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Interview: Chile turns to Australia in Asia Pacific push

Monday May 30, 2005

INTERVIEW: Chile Turns To Australia In Asia Pacific Push

By James Attwood


SYDNEY (Dow Jones)—Chile’s President Ricardo Lagos will visit Australia July 14-16 as Chile looks to strengthen its Asia Pacific trade ties and status as a Latin American entry point for foreign investment.

In his first official visit to Australia since taking office in 2000, Lagos will meet with Prime Minister John Howard and business leaders, although details of the agenda are still being defined, said Chile’s ambassador in Australia Fernando Schmidt.

Lagos and Howard are expected to advance ongoing negotiations for eliminating double taxation, as well as a working holiday agreement and nuclear scientific research cooperation, Schmidt told Dow Jones Newswires on Monday.

The trip, which will also take in Malaysia and Philippines, is part of Chile’s attempts to bolster its political, economic and cultural relations with countries of the Asia Pacific region.

On Friday, Chile will formally unveil free trade agreements with New Zealand, Singapore and Brunei, building on existing agreements with South Korea, Canada, the U.S. and the European Union.

Next on Chile’s FTA hit list are Asian giants China, Japan and India.

With 36% of Chile’ s US$32 billion mostly raw material exports last year going to Asia, increasingly the country competes with Australia in Asian raw material markets.

But Ambassador Schmidt said cooperating in order to target certain markets far outweighs any competition issues.

"Chile has signed FTAs with other competitors, New Zealand for example, without any drama...we have controlled our internal political negativity and most of Chilean society is in favor," he said.

Paving The Way For FTA

While both countries’ trade negotiators have their dance cards full for the foreseeable future, FTA negotiations between Australia and Chile are inevitable, said Schmidt, with Lagos’ upcoming visit likely to pave the way.

"Certainly something we would like to explore is the possibility of a free trade agreement with Australia," he said.

"Sooner or later the Latin American-Pacific perspective will have its time at the trade negotiating table."

Trade figures between the two countries are modest, with last year’s total coming in at just US$226 million, according to Chilean trade commission ProChile.

But Australian investment in Chile is more significant at US$2 billion, including funds channeled through third countries, and growing, as Chile establishes itself as an investor-friendly gateway to other Latin American markets.

According to Australian Trade Commission figures, there are 50 Australian businesses operating in the capital Santiago and 60 in Chile altogether.

BHP Billiton (BHP) heads the list with its 20-year history in the country centering on the world’s most prolific copper mine Escondida.

Last year BHP established its base metals headquarters in Santiago under the control of Diego Hernandez, who will manage Australia’s Olympic Dam uranium/copper complex if BHP Billiton succeeds in taking over WMC Resources Ltd. (WMR.AU).

Earlier this year, Xstrata PLC’s (XTA.LN) copper unit, which revolves around the former operations of Australia’s MIM Holdings, set up its Latin American headquarters in Santiago to explore new opportunities in the region.

Other Australian resource companies with a strong Chilean focus include Melbourne-based renewable energies firm Pacific Hydro Ltd. (PHY.AU) and chemicals and explosives maker Orica Ltd. (ORI.AU), as well as a growing list of junior mineral explorers.

If the trade promoters of Chile and Australia are successful, that list will grow to include more non-resource companies keen to use investor-friendly Chile as a platform to target Latin America’s more than 500 million consumers.

 source: Dow Jones Newswire