U.S. Investors find that Chile has a lot to offer

Chile's remarkable economic growth and political stability make it one of the most promising markets in Latin America. The accompanying surge in trade and enhanced attractiveness for foreign investors suggest Chile as an economic model for most developing countries. In the last two years, foreign investment inflows constituted 4 percent of Chile's gross domestic product, a rate matched by few countries in the world.

Chile's Minister of Finance, Alejandro Foxley, recently noted that the country is open to any type of initiative, including investment. that liberalizes its marketplace. Since the beginning of President Aylwin's administration in 1989. approved investment has risen to $13.9 billion. of which $5.3 billion is from the United States. Actual foreign investment put in place during 1992 exceeded $1.4 billion, a record.

In December 1992. Standard and Poor issued a "Double A" credit rating for Chilean internal debt instruments. Four months earlier, it had issued a "BBB" credit rating to Chile. making it the first country in Latin America to achieve an investment grade rating in the wake of the Latin American debt crisis.

The United States and Canada currently hold 40.5 percent of all foreign investment already in place in Chile. The European Community has approximately 28 percent. In 1992. the United States. Canada. and Finland were authorized the highest amount of direct investment in Chile. The United States accounted for $320 million, Canada $1.2 billion, and Finland $600 million.

Since 1982, about 45 percent of foreign investment in Chile has been in mining, but it has recently begun to diversify. New sectors include manufacturing. services. and agriculture. Total approved investment to date in mining is $8.1 billion, services $3.4 billion, and agriculture $130 million.

U.S. firms are major investors in Chile's mining sector. The U.S.-Japan $1.5 billion Phelps Dodge/Sumitomo joint venture in the "La Candelaria" copper mining project was recently approved. Another large U.S. project is a $40 million investment project by Bell South to upgrade Chile's telecommunications company (CIDCOM).

Japan and Australia have been given approval for a joint venture involving ENDESA (Chile's National Electrical Company). COMALCO Aluminum (Australia). and the Marubeni Corporation (Japan). Total investment in the project should reach $1.5 billion.

Chile encourages foreign investment under its Decree Law 600. This provides national treatment for all foreign investors. Further, there is free access to capital markets and economic sectors in Chile, and minimal government intervention in investor activities. The policy also provides for liberal profit and capital repatriation regulations. The free exchange system sets no time limit on remittance of profits and dividends. Investors should note that there is a non-interest beating cash reserve requirement or deposit (ENCAJE) of 30 percent. for a period of one year. The ENCAJE is a monetary tool used to control excess liquidity, and is not designed to discourage foreign investment.

Individuals and businesses established in Chile. except foreign subsidiaries. are subject to a tax on income received from Chilean as well as non-Chilean sources. It is likely that tax agreements will be negotiated with some countries in 1993 to avoid this double taxation burden.

Foreign investors have two income tax options--either the general regime applicable to all Chilean-owned businesses. or the special regime solely for foreign investors. The general regime has a corporate tax rate of 15 percent on accrued income. If repatriation occurs. however. there is an additional tax of 35 percent. but accompanied by a 15 percent credit on corporate taxes paid.

The special regime currently features two alternate methods of taxation--an overall income tax rate of approximately 44.3 percent and a 40.0 percent rate with variable surtax. Pending legislation, expected to pass in 1993. will likely reduce the 44.3 percent to 42.0 percent, and eliminate the 40 percent option entirely. The same investment legislation should also include a reduction in the waiting period for capital repatriation from the current three years to one.

The Capital Goods Corporation of Chile predicts that between 1992 and 1997 there will be $26 billion invested in Chilean projects. Sectors with the most projects should be private sector mining with $3.5 billion. state mining with $1.3 billion. and industry and services with $4 billion. Other projects involve forestry. energy and fuels. parts. tourism, real estate. and public works.

A May 1992 law enables the government-owned CODELCO. the world's largest copper producer. to establish joint ventures with private firms to develop mining projects to improve CODELCO'S profitability.

The telecommunications sector expects to continue its explosive growth of the last five years. Proposed legislation designed to speed up development in the telecommunications sector will be presented to the Chilean congress in May.

Chile's government is expected to continue encouraging foreign direct investment, including joint ventures of small- and medium-sized firms, to foster economic expansion and generate increased foreign trade.

Norway Increases Value Added Tax

Norway raised its value added tax (VAT) at the beginning of 1993 from 20 to 22 percent on all products and services. The value added tax is the most important indirect tax in Norway. All goods and services. both domestic and imported. are subject to the value added tax. The VAT is levied at each sale transaction along the production and distribution chain. But as the name implies. it is only the value added at each phase of production or distribution that is taxed. On imported goods. the VAT is payable to Norwegian customs authorities at the time the product enters Norway. in much the same way as customs duties are collected. It is levied on the c.i.f., duty-paid value.

Export Administration Sets Licensing/Controls Seminars

The Commerce Department's Bureau of Export Administration has released its Export Licensing and Controls seminar schedule for 1993. The list that follows includes place, date, and contact, as well as the type of seminar being conducted in each city.

Feb. 24, Dallas (Introductory), Elizabeth Hams, (214) 747-1300.

March 11, New Orleans (Intermediate), Charles Stern, (504) 529-1601.

