I thank the committee for extending its very kind invitation to me to speak about Chile, its relations with Ireland and, in particular, the recent signing in Brussels of a political and economic agreement between my country and the European Union.
Perhaps I might briefly describe Chile. The country has a population of slightly more than 15.5 million in a territory of 290,000 square miles, that is to say, it is about 50% bigger than France or Spain and twice as large as Germany. There is also the Chilean Antarctic zone. Chile is a very long country of 2,700 miles with an average width of only 110 miles. Geography has provided us with many formidable natural boundaries. In the north there are deserts, in the east the Andes mountain range, to the west the Pacific Ocean and to the south the Antarctic.
Our population has a literacy rate of 95.2% and an infant mortality rate of 9.12 deaths per 1000 live births. Although that might still sound high, if one considers that only 40 years ago the mortality figure was nearly 50, one will see that it is a great achievement. The population growth rate is 1.21%. The population living below the poverty line is 20%. Once again, that is too high and a major issue for governments to fight. In the last ten years, the population living below the poverty line has been reduced from 40%.
In Chile there are more than 4.6 million telephone lines in use, almost 6 million mobile cell phones, 3.5 million television sets and 3.1 million Internet users. Chile's purchasing power parity is $153 billion and GDP growth for 2002 was 2.1%. The inflation rate for that year was 3.5%, and unemployment in December 2002 stood at 7.9%. The GDP composition by growth is 8% for agriculture, 38% for industry and 54% for services. In the trade area, our total exports for 2002 were $18.5 billion and the main export commodities were copper and other minerals, 38%, fish, 4%, fruit and vegetables, 9%, paper and pulp, 7%, chemicals, 6%, and others, 36%.
Our main export partners are the United States, 17%, Japan, 14%, the UK, 6%, Brazil, 5% and China, 5%. If one considers the European Union as a whole, the figure is around 17%. Our main imports, totalling $18 billion for 2002, are consumer goods, chemicals, motor vehicles, fuel, electrical machinery, heavy industrial machinery and some foodstuffs. Regarding fuel, 93% of all fuel consumed in Chile is imported, so it is a big issue. Once again, our five main import partners are the United States, 19%, Argentina, 16%, Brazil, 7%, China, 6% and Japan, 4%. If one considers the European Union as a whole, the figure is around 17%.
As the committee is aware, we just recently opened an embassy in Dublin, previous to which we used to carry on our business from London. In doing this we had in mind several reasons, the first being our historical and cultural links going back to the late 18th century when one of the governors of Chile was an Irishman who became the most important figure in our history, our founding father, Bernardo O'Higgins. There are also some economic reasons such as the one the Chairman mentioned regarding the Chile-European Union agreement. Bilateral trade, although still small, has grown 83% during the years 1992-2002.
There are also political reasons. We share similar international positions on most of the international agenda. The objectives are to strengthen the economic links, create new links in trade and investment, make Chile the gateway for Irish products to South American markets, increase co-operation in culture, science and technology, strengthen the political agenda, both bilateral and multilateral, encourage visits from heads of state, government parliamentarians, Ministers, civil servants and business delegations and eventually open an embassy of Ireland in Chile.
In the document presented, there is a graphic that shows the bilateral trade between Chile and Ireland from 1998 to 2002. It is clear it has been growing continually. Our main exports to the Irish markets are beverages - wine in particular, and we are very happy that Ireland buys a lot of our wine - food and vegetables, gold, telecommunications and sound apparatus, crude fertiliser and minerals. From Ireland we import chemical materials, organic chemicals, medical and pharmaceutical products, professional scientific apparatus, computers, essential oils and perfumes.
There is another graphic in the document showing total trade, imports and exports, between Chile and the European Union and the comparison between some members of the European Union and Ireland. The graph runs from France, the main import and export partner, with a figure of $1.2 billion, down to Ireland with only $69 million for 2000.
This brings us to the association agreement. The European Union has become the first trade partner with total trade of almost $7.6 billion, compared to our second main trading partner, the United States, with $6.2 billion. Also, the European Union is the primary foreign investor in Chile. Up to October 2001, total investment by the European Union in Chile was almost $17.5 billion, compared to total US investment of almost $15 billion.
As the chairman said, the cornerstone of the association agreement is its political area. Although there are three closely linked areas, the political area is the essential foundation. Through this, Chile will enter into a bilateral relationship based on common principles and values, including respect and protection for human rights and the rule of law, protection of the environment and promotion of sustainable development. The inclusion of a democracy clause is particularly relevant. Just like the European Union, Chile has actively encouraged the inclusion of this clause in its agreements with those countries.
Another important feature is the political dialogue. This dialogue is to jointly promote, disseminate and develop the defence of democratic values, human rights, individual freedom and the rule of law, as foundation elements of a democratic society. The association agreement establishes a general framework for political dialogue and makes mention of the search for common positions at international fora and in contingent issues of foreign policy and international security, such as co-operation in the fight against terrorism. Political dialogue will be nurtured by regular meetings between heads of state and government, Ministers for Foreign Affairs, other Ministers, Members of Parliament and senior civil servants. The agreement also grants Chile a social country status which clearly represents a new sphere of action and will enable a strategic alliance to be forged not only in the economic and commercial domain, but also in the political field.
