Free Trade Agreement – Chile and Brazil

CHILE AND BRAZIL: WITHOUT LIMITS

Solid, strategic, and longstanding is the trade relationship maintained between Brazil and Chile.

The importance of this large market for Chile is evident, as Brazil is its main partner and the primary destination for Chilean direct investment in the region, with more than US$ 35 billion in accumulated stock, and one of the largest destinations for its products. Thanks to its geographic and demographic dimensions, as well as its productive potential across almost all sectors, Brazil holds great regional relevance.

Chile, in turn, serves as a gateway for Brazilian companies into Latin America. Its ease of investment and strong track record are its hallmark.

With the intention of deepening and expanding the existing trade on solid foundations, the Chile–Brazil Free Trade Agreement (FTA), signed in November 2018 after four rounds of negotiations, is already a reality.

It represents the most important step in their trade relations, which for more than two decades have been governed by the Economic Complementation Agreement (ACE) No. 35, which, like other existing agreements, will not be replaced between the two countries. The idea is for them to coexist in harmony with the new rules.

The agreement consists of 24 chapters and positions itself as a modern regulatory framework that updates existing regulations. In addition, it renews the trade relationship by incorporating new disciplines aimed at providing greater legal certainty and transparency for investors, exporters, and importers of goods and services.

According to the Undersecretary of Economic Relations, the topics covered include: Telecommunications; Electronic Commerce; Trade in Services; Environment; Labor; Gender; SMEs; Economic and Trade Cooperation; Technical Barriers to Trade; Public Procurement and Competition Policy; Trade Facilitation; Good Regulatory Practices; and Temporary Entry of Business Persons.

It is also worth highlighting that, for the first time in an agreement of this kind, a Chapter on Regional and Global Value Chains has been included.

Regarding the movement of goods, the benefits of the agreement translate into simplification and greater efficiency and agility, contributing to an improved regulatory environment. It establishes committees on sanitary and phytosanitary measures to address and facilitate issues related to the agricultural sector.

One of the efforts of the Technical Barriers to Trade Committee is to eliminate unnecessary obstacles, such as ensuring that the exchange of documentation occurs in electronic format through a single foreign trade system.

Within this committee, it will also be possible to present proposals from specific sectors of industry so that health authorities can work together with the aim of speeding up the export process.

On the other hand, non-tariff barriers represent a disproportionate burden for smaller companies. For this reason, the micro, small, and medium-sized enterprises committee aims to support, participate in, and implement development programs to promote the internationalization of this sector.

In the area of imports and exports of services, the FTA provides greater certainty regarding the conditions and timelines governing the temporary entry of businesspeople into Brazil, as well as greater legal security and non-discriminatory treatment. In this context, it facilitates electronic commerce and the digital economy between the parties, which is a major development for SMEs, as it eliminates the obligation to host national servers in order to operate, thereby reducing operational costs.

Another important point for micro, small, and medium-sized enterprises is access to opportunities through production chains to promote development. The agreement also provides for the elimination of international roaming, facilitating both business and tourism.

For investors from both countries, mechanisms for conflict prevention are created, regulating arbitration situations and guaranteeing non-discrimination in financial services. In addition, it establishes local support mechanisms for investors in order to resolve difficulties related to investment. In Chile, this occurs through the Foreign Investment Promotion Agency, and in Brazil through the Foreign Trade Chamber (CAMEX).

It is also important to mention the gender chapter, whose objective is to increase women’s participation in exporting companies. According to ProChile (an institution of the Ministry of Foreign Affairs responsible for promoting Chilean exports of goods and services), only 5% of these companies are led by women nationwide. This element is extremely important for an inclusive trade policy and includes training, studies, and programs so that women can operate under equal conditions and increase their participation in international trade.

The agreement also establishes access to the largest public procurement market in Latin America, allowing suppliers from both nations to submit bids under equal opportunities.

The FTA confirms Brazil’s commitment to trade liberalization, with the objective of expanding integration with the global economy.

Approved in August by the Chilean Senate, it is currently under urgent consideration in the Brazilian Congress.

Once promulgated, the increase in interest in trade and promotional activities will be of great importance to the business community of both nations. There are no limits to this integrative, intense, and promising relationship between Chile and Brazil in the coming years.

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Selma Nunes - International Representative of IBREI in Chile, President of the Chilean-Brazilian Chamber of Commerce (CCBC)