– An Interview with Chilean Ambassador to China, Luis Schmidt Montes

By staff reporters PEDRO LAGO & WANG YANG

Despite his over 40 visits to China, it was still a surprise to Luis Schmidt Montes when he was appointed Chilean ambassador to China in 2010. Our interview with His Excellency started with the issue of bilateral trade – for Montes played a major role in the China-Chile free trade pact that came into effect on October 1, 2006.

China Today: What are the most prominent gains of the seven-year-old free trade pact between China and Chile?

Montes: I think Chile showed good foresight in signing the agreement. Our trade with China had centered on copper, iron and other metals, with China once ranking 25th or 26th among Chile’s trade partners. In 2010, China became our largest trade partner. In 2012, the bilateral trade hit US $33.5 billion, which is still not the highest historically, but Chilean exports reached US $18.9 billion, with a surplus of close to US $6 billion.

In a mere six years, bilateral trade almost quadrupled (3.85 times) while exports to China surged from US $4.7 billion to US $18.9 billion. This is a remarkable change for Chile, which is now China’s second largest trade partner in Latin America.

What does this change mean for us? China now pays greater attention to Chile, a small country whose population is only 16.5 million. Yet more Chileans are seeking business opportunities in China or working in China-related jobs.

Such changes are obviously the outcome of the free trade agreement between China and Chile and our long friendly ties.

China Today: Since China and Chile signed a supplementary agreement on investment in September 2012, what progress has been made in terms of mutual investment?

Montes: The free trade protocol between China and Chile consists of three agreements: the commodity trade pact signed in 2006, the service trade pact signed in 2010, and that on investment. The last is important to both parties. Prior to 2010, Chilean investment in China was nearly US $200 million, while Chinese investment in Chile added up to no more than US $75 million over the decade 2000 to 2010. The reasons are varied, such as the long distance between us, the modest size of Chile, and language barriers.

After I took office as Chilean ambassador to China, one of my first missions was to reach an agreement with China on service trade, and I was successful thanks to extensive earlier exchanges on the matter. Yet when it came to the investment pact, little headway was made after eight rounds of negotiations and 10 teleconferences.

Fortunately, a deal was finally clinched in 2012, and soon showed positive results. Chile’s investment in China rose to almost US $280 million in 2012, up from the US $155 million of 2011. The momentum is just as strong on China’s side. In the first half of 2013, contracted direct investment from China surpassed US $1.35 billion, which makes China the second largest source of foreign investment in Chile following the U.S.

Chinese investors are eyeing all of Latin America, not Chile alone. Yet Chile has extraordinary merits that appeal to them, such as a sound public order, a stable economy, smooth changeovers of government, and a sound legal system that offers due protection for investment. Chinese capital of US $1.35 billion entered Chile in the first half of 2013, coming from 30 Chinese companies in different economic sectors.

Chile is a leading food exporter, ranking 14th worldwide. It is competitive in fruits – annual exports exceed US $5 billion - and salmon, with annual exports of US $3 billion. China, however, did not take this too much into consideration.

This is now changing. COSCO has bought a vineyard in Chile, and is exporting its wine back to China. A Lenovo Holdings subsidiary invested in agricultural funds in Chile, producing blueberries, cherries and grapes for export to China.