Overview 
 

Introduction

I.   Political  and economic context
II.  EU-Chile relations
III. Economic and trade relations
IV. Co-operation
V.  Basic Data

I. Political and economic context

Chile is a constitutional democracy with three independent branches: a strong executive, headed by a president elected for 4 years, legislative, and judicial. Since the end of the military regime periodic free elections have been carried out, through which four governments have been elected following the established democratic processes.

Since 11 March 2006, Chile has had a new President, Michelle Bachelet, and a new Government. In many ways, President Bachelet is considered to represent a new style and a new generation of leadership not only in Chile but also in Latin America. Half the posts of her Cabinet were given to women and many of the new faces in the Government are not part of the Concertación’s (Coalition of parties including the Partido Demócrata Cristiano, Partido Socialista de Chile, Partido por la Democracia, Partido Radical Social-Demócrata)) political elite. President Bachelet has promised continuity of the market-oriented policies followed by the previous Concertación governments that have made Chile's economy one of the strongest in the region, but has also pledged change.

Chile has managed to re-insert itself into the international community after years of isolation during the military regime. Chile is now very active in international fora.

With a GDP per capita of US$ 6,151 in 2005, Chile is classified by the World Bank as an upper middle income and moderately indebted economy. Chile is also considered the most competitive and the least corrupted economy in Latin America. Chile has distinguished itself in Latin America by its good economic performance (high growth rates, low inflation and public sector surplus). Growth rate in 2005 reached 6.3%.Unemployment felt to 8% at the end of 2005, its best figure since 1999.

The EC signed a first Framework Co-operation Agreement in December 1990, thereby officially restoring political relations with this country. This Agreement was replaced by another Framework Co-operation Agreement, signed in June 1996, which aimed at establishing a political and economic Association between the EU and Chile.

The EU and Chile started to negotiate in April 2000 and concluded the negotiations of an Association Agreement in April 2002. They signed the Agreement on 18 November 2002. It is in force since 1 March 2005. The Association Agreement is an ambitious and innovative agreement that covers the main aspects of EU-Chile relations, i.e. political and trade relations and co-operation. Click here to see the text of the Agreement.

The first Association Council met in Vouliagmeni (Greece) on 27 March 2003.

The second Association Council met in Luxembourg on 26 May 2005.

The first Association Committee met in Brussels on 10-11 December 2003, the second Association Committee met in Santiago de Chile on 16-17 December 2004 and the third Association Committee met in Brussels on 27 of January 2006. This meeting provided an opportunity for a very fruitful exchange of views on the whole spectrum of bilateral relations. In this context the parties discussed issues of mutual interest in three areas: political dialogue, co-operation and trade. See also: press release on Third Association Committee

The fourth Association Committee is scheduled to take place in Santiago in November 2006.

During the EU/ Latin America and Caribbean Summit held in Vienna in May 2006, a Summit was held between the EU, represented by the Austrian Federal Chancellor, Wolfgang Schussel, the President of the European Commission, José Manuel Barroso, the HR/ SG Javier Solana and the Representative of the incoming Finnish presidency, and the President of Chile Michelle Bachelet. This Summit took place on 13 of May 2006. This meeting was the occasion to welcome the smooth implementation of the Association Agreement in the trade area and the increasing dynamism in bilateral trade relations. The parties acknowledged that overall bilateral co-operation is very positive and welcome the stepping up of such cooperation in areas of mutual interest including higher education, employment and social policies. See also: EU-Chile Summit Vienna, 13 May 2006 Joint Communique

The EU and Chile also signed in September 2002 and Agreement on scientific and technological co-operation, and an EU/ Chile Horizontal Agreement in the field of Air transport, adopted by the Council of Ministers on 27 June 2005. Chile was the first country worldwide to sign such an agreement.

As a consequence of accession to the EU of 10 new Member States (Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia), the EU-Chile Association Agreement had to be adapted. A Protocol to the Agreement was finally adopted by the Council on 10 May 2005, after being ratified by the Member States.

Sectoral Dialogues

In order to provide added value to the relationship as associated members, and to enhance and widen the scope of our relationship, the EU and Chile launched two sectoral dialogues in 2005 in areas of mutual interest: education and social policies. In March 2005, the first sectoral dialogue meeting was held on higher education vocational training and language learning with representatives of the Chilean Ministry of Education. The results of this dialogue were very positive. On September 2005, the first EU/Chile sectoral dialogue on employment policies took place in Santiago.

