indigenous (10 per cent). Roman Catholicism is the main religion (67 per cent) with other Christian groups (17 per cent) and no-religion (12 per cent) the main minorities. Spanish is the official language.

Political overview

Background

Following the successful resistance to the first Spanish invasion of Chile in 1535 by the indigenous Araucanian people, in 1541, Pedro de Valdivia began the final Spanish conquest and founded Santiago. Chile achieved independence from Spain in 1818 after the Spanish were defeated by the Army of the Andes led by Jose de San Martin and Bernardo O'Higgins. The War of the Pacific took place from 1879 -83.

Following the election of a left-wing government, headed by Salvador Allende (1970-73), the armed forces, under the leadership of General Augusto Pinochet, seized power on 11 September 1973, suspending the constitution, dissolving congress, imposing strict censorship and banning all political parties. The junta subsequently arrested, executed, tortured or forced into exile thousands of political opponents. After 16 years, Chile again held democratic presidential elections in December 1989, won by the Christian Democrat, Patricio Aylwin. The governments of Aylwin, and all subsequent administrations of the centre-left and centre-right coalitions have continued the economic liberalisation initiated under Pinochet.

Recent developments

President Michelle Bachelet, of the Nueva Mayoría coalition (comprised mainly of centre-left political parties), won the presidential election on 15 December 2013 after heavily defeating rival Evelyn Matthei in a second round run-off election. President Bachelet took office on 11 March 2014. This is her second term, having previously served as president between 2006 and 2010.

President Bachelet’s administration has adopted a wide-ranging reform agenda. While Chile has one of the lowest poverty rates in Latin America, inequality remains significant. President Bachelet’s election campaign centred on redistributive policies including tax and education reforms, and other measures intended to address income inequality. She has also proposed amendments to the constitution, which, despite many amendments, date back to the era of military leadership under Pinochet.

In September 2014, the government passed a comprehensive tax reform aimed at tackling inequality, structural deficit and raising public funds for an ambitious education reform.  A package of bills to reform the education system aimed at strengthening public schools and promoting free access to higher education is being debated in Congress.  Two bills limiting profit and arbitrary selection in public schools and ensuring free primary and secondary education have already been enacted and more bills are expected to be passed in 2015.The election of Ms Bachelet’s predecessor, Sebastián Piñera (of the centre-right Coalición), marked the first transition to centre-right government since Chile returned to democracy in 1989 and was the first elected centre-right government in more than 40 years. During his term as president, Piñera promoted an economic agenda of structural reform to improve productivity and competitiveness and reformed healthcare, education and the labour market.

System of government

Under Chile's constitution, the president, as head of state, serves a four-year term and is unable to serve a second consecutive term. In the bicameral congress, Chile's Chamber of Deputies and Senate have 120 and 38 elected members respectively. Deputies sit in office for four years, while Senators are elected to serve an eight-year period.

Foreign Policy

Chile's most important regional partners are Brazil, Argentina and the 'Pacific Alliance' members, Peru, Mexico and Colombia. The Pacific Alliance economic integration process, covering goods, services, people and capital, offers economic opportunities beyond Chile's current bilateral FTAs with these countries. The integration of stock exchanges, for example, will form the second-largest stock exchange in Latin America.

Chile does not have diplomatic relations with Bolivia following a long-term border dispute. Bolivia lost its Pacific coastline during a 19th-century war with Chile. Bolivia has sought to regain access to the sea, including by bringing a claim against Chile before the International Court of Justice (ICJ) in 2014. On 27 January 2014, the ICJ issued its final judgment over a longstanding maritime border dispute between Chile and Peru. Despite requiring Chile to cede territory, both countries have agreed to abide by the ruling in what some see as a cause for optimism regarding bi-lateral relations between the two nations. Chile is an associate member of Mercosur (the Customs Union comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela). It is also an associate member of the Andean Community (comprising Colombia, Ecuador, Peru and Bolivia).

