Spain-Chile Relationship – A SWOT Analysis

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Chile has been traditionally remoted because of its geographical and financial traits, with roughly 98% of all its imports arriving by way of ports. Nevertheless, previously 30 years the nation has undergone an enormous change, discovering itself now within the vanguard of the Free Market motion – being a world chief within the signing of Free Commerce Accords – and shedding its former protectionist financial insurance policies.

In consequence Chile has been on the forefront with respect to many Latin American nations relating to globalization and accessing worldwide markets. This in flip, has led to Chile sustaining financial development just like different rising economies.

As a part of this opening of the nation to international markets the Chilean authorities just lately redistributed political energy on a regional foundation with the incorporation of two new areas, the Arica-Parinacota and Los Ríos. The thought behind the creation of those two new areas was to foment revenues in tourism, mining, agriculture and communications, whereas on the similar time aiming to empower the areas and decentralize energy from the capital. The brand new areas have been accepted Mar. 15, 2007 by President Michelle Bachelet.

The federal government’s insurance policies have translated in sturdy financial development, with the GDP in 2007 coming in at 5.2% versus 4% in 2006. On the draw back, the nation is feeling results from the present international financial malaise, with unemployment hitting 7.2% in 2007. Sturdy financial development has additionally led to a pointy rise in inflation, up from 2.6% in 2006 to 7.8% in 2007 on the again of upper petroleum costs and the ripple impact on meals costs, coupled with adversarial climate situations.

It needs to be famous that Spain’s economic system can also be going by a tough batch, with unemployment hitting 9.6% for the primary quarter of 2008 – the very best it has been in three years – the third consecutive quarter of rising unemployment. This sharp improve in unemployment has even stoked issues the Spanish authorities could run-out of funds to pay unemployment advantages in September.

Nonetheless – and regardless of the home nature of present Spanish press with respect to the collapse of its development sector and rising unemployment – the final notion of Chile in Spain is one in all a Latin American nation that has undergone a rigorous financial coverage that has led to its being thought of as an rising nation with a comparatively low nation danger.

In a roundabout means Chile may gain advantage from a struggling Spanish economic system – which has been constructed on EU subsidies and a booming development sector – as many Spanish firms really feel they have to diversify and look outdoors their borders for development. Of explicit curiosity are Spanish development firms which have been closely diversifying in Spain into the vitality sector. Spanish firms are notably keen on initiatives in Latin America, Center East, Jap Europe and Asia.

In Spanish enterprise circles it’s commented that Chile’s financial stability – in sharp distinction to that skilled in different Latin American nations – has made the nation enticing for funding. Whereas mining stays a sector of curiosity, Spanish firms are additionally interested in the banking, telecommunication and electrical energy sectors.

Regardless of the sturdy rise in Chile’s inflation, Spanish analysts see continued financial stability in that nation, with sustained financial development, albeit at decrease charges than in earlier years given the present international financial downturn.

On the whole, it’s seen, nevertheless, that development will most definitely come from Chile’s continued emphasis on exports and a drive to entice international funding. To additional encourage international investments Chile should proceed to make sure not solely the liberalization of its markets and monetary transparency, however search to optimize its Free Commerce agreements.

That mentioned, it’s usually talked about in Spain that the draw back of Chile’s financial development is that wealth will not be being equally divided among the many Chilean inhabitants. Extra concretely, the distinction between Chile’s rich and its poor is turning into more and more pronounced. On this age of company accountability, and with its rising significance within the Spanish company world, such discrepancies in wealth distribution might come into play with respect to future investments, both in constructive or destructive mild.

With respect to Commerce, Chile exports greater than it imports, with vitality representing round 63% of Chile’s exports in 2006, whereas it solely imported round 25% in the identical interval.

These figures are deceptive, nevertheless as Chile has restricted home vitality assets, with the nation importing nearly all of its vitality wants. Chile has proven a reliance on pure fuel exports, specifically these coming from Argentina. Since 2004 – when Argentina started proscribing its pure fuel exports – Chile has been revising its vitality coverage.

Outdoors of vitality, Chile additionally exports important agricultural items (fruits and horticultures), representing round 20% of all exports in 2006, whereas it solely imported 7% on this class for a similar 12 months. In 2006, manufacturing items represented round 10% of all of Chile’s exports, whereas it imported near 60% in the identical class of products.

Or in different phrases, Chile’s export construction is principally divided equally between industrial (45%) and mining (45%) and the remaining 10% in agricultural items.

Inside the industrial merchandise, the most important export objects are cellulose, methanol and chemical merchandise. Of accelerating significance within the final decade are forest merchandise, salmon and wine.