In 2005, trade between the EU and Chile grew by 23.6%, totaling US$ 14,104 million. The trade balance between the EU and Chile registered a US$ 4,333 million deficit for the EU as exports to Chile reached US$ 4,734 million and imports US$ 9,070 million. This deficit is lower than in 2004 (US$ 4,501million). Exports to Chile increased by 40% in 2005 despite the €/CLP exchange rate. The first EU providers to Chile in 2004 were Germany, France, Spain, Italy and Sweden.

In 2005, EU imports from Chile rose by 13%. Major EU markets for Chilean goods were the Netherlands with US$ 2,301 million, followed by Italy, France, Spain, Germany and the UK. Copper represented 76% of EU mining imports from Chile and 50% of EU total imports from that market in 2005.

In 1986 Chile initiated a process of intensive liberalization of its foreign trade by introducing a single tariff of 15%. Since then, Chilean customs tariffs have been progressively reduced to 6% across the board. Chile pursues a free trade policy of open regionalism and has become a very active WTO member. At present, 65% of Chile’s exports are bound for its FTA partners. As has been mentioned before, for the time being, Chile has signed separate FTAs with each and every one of the NAFTA countries, with Central America, the EU, EFTA, South Korea, with its P4 partners (Singapore, New Zealand and Brunei) and recently with China. Chile also holds ECAs (Economic Complementation Agreements) with each country in South America and Mercosur. In addition, Chile has been a member of APEC since 1994.

IV. Co-operation

In March 2001, the European Commission and the Government of Chile signed a Memorandum of Understanding on Co-operation. Its objective is to define multiannual guidelines for the co-operation programmes between the Commission and Chile for the period 2000-06.

The European Commission adopted in November 2002 a five-year strategy (2002-2006) for its co-operation with Chile. The Country Strategy Paper EU/Chile provides the framework for relations with Chile, covering all aspects of assistance towards that country. The budget allocated to Chile in the framework of the CSP for this period (34.4 millions €) has been totally committed for programs in areas such as state modernization, support for the creation of innovative enterprises and support for the implementation of the Association Agreement.

The key co-operation priorities for the period 2000-2006, as defined in the Country Strategy Paper, are:

1. Economic co-operation and technological innovation (56% of the indicative financial envelope)
2. Environment and natural resources (8.5% of the indicative financial envelope)
3. Support to the reform of the state (35.5% of the indicative financial envelope)

Since 2000, 22 projects have been committed for a total amount of about € 7,790,000. The bulk of the funds committed so far have been allocated to NGO projects (budget lines B7-60). 15% of the funds went to projects related to the European initiative for democracy and human rights (budget lines B7-70). And the remaining 3% went to a project in favour of the environment (budget line B7-6200).

The main on-going projects in Chile (> to € 1,000,000) are:

1. the ACTUA project to overcome urban poverty (€ 9,660,000) in the Santiago Area and in Concepción (VIIIth Region);

2. A project in favour of regional decentralisation and the integrated development of the Coquimbo Region (IVth Region, North of Santiago), also called “más región” (€ 10,708,281);

3. An integrated development project for the Araucania Region or IXth Region,homeland of the Mapuches in the South (€ 9,000,000).

Chile is also very active in regional co-operation programs with Latin America such as URB-AL (2 out of 14 thematic networks are coordinated by Chilean institutions), AL-Invest (between 1996 and 2001 the Chilean Eurocentros have organized many meetings, generating € 12.4 million of trade contracts and investment agreements worth € 1 million) or ALFA (Chile ranks third in terms of program participation after Brazil and Argentina). Chile also participates in international scientific projects funded by Directorate General Research and Technological Development.

In 2003 two projects were approved: a € 17.2 million project aiming at promoting innovation and competitiveness, and a € 5 million for a fund to support the implementation of the Association Agreement. During 2004 a large program for the modernization of the State was approved as well as a small institutional support project aiming at strengthening the management capacity of the Chilean Agency for International Co-operation (AGCI).

The Commission is currently preparing the next Country Strategy Paper Chile for the period 2007-2013. On 28 and 29 June 2005, consultations on a CSP 2007-2013 Concept Note with the Chilean authorities, representatives of civil society and other stakeholders were held in Santiago. This document presents an evaluation of the implementation of the current CSP, and some proposals for the priority sectors for our bilateral co-operation for the period 2007-2013.

The results of the discussions validated the strategy and showed consensus on the relevance and pertinence of the proposed areas of intervention. Final approval of the CSP is expected soon.