March 18, St. Louis (Aircraft/Aerospace),Susan Inslee, (314) 854-6141.

April 7, Raleigh, N.C. (Licensing), Linda Jones, (919) 333-5345.

May 5, Miami (Licensing--in Spanish), Linda Krepel, (407) 367-2271.

May 6, Ft. Lauderdale (Licensing), Linda Krepel, (407) 367-2271.

May 12, Rockville, Md. (Licensing), Steve Hall, (301) 975-3904.

June 8, Milwaukee (Licensing), Johnny Brown, (414) 297-3473.

June 9, Minneapolis (Licensing), Roger Prestwich, (612) 297-4282.

June 29, Detroit (Freight Forwarder), Paul Litton, (313) 226-3650.

July 7-8, Washington, D.C. (7th Annual Update), Joy Gardner, (202) 482-6031.

July 28, Pittsburgh (Licensing), Ed Zawadzski, (412) 644-2850.

Aug. 24, Birmingham (Introductory), Sara Barry,(205) 731-1331.

Aug. 25, Huntsville, Ala. (Introductory), Al Fowlkes, (205) 461-1147.

Aug. 26, Huntsville, Ala. (Intermediate), Al Fowlkes, (205) 461-1147.

Sept. 9, Chicago (Licensing), Stanley Bokota, (312) 353-4450.

Sept. 15, Oklahoma City (Licensing), Ron Wilson, (405) 231-5302.

Oct. 14, Atlanta (Licensing), Rachel Bailey, (404) 452-9101.

Oct. 28, El Paso (Freight Forwarder), Joe Alcantar, (915) 858-1022.

Nov. 4, Wilmington, Del. (Licensing), Michael Rice, (302) 656-7905.

Nov. 9, Tidewater, Va. (Licensing), Phil Ouzts, (804) 771-2246.

Nov. 17, Charleston, S.C. (Freight Forwarder), Ed Rojas, (803) 765-5345.

To register for these one-day seminars, contact the names listed above, or for more information, call (202) 482-6031, fax (202) 482-2927, or write: Export Seminar Staff, P.O. Box 273, U.S. Department of Commerce, Washington, D.C. 20040. Note that seminar dates, topics, and locations are subject to change.

World Bank Conference Planned in New York City

The World Bank and the European Bank for Reconstruction and Development (EBRD) play leading financial roles in the development of free-market economies in the Newly Independent States (NIS) of the former Soviet Union. The roles of such institutions in private financing present tremendous opportunities for U.S. companies to provide needed goods and equipment, technical assistance, and consulting services.

The key to tapping into World Bank and EBRD opportunities is understanding procurement procedures, keeping abreast of upcoming projects, and, of course, putting in the winning bid on these projects. In order to help U.S. companies tap into these multilateral bank contracts, ITC Consultants is organizing the 1993 World Bank and EBRD Conference in New York City, May 13-14. The May event will be modeled after ITC's successful 1992 conference organized last October in Chicago.

The conference will feature high-profile representatives who will discuss the financial resources available to U.S. companies and how to obtain funds. Agencies to be represented at the conference include not only multilateral institutions but also U.S. government agencies such as the U.S. Department of Commerce, the Export-Import Bank of the United States, the Overseas Private Investment Corporation, the U.S. Agency for International Development, the Small Business Administration, and the Trade Development Agency.

Subjects to be covered at the May conference will include World Bank and EBRD priorities and criteria implementation, the role of U.S. enterprise funds, international countertrade, private sector companies' recommendations and success stories, and U.S. government financing.

For conference registration and hotel information, contact Bill Collins. Conference Coordinator, ITC Consultants, at tel. (813) 572-8035, fax (813) 965-2630.

'Business Programs' Planned In Russia and Baltic States

The World Trade Center Association of Orange County and Cultural Access Network are cosponsoring several business development programs to Russia and the Baltic States in 1993. These programs are designed to provide business people with the information and introductions they will need to begin building economic ties with the region.

The programs are intended to allow each participant to:

* Meet and exchange ideas with key business leaders and get a firsthand report on the current business climate, and learn about developing trends and discover opportunities in their area of interest.

* Learn the basics of doing business in this new market, like finance, transportation, communications, taxes, customs, contracts, business structures, how to choose a partner, etc.

* Receive practical insider information and learn from the successes and mistakes of local and American business people who are already conducting business in these areas.

* Be introduced to potential business partners who have been specially selected to fit each participant's specific interests.

Each delegation is limited to 12 participants. Cost is $3,950 (including airfare from New York). For additional information, call (714) 497-6773.

Austrian Firms Can Represent U.S. Companies in East Europe

Many Austrian firms have long-established and close trade ties with companies in Central and Eastern Europe, and the Newly Independent States of the former Soviet Union. The Commercial Counselor of the Austrian Embassy in Washington now has a list of experienced Austrian firms which are interested in representing U.S. companies wanting to do business in these countries. The Austrian firms are experienced in products ranging from raw materials and semifinished goods to high technology equipment and consumer goods. A copy of the list is available from the Commercial Counselor at the following address: 1350 Connecticut Ave., NW., Suite 501, Washington, D.C. 20036, or telephone (202) 835-8962, fax (202) 835-8960.

COPYRIGHT 1993 U.S. Government Printing Office
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