Fruit Industry In Chile

CORFO –The Chilean Economic Development Agency– is a governmental organization founded in 1939 to promote economic growth in Chile. Since its inception, CORFO’s pioneering spirit has played a significant role in expanding the country’s economic development by promoting investment, innovation, and business and cluster development, all coupled with a focus on quality and productivity. Originally, CORFO was responsible for the creation of the country’s leading industries, namely, oil, power, steel, and transportation, among many others. CORFO oversees a variety of programs aimed at generating further economic development of Chile by promoting inward investment and encouraging competitiveness for domestic companies. CORFO’s main project areas are Quality and Productivity, Innovation, and Investment Promotion.

WHY INVEST IN CHILE? Latin America’s most competitive, peaceful, and stable economy A transparent and low-risk business climate World-class telecommunications infrastructure Outstanding access to Latin American markets Extensive network of Free Trade Agreements with Asia, Latin America, Europe, and the US

Competitive IT labor force An ‘e-ready’ society Exceptional quality of life Competitive business costs Government support for private enterprise

MAIN INTERNATIONAL INDEXES

The World Economic Forum ranks Chile as Latin America’s most competitive economy. Chile’s business environment continues to enjoy a favorable position within a selective group of 125 economies worldwide.

EXTENSIVE WEB OF DOUBLE TAXATION & FREE TRADE

AGREEMENTS Chile has consolidated its position as an attractive investment location by building an extensive network of international agreements. DOUBLE TAXATION AGREEMENTS

FREE TRADE AGREEMENTS

In force: Argentina, Canada, Mexico, Brazil, Norway, South Korea, Ecuador, Peru, Spain, Poland and France.

China

Signed: Denmark, Croatia, UK, New Zealand, Sweden, Ireland and Thailand.

Mexico

Negotiations Concluded: Malaysia, Russia.

South Korea

Under negotiation: Finland, Cuba, Hungary, Holland, Paraguay, Switzerland, USA, Venezuela, Italy, Czech Republic and China.

United States

EFTA (European Free Trade Assocation) Singapore, Brunei and New Zealand European Union

Canada

Costa Rica, El Salvador, Guatemala, and Nicaragua MercoSur (Argentina, Brasil, Paraguay and Uruguay)

Additionally, Chile has begun trade negotiations with Honduras, Panama, Peru, Colombia and Cuba. For imports from countries with which it does not have a trade agreement, Chile applies a flat-rate tariff of 6%.

THE DEVELOPMENT OF THE FRUIT INDUSTRY IN CHILE Since the 1980s, agribusiness has developed dramatically due to the implementation of a successful internationalization strategy. This strategy is based on full trade openness, free trade and double taxation agreements with several countries, and productive activities organized around their own competitive advantages. As a result of these changes, the agribusiness sector has gradually become one of the cornerstones

of the country’s economic development. Many of its sub-industries have gained global relevance, including the production of certain fresh fruits, canned fruit, dehydrated fruits, wine, and seeds, among others. Such positive evolution –with the structural modifications of the domestic economy as a backdrop– is the result of many years of joint efforts by the industry’s many stakeholders, both public

and private, which have led to the establishment of a high quality labor force, highly-educated professionals, and substantive corporate resources to face the challenges of globalization. Although the relative size of the Chilean market is small compared to other countries, the many trade agreements and treaties open new markets around the world, making Chile an attractive investment platform in this industry. Fruit exports have almost doubled in the past eight years, from US$1,396 billion in 1999 to US$2,655 billion in 2007.

MAIN FRUIT EXPORTS PRODUCT RANKING

PRODUCT



SOUTHERN HEMISPHERE

WORLD

TABLE GRAPES

N° 1

N° 1



APPLES

N° 1

N° 4



PLUMS

Nº 1

Nº 1



PEACHES/NECTARINES

N° 1

N° 5



PEARS

N° 1

N° 6



KIWIS

N° 2

N° 2



AVOCADOS

Nº 1

Nº 2



BLUEBERRIES

N° 1

Nº 5



RASPBERRIES

N° 1

N° 3



Source: ASOEX 2006





GROWTH OF FRUIT EXPORTS 2006 - 2007 FRUIT EXPORTS 2006 - 2007

MAIN FRUIT EXPORT MARKETS 2007 (In US$ million and as % of total exports)

2,700 2,600

2,655

2,500 US $ million

2,400 2,300 2,200 2,100

2,257

2,000

2006

2007 Year

Other

$ 436

16%

European Union

$ 699

26%

China

$ 28

1%

Korea

$ 47

2%

Japan

$ 38

1%

United States

$1.137 44%

Mercosur

$ 152

6%

Andean Community $118

4%

WHY INVEST IN CHILE? The Chilean fruit industry has experienced rapid growth, doubling its exports in the past 10 years. The projections for the upcoming years place Chile in the select group of the 10 top food exporters (previously ranked 17th), with an expected annual growth of US$1 billion. The Chilean fruit industry has grown due to its comparative advantages, which have made it one of the most outstanding industries at the international level. Some of these advantages include off-season production and mild weather, resulting in highest quality raw materials.

