Chile Packaging Industry Overview (2013)

Chile remains one of the most stable and prosperous developing nations and consistently ranks high on international indices relating to economic freedom, transparency, and competitiveness. It also fares very well in terms of democratic development, gross domestic product per capita, freedom of the press, and was the highest ranked country in Latin America in terms of competitiveness. Chile continues to pursue market-oriented strategies, expand global commercial ties, and actively participate in international issues and hemispheric free trade. Macroeconomic stability and growing integration with international capital markets has earned Chile an A+ credit rating, the highest in Latin America. With Free Trade Agreements with Europe, China, India, and North America, Chile has given its nearly 17 million citizens unprecedented access to the world’s products and services. This offers a unique opportunity for exporters interested in expanding their businesses in arguably the most open and stable market in Latin America. Chile is number 15 among the world's food suppliers. Projections place Chile among the top ten countries in food exports by 2015, with annual exports expected to reach between USD 15 and USD 17 billion. Chile is a large producer of fish and seafood products, as well as wine, dairy and meat products and by-products. The Chilean food industry is the second largest export sector in the country, after copper. Food exports have doubled in the last 10 years. Chilean agricultural exports accounted for 10% of the country's GDP in 2009. During 2008, Chile exported approximately $11 billion of agro-industrial products, making Chile 17th among the world's food suppliers. Projections place Chile among the top ten countries in food exports by 2015, with annual exports expected to reach $15-17 billion. The country's agro-industrial industry should continue to grow based on the excellent growing conditions and good local management. The market for food processing and packaging equipment and machinery grew from $47 million in 2009 to approximately $70 million in 2010, representing an impressive 37%, mainly due to specific one-time expansion projects. Conservative projections estimate annual growth of about 10% -12% for the next five years. Chile’s Mediterranean climate and favourable geography make it qualified to produce a wide range of food products. In addition, the country is effectively a phytosanitary island which, together with strict government policies, maintain Chile free of most pests and diseases. A major advantage as a southern hemisphere producer is the ability to do counter seasonal exports to the northern hemisphere. Market Challenges Perhaps the greatest challenges to a UK firm seeking to export to Chile are the high degree of competition and the relative market size. Even though Chile is a relatively small market (17 million people), its open trade and investment policy has attracted the attention of many foreign firms. At the same time, the small market size has led some companies to overlook Chile, leaving interesting niche markets and solid opportunities for exports. Despite Chile’s openness to new products and technology, Chilean business people are astute but tend to be more conservative and cautious than the average UK business person. UK companies should consider this when entering the market and adjust sales expectations accordingly. While the Chilean government is committed to trying to streamline certain processes such as the time it takes to open a business or close a banking account, UK companies will find that operating in Chile requires patience and a tolerance for delays associated with doing paperwork and obtaining approvals. A key to competing is finding the right in-country partner. A good agent or distributor can use their business and/or social connections to open doors and overcome regulatory, as well as cultural and language barriers. UK companies doing business in Chile should be aware that a relatively small number of individuals and families control a large percentage of Chilean businesses. The limited competition in many sectors provides greater opportunities for collusion among Chilean economic actors. Market Demand CHILE IMPORTS Harmonized System Code 8443 Printing machinery used for printing by means of plates, cylinders and other printing components of heading Year Value 2007 $277,135,143 2008 $305,590,660 2009 $272,008,889 2010 $316,487,751 2011 $386,279,003 Source: http://comtrade.un.org CHILE IMPORTS Harmonized System Code 842230 Machinery for filling/closing/sealing/labelling bottles/cans/boxes/bags/other containers; machinery for capsuling bottles, jars, tubes & similar containers; machinery for aerating beverages Year Value 2007 $39,479,112 2008 $47,410,908 2009 $34,072,978 2010 $37,044,162 2011 $46,000,598 Source: http://comtrade.un.org Market entry strategy In general, foreign suppliers enter the Chilean market by appointing an agent, distributor or wholesaler. Most are small-to-medium size firms. Several large firms handle different product lines and operate as wholesalers. Almost all the firms have their main offices in Santiago. The larger ones have branch offices throughout the country, including the free-trade zones of Iquique and Punta Arenas. Agent/representative commissions normally range from 5 to 10 percent, depending on the product. Chile is a relatively small market where relationships in the business community are a key to success. The selection of a Chilean agent or representative is an extremely important decision for Sauven, and merits a thorough review of possible candidates, their qualifications and capabilities. Depending on the product or service, price can be the key sales factor in Chile. Price-competitive products from places such as Taiwan, China, India or South Korea often outsell more expensive European or North American products, especially in consumer product categories such as electronics and appliances. Where dependability becomes more important, products such as advanced electronics or heavy machinery; Chilean customers often prefer more expensive U.S. or European products. While price remains a factor in purchasing decisions, considerations of quality, durability, technology, customer support and availability of service will also influence the purchasing decision. All sales materials should be in Spanish. Intellectual Property Several general principles are important for effective management of intellectual property (IP) rights in Chile. First, it is important to have an overall strategy to protect your IP. Second, IP is protected differently in Chile than in the UK. Third, rights must be registered and enforced in Chile, under local laws. Sauven’s UK trademark and patent registrations will not protect