The second area of the agreement is the reinforcement of co-operation. Chile and the European Union signed co-operation agreements in 1990 and 1996 and many areas of co-operation covered by previous agreements have been extended and adapted under the new association agreement. There is consideration for economic co-operation. The central aim of it will be to encourage and strengthen the productive synergy of the two parties to create new opportunities for trade and investment and promote competitiveness. It will promote co-operation in science and technology and the information society, under which Chile will be able to participate directly in the sixth framework programme on science and technology for the creation of a common European research area.
The section on culture, education, audio-visual services co-operation and support for reform of the state and public administration seeks to promote future co-operation between any institution of the Chilean state and its counterparts in the European Union. The agreement also contains a special article on social co-operation, intended to orient future co-operation between the parties on social development and the fight against poverty. An entirely new article has been added on co-operation on gender issues, which seeks to incorporate the issue of respect for and promotion of women in co-operation programmes in general.
Also, there is consideration for the co-operational fight against drugs and illegal immigration and the promotion of work of non-governmental organisations. Other articles deal with regional co-operation and regional integration, seeking to define the efforts that can be made at South American level and particularly with Mercosur. A special article has been included on triangular and regional co-operation. This establishes a possible framework for co-operating in a third country in our region with the support of one or more European Union member states. Within the field of co-operation, the most noteworthy feature is the concept involving recognition by the European Union of Chile's status as an associate country, thus affording Chile access, on a case by case basis and in accordance with the regulations governing each programme, to programmes reserved exclusively for member states. The third and last area of the agreement relates to the economic and commercial ramifications.
This agreement is the most important and wide-ranging of its kind ever signed by Chile. Its importance is reflected in the volume of trade and in the breadth and diversity of the issues covered by the agreement. During the period 1996 to 2001, the European Union accounted for over 20% of Chile's total foreign trade, making the European Union Chile's most important trading partner, ahead of the United States, Japan and Latin America. I will not go into the details of the agreement, but will just mention some of the aspects covered by it.
The trade section of the agreement is divided into four main areas: trading goods; trading services and investment; public procurement, competition and intellectual property; and institutional provisions and rules. Custom relief was agreed from imports from each of the signatories. These measures will affect 99.7% of regional trade within a maximum period of ten years. Once the agreement comes in to full effect, tariffs will be immediately lifted on 85% of Chilean imports to the European Union and 92% of EU exports to Chile. After four years, tariffs will have been lifted on approximately 95% of all reciprocal trade.
There are also terms regulating the free trade programme such as rules of origin, customs procedures, technical standards and regulations, sanitary and phytosanitary aspects, overall safety and anti-dumping provisions.
With regard to trade in services and investments, special consideration is given to financial services and for the establishment of investment. There is regulation for the investment in goods production industries. The parties acknowledge the commitment of the bilateral agreements on promotion and protection of investment signed by Chile and the member states of the European Union. To date, Chile has entered agreements of this kind with 13 EU countries.
Public procurement competition and intellectual property, there are regulations for each aspect of this area. There are also institutional provisions and horizontal rules and the trade agreement contains general provisions regulating the operation of its constituent element. This includes provisions on taxation, payments and transfers, complex situations of balance of payments and transparency.
This is why we think it is good to do business with Chile. Apart from the fact that we have diversity of climates, resources and landscapes, we have inverted seasons with respect to the northern hemisphere. When it is winter here, we are in the middle of our food producing season.
We have an enormous potential to generate hydro-electricity, thus allowing the establishment of heavy industry. There are short distances to ports, the majority of which are modern and privatised. Chile's development is based on open markets. When one gets to the Chilean market, one is entering the market for most of Latin America. We have trade agreements with Canada, Korea and are in the final stages of agreement with the US. We have created a good network of communications to the rest of South America, establishing what is known as the bi-oceanic corridor.
Chile has sustained economic development for the past 15 years, is politically stable and can become a gateway for Irish products in Latin America. We have a high degree of economic freedom. According to the index of the Washington Heritage Foundation, Chile was placed 13th among 151 countries, ahead of Austria, Canada, Belgium, France, Germany, Japan and Denmark, among others. There is a very low level of corruption in Chile. Once again, the index estimated by Transparency International and Go1ttingen University places Chile 18th among 90 countries, one place below Germany and ahead of Spain, France, Belgium and Japan. There is a high transparency according to the opacity index by PricewaterhouseCoopers. Chile was placed second among 35 countries, only after Singapore. We are open to trade and the Emerging Market Access Index created by the Tuck School of Business at Darthmouth University places Chile second after Singapore and ahead of Hong Kong, Taiwan, Hungary, Israel and South Africa.
The political and co-operation areas of this agreement are now under the process of approval by the parliaments of the member states of the European Union. Most of the trade area is already in force since approval last February. For Chile, this is of the utmost importance, not only from an economic point of view but also for its social and labour impact and, I stress, its political relevance. It means a qualitative change for Chile in its relations with Europe. It can serve as a showcase for the rest of Latin America in regard to what they can expect in the future in relations with Europe. The timing for the approval of this agreement is the best we could hope for. Ireland's EU Presidency next year will coincide with the summit between Latin America and Europe in May 2004. In July of this year, President Lagos is coming on a State visit to Ireland, the first ever by a Chilean Head of State.
Once again, Chairman, I thank you for your invitation and your patience. If members have any questions or would like me to forward any additional material, I would be more than pleased to do so.