It needs to be talked about that whereas Chile is trying to diversify away from its dependence upon the semi-manufacturing of copper – a product that represented 60% of the nation’s exports within the Seventies – to 35% in 2004, this product remains to be overly represented within the nation’s export basket and the Commerce Stability because of international calls for and rising market costs for this commodity.

Copper exports in 2007 represented roughly 45% of the overall exports on a Commerce Stability foundation.

Chile exported $1.3 billion to Spain in 2007, down barely from nearly $1.4 billion in 2006. By comparability, Chile exported $8.4 billion in 2007 to america, barely down from $8.9 billion in 2006. With respect to imports, Chile acquired $845 million in items from Spain in 2007, up from $708 million in 2006. With respect to the U.S., $7.3 billion of North American items have been imported in 2007, up sharply from the $5.6 billion Chile imported in 2006.

PRESS ANALYSIS

Regardless of Chile’s constructive financial story, that information is not hitting Spain – in reality, information protection of Chile in Spain is near non-existent. For instance, when a number of Spanish businessmen have been requested to say a present article that they’d examine Chile they could not identify one. Nearly invariably the response had one thing to do with the Dictator Pinochet or the present president, Michelle Bachelet, who’s seen as a one thing as a novelty, consistent with Argentina’s Cristina Kirchner.

Different latest information objects associated to Chile embrace: studies a Nazi “Physician of Dying,” might be hiding in Chile; the closing of an investigation within the dying of well-liked actor and singer 35 years after his dying; Chile and Hawaii are each attempting to get a contract for an enormous telescope; A Chilean gang was busted with objects stolen from Europe; Ongoing information protection of Peru’s ex-president Fujimori who’s being held in a Chilean jail; and the widespread entry of web in Chile.

There was widespread protection of the EU-Latin America Summit in Chile, however once more the protection was geared for Spain’s home viewers, with the first information being whether or not or not Venezuela’s Chavez had apologized to Spain’s King Juan Carlos I – or vice versa – after the Royal instructed the President to “shut up” at a summit final 12 months in Chile.

When Chile is roofed within the press, it’s nearly all the time in phrases associated to Spanish companies which can be working in that nation. Particularly, there are repeated tales associated to numerous Spanish vitality and telecommunications firms, however usually they lack depth and usually are not in and of themselves the sorts of articles that may entice traders.

There have additionally been latest articles about threats to Spanish firms.

Particularly, there was destructive press relating to the US businessman Douglas Tompkins (proprietor of Patagonia and North Face) who it’s reported is shopping for up land in Chile. Studies in Spain declare Tompkins is attempting to purchase sufficient land to create a wildlife protect within the south of the nation – and which might run from the Andes to the ocean, successfully chopping the nation in two. There are issues this might have an effect on Spanish firm Endesa which has plans to construct hydroelectric dams close to the undertaking. In typical Spanish style of searching for extraordinarily weird particulars, the ABC newspaper reported hypothesis is rife within the Chilean area that Tompkins might be planning on exporting water and even constructing a brand new promised land for some Jewish sect.

There are sometimes articles associated to tourism, however these are most frequently associated to commerce publications. On the whole, the notion is that there are extra articles on the Caribbean, Mexico and Peru than these printed on Chile. One particular person interviewed for this report, mentioned they have been shocked {that a} member of the family was considering of going to Chile for holidays as a substitute of some place extra “unique.”

There may be subsequent to no protection of Chilean imports, though there’s a reasonable information of the standard of that nation’s wines – however that is coated in choose media aimed an much more choose reader, which is maybe not stunning given Spain’s personal private, and plentiful, historical past with wine.

This lack of understanding can also be backed up by a 2006 survey by the Spanish state company CIS that famous that of these people polled on their viewing information habits, solely 7.8% of the respondents mentioned they watched “A Lot” of reports associated to Latin America, and 49% “Fairly A Bit.” The preferred objects in Spain are associated to information concerning the European Union, adopted by these concerning the North Africa. Information objects relating to Latin America have been the fourth hottest objects (EU, North of Africa, US, and Latin America, in that order). On the whole, Spaniards establish extra with European nations, and North Africa, though there are some indications of change. In a late 2007 CIS survey, 31% of these Spaniards polled thought that Spain ought to develop applications in Latin America to foment financial development.

Nevertheless, simply the earlier 12 months the CIS famous that by way of worldwide politics, 56% of the respondents thought European Integration was extraordinarily vital, with solely 8.6% displaying concern about relations with Latin America.

It’s attention-grabbing to notice that this shift has additionally been accompanied with an increase in Latin American immigrants in Spain, accompanied with rising unemployment.

Amazingly, regardless of 85% of these polled saying they’d by no means travelled to a Latin American nation the overwhelming majority believed the principal downside in Latin America was a scarcity of democracy, weak economies and corruption. Of those that had travelled to Latin America, the overwhelming majority visited Mexico (24.5%), whereas solely 5.7% went to Chile.

