Who wins with the FTA agreement between Chile and Brazil?

The accelerated signing of the Free Trade Agreement (FTA) between Chile and Brazil generated diverse opinions in favor and against negotiation

Who wins with the FTA agreement between Chile and Brazil?

Five months, that was the negotiation time between the governments of Chile and Brazil to take forward the signing of the Free Trade Agreement (FTA) between both nations, which will be a complement to the ACE 35 agreement with Mercosur. In addition to this, the agreement also regulates trade and has been implemented since the 1990s.

Leer en español: ¿Quién gana en el TLC de Chile-Brasil?

The FTA between these two countries cannot be very beneficial for the region, given that the lifting of tariffs will strengthen the transnationals and will "shake" the domestic industry of each nation. However, the approval of the Brazilian Chamber is necessary when Jair Bolsonaro takes office on January 1, 2019, as the process was advanced between Chilean President Sebastián Piñera and outgoing Michel Temer.

Economists analyze that this movement in South America reaffirms the capitalist government of Piñera and the substantial change that Brazil is going through since the election of Bolsonario, going radically from left to right.

Although not much is known about the content of the agreement between the two countries, the newspaper El Mercurio of Chile indicates that issues such as SMEs, Telecommunications, Cooperation, Gender, Good Regulatory Practices, and Global Value Chains have been finalized. Topics like Trade Facilitation, Labor Standards, and Electronic Commerce remain being discussed.

Who wins?

Brazil is Chile's first commercial partner in Latin America. Between January and August of this year, the commercial exchange between the two countries was of  USD 6,808 million, a variation of 21% in relation to the same period of 2017.

In addition, Brazil, with 208 million inhabitants, is the main recipient of direct investment in the austral country abroad, with an accumulated stock of USD 35,253 million between the period 1990 and 2017, that is, 29.5% of the total of all direct Chilean investments in the world.

"If Brazil solves its problems and more real and financial investments arrive in that country, Chile is directly benefited because the region as a whole improves and receives more investments (...) Foreign investors care more about what happens in Mexico, Brazil and now Argentina, that the realities of Chile and Peru, for example, when investing, "said Patricio Rojas, an economist at Rojas y Asociados, at the newspaper El Mercurio.

Read also: Chile leads in human development, but gender inequality persists

According to figures provided by the Directorate General of International Economic Relations (Direcon), the exports of 2017 from Chile to Brazil represented 66% of the total sent to the founding countries of Mercosur, registering USD 3.413 million, 14% higher than happened in 2016.

This billing corresponds to 43% of cathodes, copper ores and related producers, and significant increases in bottled wines (20%), metal products, machinery and equipment (16%), chemical products (15%) and salmon shipments (11%).

But Brazil also received its commercial 'slice', since the Chilean imports from the country of the Samba represent near 60% of the total introduced from the founding countries of the Mercosur, arriving at 5,614 million dollars, 30% of them coming from the Crude oil oils, followed by beef, vehicles and road tractors.

And if it were not enough, between 1990 and 2016, 150 Chilean companies developed about 290 projects in Brazilian territory, which exceeded 31 thousand USD 600 million, 27.7% of the total of the southern investments in the world.

Undoubtedly this FTA has many 'pulling calculator', the fact is that some criticize the accelerated way in which this process has taken place, and the possible favor to the transnationals, 'burying' the aspirations of small and medium-sized merchants local.


LatinAmerican Post | Jorge Hernández

Translated from: '¿Quién gana en el TLC de Chile-Brasil?'

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