Chile is located on the southernmost tip of the American continent along the Pacific coast, therefore fruit production is off-season in respect to the main consumption markets in the Northern hemisphere. Additionally, Chile’s north-south orientation, with more than 4,000 km of arable land, provides for staggered harvests over multiple seasons, producing fruits of unsurpassed quality compared with those from other places in the world. Chile’s mediterranean climate, one of the few countries with such a climate in the southern hemisphere, means excellent opportunities for fruit production. Another distinctive characteristic is the thermal oscillation



between day and night during the harvest season. This condition allows the buildup of natural sugar in the fruits, endowing them with unique flavors, aromas and colors of wide renown among consumers. Chile’s geography makes it similar to an island. The country is naturally protected against exotic plagues. Additionally, natural pest incidence



is minimal given strong changes in temperature and humidity, with rainy, cold winters and hot, dry summers. Agrochemicals are not widely used compared to their prevalence in other places. To the North, is the Atacama desert, the driest in the world, and over 1,000 km in length. To the East, the country borders Argentina and Bolivia, separated by the Andes Mountain Range, one of the most extensive and highest mountain ranges on Earth. Its eternal snows prevent the free flow of insects, birds and other living things. To the South, Chile borders the Antarctic territory where there is no plant life. Finally, to the West is the Pacific Ocean, which, thanks to the Humboldt cold current, moderates climatic conditions and prevents major disasters, frequent in other parts of the world where fruits are also grown.

In addition to the natural protection provided by Chile’s geographic location, the country relies on a Plant and Animal Health Policy under the direction of the Ministry of Agriculture. According to this policy, passage of live organisms is monitored at border passes, ports and airports, thus keeping the country free of plagues and diseases. As a result of this effort, easily transmitted plagues which cause great damage to agriculture, among them Philoxera, have never entered the country. Chile, hence, is the only country free from this plague, and others, such as the Mediterranean fly, have been eradicated from Chilean farms. Apart from climatic mildness and positive geographic features, Chile has highly efficient production and marketing services in the food industry. Global banks, shipping companies, couriers, airlines and service companies operate efficiently in a highly competitive market to seamlessly connect Chile to the rest

of the world. Given the tight link between Chile and international markets, there is a strict monitoring system customized to each country and client’s quality and environmental provisions. Finally, Chile’s high quality of life is well reputed throughout the region. This has facilitated the introduction of foreign capital into the food industry, both through the establishment of transnational food companies and by means of joint ventures with local producers. To conclude, the natural advantages of the fruit sector added to Chile’s sound macroeconomic and institutional framework create the ideal environment for the development of investment projects in the entire agroindustry production chain, both in the primary fresh fruit and packing industry and in the secondary processing and ancillary industries, within the context of the current global demand for healthy, organic and low-calorie food.

MEDITERRANEAN AREAS IN THE WORLD GLOBAL LOCATIONS WITH MEDITERRANEAN CLIMATES EUROPE

CALIFORNIA 45º 30º 0º 30º 45º

CHILE

SOUTH AFRICA AUSTRALIA



Average COSTS FOR Production Factors in Mediterranean Areas: (in US$) COUNTRY MINIMUM WAGE

AVERAGE COST OF ONE HA OF LAND

AVERAGE COST OF ONE LITER OF OIL

286.1

15,258.73

0.92

439.55

19,395.45

1.12

1,952.58

24,710.44

0.87

SPAIN(*)

822.75

35,083.43

1.37

ITALY(**)

1,133.11

45,872.00

1.76

CHILE(*) AUSTRALIA(*) USA(*)

Source: (*) Revista Del Campo de El Mercurio (**) CORFO Antenna, Italy

INVESTMENT OPPORTUNITIES: General Opportunities:

The country’s macroeconomic and institutional stability provides guarantees and security for investors. The industry’s development is strongly supported by the Chilean government. Free trade agreements with more 80% of the world’s GDP; decreased or zero tariff access to multiple global markets. Off-season fruit production for Northern Hemisphere countries; access to the largest markets in the world under excellent marketing conditions. Country’s geographic orientation provides for staggered production with a relatively broad export season given diversity of weather conditions. Producers can access top quality prices due to the renowned quality of Chilean fruits. Competitive production costs compared with the industry’s leading countries. World class infrastructure.