With respect to the notion of which Latin American politicians are implementing measures to additional their economies, there was just lately a dramatic shift in favor of Chile. In a CIS report launched Might 29, 2008 (administered in Nov. 2007), on a scale of 1 to 10, Spaniards rated Chile’s Bachelet as being the simplest Latin American chief with a 4.93 rating. The following most extremely ranked Latin American chief was Brazil’s Lula with a 4.61 out of 10 rating. Bolivia’s Morales had acquired a 3.42 ranking, whereas Cuba’s Fidel Castro obtained a 1.82 out of 10.

Whereas this latest survey will not be precisely measuring the identical standards, it’s attention-grabbing to notice that of these polled in a 2006 CIS survey, 19% of them gave Brazil’s Lula excessive marks, adopted by Bolivia’s Morales (16%). Solely 6.6% of these Spaniards polled in that survey valued the job accomplished by Chile’s Bachelet, which in relative phrases was solely barely greater than the three.7% who amazingly thought that Cuba’s Fidel Castro was doing a very good job.

Regardless of the development within the notion of Chile’s authorities, it stays clear that nation’s message will not be reaching the Spanish public, however then it is a public the place 35% of the inhabitants has by no means heard of the Latin American Summits.

SWOT ANALYSIS

Energy

• Because of its having the bounce on different Latin American nations with respect to liberalizing its markets there’s a generalized notion that in Chile there’s an elevated sophistication and professionalism when coping with Chilean businessman.
• The Chilean telecommunications and software program sectors are seen as being consolidated and extremely revered.
• Tourism is a particular power with not solely majestic views, but in addition the additional benefit that it is seen as protected to journey to distant places, in contrast to in a number of different Latin American nations. In spite of everything, what good is a trip if you cannot come house to develop the images.
• As talked about repeatedly on this report, Chile’s economic system is seen as a particular bonus, with the federal government totally searching for to observe a Free Market mannequin, and entice international traders.
• A willingness – and enterprise code – to permit international traders purchase or create companies in Chile with none kind of restriction of discrimination towards foreigners.
• A good tax regime, which avoids double taxation with Spain. Direct tax on Corporations/Societies is 17% on income; Oblique tax of VAT 19%.
• Patent safety: Chile subscribes to strict patent protocol, together with that of the Paris accord and acknowledges these patents that have been issued in different nations. Patents needs to be registered additionally in Chile to obtain full safety.
• Frequent language – Spanish – and in lots of respects a standard tradition and faith. This isn’t to be downplayed as Spaniards are infamous for there horrible grasp of international languages. o The present power of the Euro additionally makes investments in Latin America enticing.

Weak point

• As talked about beforehand, one space that can more and more draw criticism from stakeholders and activists is within the space of distribution of wealth. In Chile the traces between those that have and those that do not have are rising.
• Chile’s vitality community/grid has proven indicators previously (1999) of needing additional investments to keep away from shortfalls in manufacturing and provide.
• Chile’s vitality portfolio is definitely a weak level, which whereas the nation does have some renewable vitality sources – most notably within the space of hydroelectricity – there’s a deficit with respect to fuel and oil, the consequence lending to provide shortages.
• Whereas Chile is “an open market” there’s truly tight management on the distribution channels – roughly 80% of retail distribution is dealt with by 20% of the distributors, which might counsel that this space must be liberalized.
• With respect to the above level, when introducing some client merchandise distributors will demand further help for publicity and promotions, for which the international firms must be prepared to supply.
• Given the tight management on the retail provide chain and distribution at instances it’s seen that sure members maintain an excessive amount of energy when it’s time to negotiate enterprise phrases.
• Whereas taxation is mostly decrease – apart from alcoholic drinks (27%), there are additionally some obstacles for the importation for motor automobiles and components.
• There have been some studies tighter controls on press freedom. In Spain there was protection just lately of a Committee to Shield Journalist report (Might 23) that Chilean photographer Víctor Salas suffered a critical eye harm on Wednesday when he was struck by a police officer as he was masking a protest outdoors parliament within the southwestern metropolis of Valparaíso. Salas works for the Spanish state information company EFE.
• Whereas Chile’s economic system is a constructive, it is usually displaying some indicators of development slowing down, and unemployment and inflation each rising.
• For essentially the most half Chile has averted political monetary scandals, though that has just lately modified – and which oddly appears to be the product of a stuffy authorities course of inherited from Dictator Pinochet. o Certainly, Pinochet stays a weak spot by way of branding and advertising, maybe not helped by the continued leaks, trials and studies. Then again, Spain has one thing to supply on this space because it additionally appears to have recovered from the same scenario underneath Franco.
• Some Spanish businessmen mentioned they can not perceive why there is not a full settlement between Chile and Mercosur, relatively than simply being an Affiliate Member.