you in Chile. There is no such thing as an “international copyright” that will automatically protect an author’s writings throughout the entire world. Protection against unauthorized use in a particular country depends, basically, on the national laws of that country. However, most countries do offer copyright protection to foreign works under certain conditions, and these conditions have been greatly simplified by international copyright treaties and conventions. Registration of patents and trademarks is on a first-in-time, first-in-right basis, so you should consider applying for trademark and patent protection even before selling your products or services in the Chilean market. It is vital that companies understand that intellectual property is primarily a private right and that the UK government generally cannot enforce rights for private individuals in Chile. It is the responsibility of the rights' holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. Sauven may wish to seek advice from local attorneys or IP consultants who are experts in Chilean law. Business Opportunities In the coding and marking niche, the “Continuous Inkjet” technology is the one more used for Chilean companies and "Drop and Demand" is the secondary technology. In the last years had been increasing the demand of Piezo Technology. Many Chilean companies are improving the traceability of their products and are in need to add barcodes to their products. Chilean wine, salmon, trout, and fresh fruit are well recognized internationally, and even though still growing, have reached maturity as sub-industries. Strong growth products include meats (beef, poultry, pork and exotic meats), olive oil, aquaculture products (mussels, abalone, scallops, tilapia, oysters, catfish, etc.), and dairy products. As a result, great opportunities exist for new technologies, food processing and packaging machinery, and equipment that allow for improved quality, efficiency and greater production of processed food items. Chile is moving from exporting raw material and commodities, to value added products, which require more processing equipment as well as packaging equipment. The dairy industry continues to grow its production and exports. However, this sub-sector uses mainly machinery and equipment of European origin, especially from Denmark, Finland, Holland, Spain and Germany. Companies in the food and packaging industry are fully aware of the need to remain competitive with up-to date technology, as well as highly efficient production processes. Advanced technology such as automated systems, quality control, and environment-friendly equipment could provide opportunities for UK companies. The two largest dairy companies, Nestle and Soprole, announced their intention to merge, which would have an impact on the local market and provide additional requirements for machinery and equipment. Good opportunities exist for the export to Chile of new technologies, food processing and packaging machinery, and equipment that allow for improved quality, energy efficiency and increased production. Chilean producers are constantly on the look for environmentally friendly machinery, equipment and supplies to comply with requirements from destination countries and importers. Chile has generally recovered from the international financial and economic woes of 2008-2009 as well as the February 2010 earthquake that severely affected the economy in the southern part of the country. The housing market has rebounded, led by earthquake reconstruction projects and a housing boom in the Santiago Metro area. Energy costs continue to be the highest in South America and Chile is searching for all available technology and capital to increase supply through new power plants and promote energy efficiency. Labelling and Marking Requirements Chile has fairly common labelling requirements for imported products. Among the most important requirements for UK exporters is that labelling must be in Spanish and measurements must be in the metric system. In addition, consumer products must display the country of origin before being sold in Chile. Packaged goods must be marked to show the quality, purity, ingredients or mixtures, and the net weight or measure of the contents. There are also specific requirements for canned food, shoes, foods, electric machinery, liquid and compressed natural gas equipment (LNG and CNG), plastics, wines and alcoholic beverages, textiles and apparel, wheat flour, detergents and insecticides for agricultural use. Canned or packaged foodstuffs imported into Chile must bear labels in Spanish for all ingredients, including additives, manufacturing and expiration dates of the products, and the name of the producer or importer. All sizes and weights of the net contents also must be converted to the metric system. Goods not complying with these requirements may be imported but not sold to consumers until conversion is made. Thus, foodstuffs labelled in English can be re-labelled in Chile before they can be sold. For information on Chile’s labelling requirements for food, see the Foreign Agricultural Service’s Food and Agricultural Import Regulations at www.usdachile.cl. Methods of Payment In Chile, payment to foreign suppliers is often made via an irrevocable letter of credit from a Chilean commercial bank. This is relatively fast and simple, with no lengthy delays in the remittance of foreign currency. Payments are made upon receipt of notice of shipment of goods. Other methods of payment to suppliers include cash against documents and open account. Suppliers willing to offer an open account generally do so only after developing a long-standing relationship with the buyer. Trade Exhibitions The following trade shows provide an excellent opportunity to enter the Chilean market: • Vinitech (wine industry trade show), July 2013, Santiago: www.vinitech.cl • Agrotech (agriculture machinery and equipment trade fair), June, 2013, Santiago: www.agrotech.cl • FruitTrade (related to fruit production and exporting), October 8-9, 2012, Santiago: www.fedefruta.cl • Pesca Sur (commercial fishing equipment trade fair), www.pesca-sur.cl • Aqua Sur, (aquaculture fair), Oct. 10-13, 2012, Puerto Montt, Chile: www.aqua-sur.cl Resources • Chile Alimentos, Chilean Food Producers Association: www.chilealimentos.cl • SalmonChile, Chilean Association of Salmon Industry: www.salmonchile.cl • APA, Chilean Association of Poultry Producers: www.apa.cl • ASPROCER, Chilean Association of Pork Producers: www.asprocer.cl • Wines of Chile, Association of Wine Producers and Exporters: www.winesofchile.org • Chileoliva, Chilean Association of Olive Oil Producers: www.chileoliva.cl • Fedefruta, Chilean Association of Fresh Fruit Producers: www.fedefruta.cl • ASOEX, Chilean Association of Fruit Exporters: www.asoex.cl