Companies and Areas of Interest for Investment Opportunities:

Agriculture: Companies devoted to cultivating emerging varieties in berries and dry fruits looking for direct investments or local partners Fruit tree nursery companies Companies devoted to organic agriculture Companies developing precision agriculture Manufacturing plants: Pulp processing plants Frozen food processing plants Canned food processing plants Dehydrated food processing plants Juice and concentrates processing plants High value added processed food plants (chocolates, candies, fruit pastes, baby food, etc.) Ancillary Industries: Packaging, containers and wrappings: plastic, wood, cardboard, product labeling, thermo-retractable film, individual support (trays), mesh, other packaging elements Advance services suppliers: labs, agronomic engineering, agronomic training, specialized computers, production and handling engineering Agrochemical producers and marketers: fertilizers, plant health, protection gear for applications Technological equipment and service suppliers Environmental control systems Conservation and freezing equipment Farm machinery: (automation/robotics for picking and harvesting, treatment and harvest machinery and equipment, etc.)



Handling machinery: (automatic and semi-automatic sorting lines, automation of tasks, i.e.; weighing, etc.) Greenhouse structure vendors and related mounting and maintenance services Companies that provide installation and maintenance services for irrigation systems and fertirrigation services Companies that provide biological production elements (pollinating insects, pheromones and traps, raising ancillary species for pest control, anti-insect mesh, etc.) and culture substratum (sand, manure, peat, hydroponics systems, containers for substratum, etc.) Waste treatment

HARVEST PERIODS IN CHILE: PRODUCT Olives Almonds Blueberries Boysenberries Cherries Plums Cranberries Apricots Peaches Raspberries Strawberries Kiwis Apples Melons Blueberries Walnuts Papayas Pears Grapes

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JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

SURFACE AREA PLANTED WITH FRUIT TREES SPECIES Country Total Almond Tree Blueberry or Cranberry Blueberry European Hazelnut Tree European Chestnut Tree Cherry Tree Cherimoya Tree European Plum Tree (for dehydration) Japanese Plum Tree Clementine Tree Apricot Tree Fresh Peach Tree Canned Peach Tree Raspberry Strawberry Pomegranate Tree Fig Tree Kiwi Tree Lemon Tree Lucuma Tree Mandarin Tree Mango Tree Red Apple Tree Green Apple Tree Quince Tree Cultivated Blackberries Orange Tree Nectarine Tree Walnut Tree Olive Tree Other Fruit Trees Avocado Tree Papaya Tree Asian Pear Tree European Pear Tree Pistachio Pluots (Plum cot) Grapefruit Tree Rosehip Prickly Pears Table Grapes Others

Under development hectares

In production hectares

Total (ha) hectares

69,269 2,163 120 5,995 2,276 220 4,283 52 5,087 772 689 261 484 1,327 698 370 147 37 3,072 872 21 156 51 3,948 1,201 78 302 1,788 576 5,218 6,858 1,111 8,411 63 35 679 41 17 45 50 242 9,326 130

254,988 5,554 448 4,768 2,851 290 9,156 806 7,016 6,083 2,129 1,845 5,989 8,951 6,853 1,484 96 181 6,877 6,984 187 418 132 24,298 7,751 354 941 7,443 4,735 9,366 9,662 2,398 30,892 182 257 5,911 18 118 310 370 1,253 53,085 16,549

324,279 7,717 568 10,763 5,127 510 13,461 858 12,103 6,855 2,818 2,106 6,472 10,277 7,550 1,853 244 218 9,949 7,856 208 574 183 28,245 8,952 433 1,243 9,231 5,311 14,584 16,520 3,509 39,303 245 292 6,590 59 135 355 420 1,494 62,411 16,679

Source: National Institute of Statistics, Chile

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CURRENT PLANTED SURFACE AREA BY REGION: AREA OF FRUIT TREE PLANTATIONS 80.000 70.000

PLANTED HECTARES

60.000 50.000 40.000 30.000 20.000 10.000 0

Under development Producing

lll lV V Atacama Coqu imbo Valparaiso

Santiago Vl Vll VllI lX XlV X Metropolitan O’Higgins Maule Bío-Bío La Los Los Region Arauca Ríos Lagos

