Chile Shares the Chinese Dream

By+staff+reporters+PEDRO+LAGO+&+WANG+YANG

Despite his over 40 visits to China， it was still a surprise to Luis Schmidt Montes when he was appointed Chilean ambassador to China in 2010. Our interview with His Excellency started with the issue of bilateral trade – for Montes played a major role in the China-Chile free trade pact that came into effect on October 1， 2006.

China Today： What are the most prominent gains of the seven-year-old free trade pact between China and Chile？

Montes： I think Chile showed good foresight in signing the agreement. Our trade with China had centered on copper， iron and other metals， with China once ranking 25th or 26th among Chiles trade partners. In 2010， China became our largest trade partner. In 2012， the bilateral trade hit US $33.5 billion， which is still not the highest historically， but Chilean exports reached US $18.9 billion， with a surplus of close to US $6 billion.

In a mere six years， bilateral trade almost quadrupled（3.85 times） while exports to China surged from US $4.7 billion to US $18.9 billion. This is a remarkable change for Chile， which is now Chinas second largest trade partner in Latin America.

What does this change mean for us？ China now pays greater attention to Chile， a small country whose population is only 16.5 million. Yet more Chileans are seeking business opportunities in China or working in Chinarelated jobs.

Such changes are obviously the outcome of the free trade agreement between China and Chile and our long friendly ties.

China Today： Since China and Chile signed a supplementary agreement on investment in September 2012， what progress has been made in terms of mutual investment？

Montes： The free trade protocol between China and Chile consists of three agreements： the commodity trade pact signed in 2006， the service trade pact signed in 2010， and that on investment. The last is important to both parties. Prior to 2010， Chilean investment in China was nearly US $200 million， while Chinese investment in Chile added up to no more than US $75 million over the decade 2000 to 2010. The reasons are varied， such as the long distance between us， the modest size of Chile， and language barriers.

After I took office as Chilean ambassador to China， one of my first missions was to reach an agreement with China on service trade， and I was successful thanks to extensive earlier exchanges on the matter. Yet when it came to the investment pact， little headway was made after eight rounds of negotiations and 10 teleconferences.

Fortunately， a deal was finally clinched in 2012， and soon showed positive results. Chiles investment in China rose to almost US $280 million in 2012， up from the US$155 million of 2011. The momentum is just as strong on Chinas side. In the first half of 2013， contracted direct investment from China surpassed US $1.35 billion， which makes China the second largest source of foreign investment in Chile following the U.S.

Chinese investors are eyeing all of Latin America， not Chile alone. Yet Chile has extraordinary merits that appeal to them， such as a sound public order， a stable economy， smooth changeovers of government， and a sound legal system that offers due protection for investment. Chinese capital of US $1.35 billion entered Chile in the first half of 2013， coming from 30 Chinese companies in different economic sectors.

Chile is a leading food exporter， ranking 14th world-wide. It is competitive in fruits – annual exports exceed US $5 billion - and salmon， with annual exports of US $3 billion. China， however， did not take this too much into consideration.

This is now changing. COSCO has bought a vineyard in Chile， and is exporting its wine back to China. A Lenovo Holdings subsidiary invested in agricultural funds in Chile， producing blueberries， cherries and grapes for export to China.

Meanwhile， more Chilean businessmen are coming to China. Some have set up joint-venture vineyards here， as they are not allowed by Chinese law to purchase land. One brand from such cooperation is 1421.

Others entered the manufacturing sector， for instance， ME Elecmetal. They established operations in China producing wear-resistant parts for crushing and grinding equipment used in mining. Since mining equipment components needed in Chile are made in China， why shouldnt we open factories in China producing them in the first place？ This was the logic.

My estimate puts 2012 Chilean investment in China at about US $300 million – which， while not as impressive as Chinese investment in Chile， has still been maintaining a steady upward trend. At the current momentum， Chinese investment in Chile may hit US $3 billion in 2013， auguring well for the coming years.

China Today： How has the free trade agreement impacted on bilateral trade between China and Chile？

Mr. Montes： Chile is lucky to have a sustained surplus in its trade with China. In 2012 our exports to China stood at US $18.9 billion， compared with Chinas US $13.5 billion in exports to Chile. This put our surplus at a comfortable US $5 billion， which should pick up further after food exports to China increase. It is not easy to obtain entry permits for our exports. Since taking office I have been personally involved in the issue， and this has paid off. China and Chile have reached more agreements concerning agricultural products over the past three years than those in the previous 15 years. Before the signing of the free trade pact， food was only 1 to 2 percent of Chiles exports to China， and now the share is about 12 percent.

Chiles food exports， comprising fruits， wine， salmon， pork， and more， were valued at US $2.3 billion in 2012. With the spike in pork sales， our food exports are expected to reach US $2.8-3 billion in 2013， accounting for 18 percent of total export to China. And Chiles surplus will be absolute.

China Today： Has Chile been successful in diversifying its exports？

Mr. Montes： Prior to the free trade agreement， 98 percent of our exports to China were metals such as copper， iron， molybdenum， silver， and gold. The rest were cellulose and fish meal. But last year， Chinas imports from Chile included 510 items outside of these three categories.

Food is a key export. Chile is a big food exporter， and theres a huge demand in China. We have been cooperating well.

When I first came to China in 1992， many people here had no idea about （grape） wines. Now Chile is exporting US $160 million worth of wine a year. Chinese people once thought our fruits were expensive， but now they buy more than US $400 million worth of fruit every year. Chile is also the worlds biggest salmon producer and exporter.

When I told officials of Chinas Ministry of Health that Chile is the worlds top blueberry exporter， they responded with disbelief， saying it had to be the U.S. Yes， the U.S. has a bigger output， but it is mostly for domestic consumption. Chile is now the only country exporting fresh blueberries to China. In 2012， we also exported US$18 million worth of cherries to China. A good portion of the fresh cherries on the Chinese market during the Spring Festival were from Chile， as we are the only country who can supply fresh fruits during that time of the year.

China Today： Are there any other fields where the free trade agreement has widened opportunities for furthering bilateral trade ties？

Mr. Montes： Yes， there are plenty. The agreement boosts both twoway trade and investment. For the latter there is vast room for future growth for both parties. But there is one more sector that some overlook– trade is not only about commodities， but also services of all types. When the world was less developed， trade in goods dominated. As economies grow， brainpower gains prominence， and service trade takes the lead. Trade， particularly in services， between China and Chile has bright prospects.

China Today： Your Excellency， since you made your first trip to China in the 1990s， do you think you have realized your Chinese Dream？

Mr. Montes： The concept of the Chinese Dream was raised by President Xi Jinping. My understanding is that it represents a fusion of the aspirations of people from all walks of life. This would include the fisherman I spoke to in Guilin last weekend， the sheep-herder I met in Urumqi， a Shandong farmer who impressed me with his orchards and fruit wine brewery， as well as factory workers in Shanghai producing automobiles and mobile phones. Each one cherishes a dream. What they all have in common is the desire for a rising and more advanced country， and better lives for their descendants.

The Chinese Dream is a global dream. China is now the worlds second largest economy and on the way to the No. 1 slot. A better-off China is in the interest of Chile. If China shares its dream with other countries， the world will become a better place.