Chile is an active participant in other major international fora, including the United Nations, Organisation of American States (OAS), Asia Pacific Economic Cooperation (APEC), Organisation for Economic Development and Cooperation (OECD), International Monetary Fund (IMF), World Bank, the World Trade Organisation (WTO), Union of South American States (UNASUR) and the Community of Latin American and Caribbean States (CELAC). Chile served as a non-permanent member of the United Nations Security Council from 1996-97 and 2003-04, and is a currently sitting for the period 2014-15.

Chile has strong political, economic and trade relations with the United States (US). Bilateral trade has more than doubled since the US-Chile Free Trade Agreement (FTA) entered into force in 2004. The United States is Chile's second-largest goods trading partner overall, and the largest foreign direct investor in Chile.

Chile's trade focus in Asia is supported by a growing list of free-trade and economic agreements, including China, Japan, ROK, Viet Nam, Hong Kong, and Malaysia. China is Chile's number one destination for goods exports and number two source of imports after the United States. Chile and China upgraded relations to a "strategic partnership" in June 2012. Chile was the first South American country to establish diplomatic ties with China (in 1970), the first country in South America to sign off bilaterally on China's accession to the WTO and the first to conclude an FTA with China.

Bilateral relations

As members of the Cairns Group, Australia and Chile work to ensure that agricultural trade reform issues are a priority in the WTO Doha Round. Both countries are negotiating the Trans-Pacific Partnership agreement and the Plurilateral Services Agreement. In 2012, Australia became an observer of the Pacific Alliance (Chile, Colombia, Mexico and Peru) and commenced a senior officials' dialogue with the Community of Latin American and Caribbean States (CELAC) during Chile's pro-tempore presidency of both organisations. Within APEC, Australia and Chile cooperate to promote trade and investment liberalisation in the Asia-Pacific region. We also share many common interests in regional and global issues ranging from the environment, the Antarctic and illegal fishing, through to disarmament and regional security.

The first known Chilean to arrive in Australia was former president and political exile, General Ramon Freire, who arrived in 1838. Australia's third Prime Minister, John Watson, was born in the Chilean port city of Valparaiso in 1867 and emigrated to Australia, via New Zealand, in 1886. Chileans in Australia numbered 90 in the 1901 Census and grew slowly until the late 1960s. Numbers increased from the 1970s and the 2011 Census recorded just under 25,000 Chilean-born people in Australia. Australia's Chilean community now includes second and third generation Chilean Australians. More information on Australia's Chilean population can be found at the Department of Social Services’ Community Information Summary page.

In December 2014, the inaugural Australia-Chile Economic Leadership Forum (ACELF) was held in Santiago with the aim of exploring new ways to expand and deepen the Australia-Chile bilateral relationship. The event attracted high-level public and private participation from both countries, including Australia’s Minister for Trade and Investment, Andrew Robb AO MP, the President of Chile, Michelle Bachelet, former Chilean Presidents Ricardo Lagos and Eduardo Frei Ruiz-Tagle, as well as the Chilean Ministers for Foreign Affairs, Economy, Mining and Energy.

In 2001, the Australian Government established the Council on Australia-Latin America Relations (COALAR) which aims to enhance commercial, political and cultural relations between Australia and Latin America. Since its inception, COALAR has been active in promoting business, education, tourism and cultural links between Australia and Latin America. For updates on COALAR activities and information on the annual grants program, follow COALAR on Facebook.

People to people links

Australia is an attractive education destination for Chileans. In 2014 there were 1805 Chilean students studying in Australian educational institutions making Chile the third-largest source of international students from Latin America, after Brazil and Colombia.