Xl Aysen

2,490

7,132

9,989

9,737

17,469

12,384

4,351

3,522

999

808

67

11,096

24,609

42,910

43,282

60,498

42,345

8,422

8,851

4,035

6,666

213

REGION

VALUE OF INVESTMENTS IN THE FRUIT INDUSTRY 1° Cost of land and water: US$ 15,000/ha x 255,000 ha = US$ 3.825 billion 2° Cost of plantation, irrigation and working capital (first three years) US$ 15,000/ha x 255,000 ha = US$ 3.825 billion 3° Investments in infrastructure: Total investment: US$ 8.650 billion Annual working capital: US$ 2 billion

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CORFO’S INVESTMENT PROGRAM IN THE FRUIT INDUSTRY: OBJETIVE: To strengthen the fruit and agribusiness cluster in Chilean regions by promoting business opportunities and domestic and foreign investments to contribute to the specialization and diversification of the industry and to complete the value chain in production, processing, logistics and distribution in order to increase the industry’s competitiveness.

The New Challenge: Improving competitiveness is the major challenge for Chilean fruit agribusiness.

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Scope for Investments in Fruit Agribusiness: To meet the proposed challenge, CORFO promotes investments in different areas, to obtain the following goals: Achieving enhanced quality in the final product by introducing greater value added processes to the value chain: Irrigation technology, traceability, biosafety, biofertilizers, conservation equipment, quality control equipment, processing plants for dehydrated and frozen products, pulp, juices, concentrates and canned fruits, packaging, waste treatment, etc. Improved management of the fruit industry investment portfolio: Increasing the share of premium and high-value varieties such as nuts, berries, cherries, avocados, organic products, etc. Customization of fruit products: Growing varieties to sell fresh and for processing, in accordance with new market trends, by increasing investments in biotechnology, agronomic engineering and nurseries, among others. Diversify fruit species: Introduction and development of new varieties through offshoring, biotechnology, royalties, nurseries, etc. Cultivate new areas: Plantations in not yet developed areas, irrigation technology, resistant varieties, greenhouses, etc. Increase productivity: Consultancies for precision agriculture, nurseries of certified plants, biofertilizers, fertirrigation, pollination, automation equipment, cold technology, new transportation technologies, picking and harvesting machinery and technology, specialized informatics, agronomic engineering, etc.

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PUBLIC-PRIVATE NETWORK CORFO and its network of regional offices has expert capacities to meet the needs of investors in all of the country’s regions, including advancing new businesses and partnerships with foreign companies to face new markets together. (www.corfo.cl) CORFO also has an international network of “investment officers abroad” who attract investments in markets in North America, and in the north and south of Europe. This effort has introduced Chile into new international technological business networks and promoted strategic alliances among national and international companies in multiple productive industries.

Country -CORFO Officer

e-mail

Spain - Tomás Pablo Roa

[email protected]

Italy - Romina di Lorenzo

[email protected]

Finland, Sweden, Denmark and Norway - Arturo Puga

[email protected]

Canada - Fabiola Galaz

[email protected]

New Zealand - Michael Fitzgerald

[email protected]

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CORFO also works with a network of national and foreign private stakeholders in investment promotion and attraction. This includes Chambers of Commerce and trade associations, among others. Other sectoral or territorial organizations related to investment support are:

Asociación Chilena de Empresas de Tecnología de Información A.G.: ACTI Asociación Gremial de Empresas Chilenas Desarrolladoras de Software: GECHS Comité de Inversión Extranjera Confederación de la Producción y el Comercio: CPC Dirección de Promoción de Exportaciones: PROCHILE Fundación Chile Sociedad de Fomento Fabril: SOFOFA

Following is a list of public-private stakeholders who take part in an investment promotion strategy in the agribusiness industry, particularly in relation to fruit growing resources: The Asociación de Empresas de Alimentos de Chile AG - Chilealimentos (www. chilealimentos.com), has deployed an important set of activities focused on the mission of transforming Chile into a premium food power. Thanks to this effort, the Chilean public opinion has been made aware of the true contribution made by the food industry to national development, and the country at large has begun to define the strategic role that this activity should play in the years to come. This valorization by the national community means greater value for the industry and its companies. The Federación de Productores de Fruta de Chile - Fedefruta F.G. (www.fedefruta.cl) seeks to meet the needs of the domestic fruit industry in terms of advocacy, promotion, discussion, dissemination, training, studies and certification. Fedefruta focuses on the unification of producers who look for shared criteria to protect their interests by representing and promoting their legitimate rights before governmental authorities, and connects producers with other public and private stakeholders in order to efficiently develop their commercial activities.