Alternatives

• Given the present make-up of Chile’s vitality sector – its dependence upon fuel and oil, and so on – this could present the nation a chance to put money into renewable energies, reminiscent of in photo voltaic and wind-power, areas through which Spain has a number of main firms. Iberdrola, Acciona, Endesa, Gamesa, ACS amongst others are greater than certified to convey their expertise and know-how to Chile.
• Chile can also be diversifying into the LNG market, an space the place Spanish firms are world leaders.
• Chile generally is a platform to enter different nations given its huge Free Commerce agreements. Particularly, international traders can make the most of a Regulation signed Nov 23, 2002 that seeks to foment international traders to make use of Chile as base to enter different Latin American and international nations. Spanish firms and traders are particularly suited to make the most of such laws given the cultural similarities and customary language within the area.
• Chile gives development and funding prospects within the development sector, particularly within the space of constructing second houses.
• Chile continues to supply vital funding prospects within the space of tourism.
• Chile gives a steady and dynamic market that’s supported by knowledgeable method of doing enterprise.
• One sector that’s at the moment present process spectacular development, and which Spanish firms can convey their know-how and investments, is within the space of “inexperienced” initiatives, associated to sustainable development, company accountability and environmental safety.
• The Chilean market is extraordinarily aggressive by way of the connection between worth and product, which implies that there’s room when negotiating for value-added companies or merchandise when searching for positioning available in the market and client-customer loyalty – one thing that Spanish firms can present.
• The Spanish authorities has made it a precedence to put money into science and expertise, that means there might be clear alternatives to do enterprise in Chile provided that authorities’s financial insurance policies that additionally search to foment investments on this sector.

Threats

• There are continued provide issues with respect to not solely electrical energy, but in addition within the space of agricultural merchandise.
• Chile should resolve its excellent border disputes with Peru and Bolivia.
• There does exist the specter of the affect from populist Latin American governments in Chile’s politics, most notably from Venezuela, Ecuador and Bolivia.
• Given Chile’s geography there does exist the fixed menace of earthquakes.
• Environmental issues:

1. Vital threats to Chile’s freshwater and marine habitats are attributable to the ever rising aquaculture trade – primarily salmon farming.
2. The institution of non-native tree plantations is taken into account by many to be the best menace to Chile’s native forests.
3. The first environmental threats to Chile are air air pollution from automobile and. industrial emissions, water air pollution from untreated industrial sewage.

COUNTRY PERCEPTIONS

With respect to what most positively impacts a rustic’s notion in Spain it should first be said that Spain could be very nationalistic. There’s a love-hate relationship – some would say envy – with numerous nations based mostly on historic incidents.

As well as, Spaniards love rankings and frequently are publishing articles to indicate that they’re within the vanguard. This at instances is excessive, to the purpose the place there have been articles evaluating what number of cigarette butts, or timber – or worse – could be discovered on the streets of varied European capitals.

Extra particularly, Spaniards may admit that sure merchandise from the U.S. are top-quality, however they will not let that sway them from nonetheless dredging up the Spanish-American Struggle of 1898 and complaining of the lack of territories. Individuals are persistently portrayed as being naïve and spiritual fanatics, whereas on the similar time being hypocrites. It’s a frequent sport in Spain amongst American ex-pats to search for the “unusual or weird American information story” that Spanish media routinely publish.

In the identical means, there was in depth information protection this 12 months to have fun the 1808 battle once more France – which whereas it freed Spain from the French was additionally the start of its decline in affect in Latin America. A weakened Spain subsequently discovered itself going through Wars of Independence in Venezuela and Argentina.

All to say, that Spain – and Spaniards – have a protracted reminiscence, and a few would argue an inferiority complicated.

Spaniards, apart from being nationalistic, are additionally idealists. International locations with essentially the most constructive picture perceptions in Spain have a powerful document in Human Rights and Democratic beliefs, fortified by strong financial fashions. On this respect of equal significance are nations that may contribute within the areas of Tradition and Artwork, and Excessive Expertise. Spaniards are massive spenders who love the newest high-tech gadget, and in that vein luxurious items.

With this in thoughts, it’s attention-grabbing that in line with a latest research by BBC, solely 31% of Spaniards contemplate it a constructive issue that China is an financial powerhouse. Certainly, in line with that research out of all European nations it’s Spain that holds the excellence of getting essentially the most destructive picture of China.

On the backdrop of the above data, the standard Spaniard tends to affiliate his spending by what’s well-liked and stylish, relatively than as being associated to a selected nation.

By Robert Steven Duncan

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Source by Robert Steven Duncan