Australia's bilateral education relationship with Chile is well developed. Collaborative agreements exist between Australian education and training institutions, the Chilean Government and local education providers, covering scholarships, student exchanges and double degree arrangements. Australia is among the top destination countries for scholarship students funded by the Chilean Government's Becas Chile Scholarship Program, under which more than 500 students have been sent to study in Australia since 2010. The program includes postgraduate, undergraduate and vocational education and training scholarships. New opportunities are emerging for Australian education and training providers in areas such as mining, energy and water management, where Australia has key research and teaching strengths and Chile has human capital development needs. Greater engagement between government, researchers, education and training providers and industry is taking place as a result.

Short-term visitor numbers are growing since Qantas began direct flights from Sydney to Santiago in March 2012, in addition to LAN services via Auckland, which commenced in 2002.  Since December 2014, Qantas operates four direct flights a week on the Sydney-Santiago route.  In February 2015 capacity was doubled to 4,000 seats per week each way under bilateral air service arrangements. Chilean tourism authorities recorded the arrival of 42,133 Australians in 2014.

In September 2011, Australia introduced an e-visa for Chilean tourists visiting Australia. The e-visa processing system has benefitted relatives of the large resident Chilean community in Australia and facilitated a greater flow of Chilean tourists to Australia. In July 2005, Australia and Chile signed a MOU establishing a work and holiday visa program. This program began with 100 available places, and this has increased progressively to 1,500 places, reflecting the popularity of the program. Under the program, young Chileans and Australians with appropriate qualifications and language skills can explore living and working in the other country. Also, since October 2014, Chileans transiting Australia for a period of eight hours or less do not require a visa.

Development assistance

From 2010 to 2014, Australia provided $100 million in official development assistance to Latin America, including 250 Australia Awards scholarships. Chile received 23 Australia Awards Scholarships and 14 Australia Awards Fellowships (including the current round). The regional program has now closed, though some activities that have already been funded will continue until 2017. Following the 2010 Chile earthquake and tsunami, Australia provided $5 million for the immediate relief of emergency supplies (generators, tents, stretcher beds and rain jackets), and helped Fundacion Integra to reconstruct and restore 32 child care centres in the poorest areas of Chile that were most affected. At the time, the Fundacion Integra board of directors was chaired by Cecilia Morel, the wife of the then Chilean President, Sebastian Piñera.

The Australian Embassy in Santiago manages a Direct Aid Program (DAP), which provides financial support to a broad range of projects in Chile, including community development projects and those designed to address challenges in vulnerable communities.

Economic Overview

At a glance

For the latest economic data refer to Chile country fact sheet [PDF 31 KB]

Economic outlook

Chile retains an open economy with a liberal trade regime, including a floating exchange rate, a rules-based counter-cyclical fiscal policy, and inflation-targeting, all geared towards reducing economic volatility. Chile continues to record solid economic growth: GDP reached approximately US$264.1 billion in 2014 at an estimated real GDP growth of 2.0 per cent (2014).  The Chilean government's strong fiscal position has allowed for the repayment of debt and, until recently, placed the government in a net creditor position. In recent years, the strong performance of the mining sector, combined with economic growth and a favourable domestic investment climate contributed to a reduction in unemployment to an estimated 6.0 per cent in 2013 (from over 10 per cent in 2004).

As a major exporter of copper and other commodities, Chile was significantly affected by the global financial crisis. While the OECD has noted that Chile remains vulnerable to a sharper than expected economic downturn because of the dominance of copper in its exports (approximately 50 per cent), the underlying strengths of the economy, its strong public-sector financial position, flexible exchange rate regime and relatively well-capitalised and well-regulated banking sector put it in a better position than many countries to respond to future financial uncertainty in Europe.

Chile has eliminated most trade distortions and non-tariff barriers. It has a uniform tariff of six per cent, although due to its network of FTAs, the average applied tariff is much less. Draft taxation reform issued in April 2012 proposed to remove all tariffs unilaterally by 2015, but this was later removed from the agenda. The Central Bank of Chile maintains an independent monetary policy aimed at maintaining inflation at OECD standards. Privatisation over the past two decades has meant that relatively few state-owned enterprises remain. However, CODELCO, the Chilean National Copper Corporation, Chile's largest company, remains state-owned.