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This federation comprises over 1,000 producers and 20 associations throughout the country. The Comité de Nueces de Chile - CHILENUT (www.chilenut.cl), this is a non-for-profit organization linked, in administrative terms, to the Federación Gremial Nacional de Productores de Fruta de Chile, FEDEFRUTA. This organization is made up primarily of domestic walnut producers and exporters, a total of 130 partners, including walnut nursery managers, producers and exporters.

unites Chilean fresh fruit and vegetable exporters. Established in 1935, its mission is to promote exportation of Chilean products, promote and protect the fruit export trade, open new markets and encourage professional training among its members. It also disseminates technical and business information and supports research in industry development. Similarly, ASOEX is the organization in charge of managing international plant health agreements.

The Chilean Internal Revenue Service, (www.sii.cl) currently maintains an assistance network for foreign investors, which comprises expert service groups in the regional branches (Santiago Oriente and Santiago Centro), a bilingual telephone help desk and a web portal that provides information and facilitates interaction.

The Bureau of Agriculture Policies and Studies - ODEPA-, (www.odepa.cl) is a centralized government agency, dependent on the President of the Republic and the Ministry of Agriculture, established on June 21, 1992, whose purpose is to provide regional, national and international information to allow different forest and agricultural stakeholders to make informed decisions.

The Asociación de Exportadores de Chile A.G.-ASOEX, (www.asoex.cl), is the private trade organization that

The Institute of Agricultural and Livestock Research - INIA, (www.inia.cl) established in 1964, is the main

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research institution devoted to agriculture and livestock in Chile, dependent on the Ministry of Agriculture. The mission of INIA, framed within the National Policy for Agriculture, is to develop, adapt, and transfer technologies so that the agricultural sector can support food safety and quality in Chile, and respond in a competitive and sustainable manner to the country’s enormous development challenges. The INIA is a non-for-profit private institution dependent on the Ministry of Agriculture, funded by means of public and private funds, research projects and the sale of technological inputs.

The Institute of Agricultural Development, INDAP, (www.indap.cl) is the main agency of the Government of Chile focused on promoting small farming practices. It was established on November 27, 1962, and it is a decentralized agency dependent on the Ministry of Agriculture with regional branches, legal status, its own assets and the capacity to purchase, and undertake liabilities. INDAP’s main objective is to promote the development of small farming practices.

CORFO`s Invest Chile Program CORFO launched the Invest Chile Program in 2000 with the purpose of attracting technology-intensive foreign investment and assisting companies interested in establishing permanent operations in Chile.

How We Can Help You

The Program encourages foreign investment by offering a range of services to help companies set up successful ventures in Chile.

Services available to investors

Among these service are: Extensive information on Chile Intermediaries in related services Financial incentives

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CORFO encourages foreign investment and offers a wide range of tools to help companies successfully establish operations in Chile.

Information services. Support during the different stages of project implementation. Access to business networks and public agencies. Support to access funding sources. Support to locate and identify land lots. Identification of investment incentives. Special investment promotion laws.

Confidentiality Any information provided by your organization regarding business proposals and plans related to potential investments in Chile is strictly confidential.

Regional Investment Incentives Pre-Investment Studies This incentive applies to all regions in Chile except for Metropolitan Santiago. To be eligible, your project must fulfill the following criteria: New investment projects must involve a minimum investment of US $400,000. Expansion investment projects must involve a minimum investment of US $250,000. Financial support: CORFO offers matching funds for studies required for evaluating the feasibility of your investment project. Maximum: up to 50% of the total cost, 2% of total investment, with a ceiling of US $60,000.

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Special Economic Zones Incentives

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High Technology Investment Incentives Whether your investment project is located in Santiago or elsewhere in Chile, you can apply for financial incentives to support project development. To be eligible for financial incentives, a project must fulfill at least the following criteria:

The project must be proposed by a foreign company or institution, alone or in alliance with a Chilean counterpart The project must involve research activities and technological development to add value to the economy. Projects must maintain a minimum investment of US$500,000 Applications must be submilted before the project is begun

The Application Process can be explained in 4 Basic Steps:

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CORFO´s High Technology Investment Incentives

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CONTACT US:

Notes