New Zealand’s recent free trade agreement with Chile may have slipped under the media radar but it heralds the possibility of real opportunities for businesses seeking to expand into new markets.
The link with Chile is part of the new Trans-Pacific Strategic Economic Partnership between New Zealand, Chile, Singapore and Brunei Darussalam, known as P4, which is expected to come into force around the middle of this year.
And the agreement is very much strategic one. It is New Zealand’s first trade deal with Latin American country and has been described as “new generation of FTA” – not only dealing with goods and trade access but also with trade facilitation, and provisions around customs and other procedures aimed at making trade easier for business.
It is also seen as possible platform into the vast South American market and as offering opportunities for production upscaling and access to third markets, via Chile.
The major Latin American countries, (Chile, Brazil, Mexico and Argentina) have total population of more than 340 million and combined GDP of almost US$1,900 billion.
They also have large resource base (Chile in particular is very similar to New Zealand climatically) and are able to increase production easily by expansion and/or intensification. On top of this there is strong availability of labour and associated low costs.
Chile currently has trade or tax agreements with more than 30 countries including an FTA with the United States. It is an associate of the South American common market agreement (MERCOSUR) and its historic links mean access to Spain along with the huge Latino population in the United States.
Other similarities between Chile and New Zealand include both countries’ reliance on primary produce for our main exports. In New Zealand the food industry as percentage of GDP is around 11.4 percent while in Chile it sits at 10.3 percent. In 2004 Chile exported US$7,000 million of food products while New Zealand exported US$6,328 million.
Traditionally, Chile may have been seen as threat to New Zealand exporters in global markets and in some sectors Chilean companies have undermined the price of New Zealand goods. But with this new agreement the Government is focusing on the opportunities for those New Zealand businesses which can see beyond pure exporting.
A series of seminars run by NZ Trade & Enterprise late last year highlighted the opportunities for New Zealand companies in the food technology, forestry, dairying, seafood and horticultural sectors to work with Chilean companies throughout the whole value chain, particularly in areas where New Zealand has technological expertise it can bring to the Chilean industries.
Jose Prunello, NZTE country manager in Buenos Aires, told attendees at the seminars the agricultural technology and equipment markets in Chile, Argentina and Brazil amount to close to NZ$500 million year. Food processing inputs are around NZ$2 billion and the food processing equipment market is worth NZ$1.6 billion. New Zealand’s market share of this is less than one percent, or around NZ$30 million.
The seminars highlighted the opportunities that lie throughout the food value chain, from biotech to farming to processing to brand marketing and sales and into distribution and retail.
This might include R&D, licensing, technology, training and equipment for processing; software, hardware, sensors – everything that is used at the industrial production stage and into the marketing and distribution areas.
Two major New Zealand companies, Zespri and Fonterra, are already in South America. Zespri grows its Kiwi Gold fruit in Chile for export under the Zespri brand and the fruit goes out to global markets through Zespri’s distribution chain. This expands Zespri’s seasonal coverage and geographic penetration beyond what the New Zealand growers can cover. Zespri has worked with Chilean producers on training and technical issues to ensure the Chilean product conforms to Zespri’s standards.
Meanwhile Fonterra has majority shareholding in leading Chilean dairy company SOPROLE and is driving range of on-farm and in-plant initiatives.
During recent visit to Chile, Prime Minister Helen Clark told Chilean audience these are examples of innovative partnerships in the primary industries “which go far beyond the traditional model of companies in one country supplying goods and services to customers in another.
“They combine the strengths of both sides in research and development, production, distribution and marketing to create new business opportunities. Both sides benefit as result…”
• New Zealand Trade & Enterprise is currently organising trade mission in June to Chile. Any businesses interested should contact NZTE’s America’s division.
Annie Gray is an Auckland-based freelance writer. [email protected]