Chile's strong push to engage economically with the Asia-Pacific region and to build strategic alliances along the eastern seaboard of South America is reflected in its busy FTA agenda. In October 2014, Chile announced that it had reached agreement on expanding an existing Partial Trade Agreement with India. Chile participates in the Trans-Pacific Partnership negotiations.

Chile strongly supports trade and investment liberalisation within APEC. It pursues its market access objectives within the WTO and is a member of both the Cairns Group and the WTO G20 group of developing countries. Chile's economic success and its liberal economic policies were significant factors in its accession to the Organisation for Economic Cooperation and Development (OECD) in January 2010, which Australia strongly supported. Chile was a special invitee to the G20 in 2012.

Bilateral economic and trade relationship

Chile and Australia share a healthy and growing economic and trade relationship. Chile is Australia's third-largest trading partner in Latin America, with two-way goods and services  trade totalling $1.8 billion in 2013-14. Exports to Chile totalled  $539 million in 2013-14 comprising coal, crude petroleum, professional, technical and other business services and education-related travel. Australia's goods and services imports from Chile totalled $1.3 billion in 2013-14, and included copper, lead and zinc ores and concentrates, transport services and personal travel services. Services are a significant component of Australia’s trade with Chile, with two –way trade-in-services totalling $413 million in 2013-14 and constituting 23% of Australia-Chile trade.

The entry into force in March 2009 of the Australia-Chile Free Trade Agreement (ACI-FTA) eliminated tariffs on 97 per cent of existing merchandise trade. As of 2015, tariffs have been eliminated on 100 per cent of existing merchandise trade . The FTA also contains provisions with respect to services and investment liberalisation, and guarantees access to government procurement markets. The ACI-FTA was Australia's fifth free trade agreement and the first with a Latin American country.

The Australia-Chile Double Taxation Agreement (DTA) entered into force in February 2013. The agreement provides certainty for Australian and Chilean businesses through a framework for the taxation of cross-border transactions. It reduces barriers to the cross-border movement of people, capital and technology, primarily through reducing withholding taxes on dividend, interest and royalty payments.

The Australia-Chile Social Security Agreement, signed in 2003, improved social security protection for those who have lived and/or worked in both Australia and Chile. The social security agreement also exempts Australian employers from the need to provide Chile social security support for Australian employees sent temporarily to work in Chile, provided the employee remains covered in Australia, by compulsory superannuation arrangements.

Further information is available on the Australian Taxation Office website or the Department of Social Services website.

Trade and investment

Chile is developing frameworks to encourage more foreign investment and trade, with a view to stable and sustainable economic growth. Chile is the most like-minded country in Latin America for Australians wishing to conduct business and Australia has a significant history of investment in Chile. Recent developments in the relationship, such as the Australia-Chile Free Trade Agreement and the Australia-Chile Double Taxation Agreement, have significantly reduced barriers to trade and investment. The Australia Chile Free Trade Agreement has a review process and we would welcome advice of any further obstacles faced by Australian companies when doing business in Chile. Austrade's Santiago office and the Australia-Chile Chamber of Commerce work on promoting trade and investment links between the two countries.

Australian companies are significant investors in Chile. Chile's relatively open business environment has made it an ideal base for Australian companies looking to expand into Latin America. Over 100 companies are active in Chile of which over a quarter are listed on the ASX200. More than half of the Australian or Australian-affiliated companies with offices in Chile are related to the mining industry, though this has diversified in recent years. The Australian Embassy in Chile estimates total Australian investment in Chile at around $$A5 billion. Significant Australian private-sector investors include BHP Billiton, Rio Tinto, Origin Energy, Orica (chemicals) and Pacific Hydro (power generation). The CSIRO Chile Centre of Excellence in Mining and Minerals Processing, co-funded by the Chilean government and supported by local universities and major industry partners, has offices in Santiago and Antofagasta.

