Brazilian President Michel Temer (L) and his Chilean counterpart, Sebastián Piñera (R).

Only six months after Brazil and Chile committed themselves to make a new free trade deal happen, presidents Michel Temer and Sebastián Piñera inked an agreement at Santiago’s Palácio de la Moneda. “Few deals in the world have been initiated, negotiated and signed in such a short time span,” said Mr. Piñera. “This is the result of a natural convergence between our governments,” replied Mr. Temer. Now, the Brazil-Chile free trade deal only needs approval from both countries’ parliaments, which should come without much resistance.

Besides updating the terms of a 1996 trade deal, this new one remove tariffs from 17 key areas, including the elimination of international roaming charges between Brazilian and Chilean mobile lines for calls and data transmission (which will have an impact on tourism and business between the two countries) and the protection of origin seals such as “Brazilian Cachaça” or “Chilean Pisco.” The accord includes chapters on the temporary entry of people into both countries and e-commerce, which will facilitate the operation of Chilean digital products and services.

The new deal helps Brazil become more integrated to the global economy. In recent years, the country has only signed deals with more peripheral economies, such as Egypt, Israel, and Palestine. The Brazil-Chile deal is an inflection point. The average Brazilian exports/imports is about one-quarter of the GDP, which is very different from Latin America’s most dynamic economies. In Chile, for instance, the rate gets to 62 percent.

Chile, a key partner for Brazil

The Brazil-Chile deal was important for both countries. For one, Brazil is Chile’s main trading partner in Latin America and third worldwide, behind only China and the U.S. It is also the main destination of Chilean foreign investments. Trading between the two countries reached BRL 8.1 billion between January and October this year—a 15-percent bump from 2017. Chile is Brazil’s second-largest partner in the region, behind only Argentina.

The deal affects not only Brazil and Chile, but could serve as a vector of rapprochement between Mercosur and the Pacific Alliance (a bloc formed by Chile, Colombia, Mexico, and Peru).


Brazilian exports to Chile

brazil-chile exports


Brazilian imports from Chile

brazil-chile imports


Key points of the deal

  • Unencumbrance of the 25 percent withheld from the salaries of Chileans who retire in Brazil. Today, the withholding is done as the money is transferred to Chile;
  • Allowing both countries’ trading authorities to exchange documents digitally, which will reduce bureaucracy costs by 35 percent;
  • End internet and telephone roaming: owners of Brazilian and Chilean telephone lines won’t be charged extra if traveling between the two countries;
  • Allowing small and medium-sized companies from one country to become suppliers of the others’ government – competing on an equal footing with local companies;
  • Protecting the origin seals of “Brazilian Cachaça” and “Chilean Pisco.”

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MoneyNov 22, 2018

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