Australian investment in Chile is heavily skewed towards the resources sector, including the Escondida mining project, a joint venture between BHP Billiton (57.5 per cent equity) and Rio Tinto (thirty per cent), which is the world’s largest copper mine.

According to a 2014 report from the Chilean Trade Directorate (Direcon), the stock of Chilean direct investment in Australia, for the period 1990 to June 2013, is US$743 million (1.2 per cent of total Chilean outward FDI), making Australia Chile’s 10th largest destination for foreign direct investment

Mining and associated services remain significant players in the bilateral economic and trade relationship, however, growing income levels within Chile and a good economic outlook for the country means Australian agribusiness, financial services, energy and water, and education providers will also see significant opportunities in the future.

The 2014 Australia-Chile Economic Leadership Forum (ACELF) raised the profile of Australian business in Chile significantly, and has prepared the ground for further expansion of trade and investment links and institutional cooperation between both countries. The ACELF explored commercial opportunities and challenges for Australian and Chilean businesses in six key industry sectors - mining, energy, water management, education, transport and logistics, and financial services. It promoted the concept of Australia and Chile as platforms for trade and investment in Asia and Latin America respectively, in addition to underscoring the importance of the bilateral trade and investment relationship.

For Information on doing business and opportunities in Chile please see the Austrade website.

High level visits

December 2014: The Minister for Trade and Investment, the Hon Andrew Robb AO MP, visited Chile and gave the keynote address to the inaugural Australia‑Chile Economic Leadership Forum in Santiago. Mr Robb met with President Bachelet, former Chilean Presidents Ricardo Lagos and Patricio Aylwin, as well as with the Chilean Ministers for Foreign Affairs, Economy, Mining and Energy.

October 2014: Australia’s Chief of Army, Lieutenant General David Morrison, visited Chile to meet with the Commander in Chief of Chile’s Army and further strengthen the relationship between Australia’s and Chile’s Armies.

September 2014: Chilean Mining Minister, Aurora Williams visited Australia to attend the International Mining and Resources Conference in Melbourne. She also met with government officials in Brisbane and Canberra, and visited the Olympic Dam mine site in South Australia.

February 2014: Vice Chief of the Australian Defence Force, Air Marshal Mark Binskin AC, travelled to Chile to meet the Chiefs of the Chilean Army and Air Force, Senior Naval Officers and the Vice Minister of Defence. This visit was the most senior level Australian Defence Force visit to Latin America in recent memory and laid the foundation for practical and sustainable defence engagement, with a particular focus on the Pacific.

May 2013: Then Parliamentary Secretary for Trade, the Hon Kelvin Thomson, visited Chile on his way to the Pacific Alliance Summit in Cali, Colombia.

March 2013: Then Environment Minister of Chile, Maria Ignacia Benitez, visited Australia.

September 2012: President Sebastián Piñera visited Australia, accompanied by Foreign Minister Alfredo Moreno. Memorandums of Understanding on trilateral development cooperation with AusAID, mining with the CSIRO and biosecurity with the Department of Agriculture, Fisheries and Forestry were signed during the visit.

2012: Then Chilean Minister for Labour and Social Welfare Evelyn Matthei and then Minister for Defence, Andrés Allamand, visited Australia

April 2012: Then Minister for Trade and Competitiveness, the Hon. Craig Emerson, visited Chile.

May 2011: Then Minister for Broadband, Communications and the Digital Economy, the Hon. Stephen Conroy, visited Chile.

2011, 2012, 2013: The Chilean Minister for Mines, Hernán de Solminihac visited Australia and signed MOUs with the Department of Resources, Energy and Tourism and the South Australian Government.

Last Updated: 25 March 2015

Last Updated: 1 August 2014