Chile WT/TPR/S/124
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. Since the previous Review of Chile in 1997, GDP shares have, in broad terms, remained
constant for the agriculture sector and most service subsectors (Table IV.1).  The contribution of
manufacturing and construction to total GDP has tended to decrease.  Growth rates have been
relatively high for mining, transport, and communications.
Table IV.1
GDP shares, 1996-02(Per cent, based on 1996 prices)
1996 1997 1998 1999 2000 2001 2002
GDP (1996, Ch$ billion) 31,237 33,301 34,377 34,115 35,537 36,626 37,412
Agriculture 4.2 4.0 4.1 4.1 4.2 4.2 4.3
   Agriculture 1.2 1.2 1.2 1.1 1.1 1.2 ..
   Fruits 1.3 1.1 1.2 1.2 1.3 1.2 ..
Fishing 1.2 1.3 1.1 1.2 1.3 1.4 1.5
Mining 6.7 7.0 7.3 8.2 8.1 8.4 8.2
Manufacturing 17.5 17.2 16.3 16.3 16.3 15.9 16.0
   Food, beverages and tobacco 5.5 5.2 5.0 5.1 5.1 5.2 ..
   Textiles 1.6 1.5 1.4 1.3 1.2 1.0 ..
   Chemicals and petroleum 3.5 3.4 3.3 3.4 3.4 3.4 ..
Electricity, gas and water 2.8 2.9 2.9 2.8 2.9 2.8 2.9
Construction 9.3 9.3 9.2 8.3 7.9 7.9 7.9
Commerce, hotels and restaurants 11.1 11.2 11.3 10.8 10.8 10.7 10.7
Transport and communications 6.4 6.7 6.9 7.0 7.3 7.7 7.7
Financial servicesa12.1 12.2 12.5 12.5 12.5 12.5 12.4
Real estate 7.5 7.3 7.4 7.6 7.5 7.4 7.5
Private (personal) servicesb10.6 10.6 10.5 10.8 10.7 10.7 10.7
   Education 4.1 4.0 3.9 4.0 4.0 4.0 ..
   Health 4.4 4.4 4.4 4.5 4.6 4.6 ..
   Other 2.1 2.2 2.2 2.2 2.2 2.1 ..
Public administration 4.0 3.8 3.8 3.9 3.8 3.7 3.7
Other 6.3 6.5 6.7 6.4 6.7 6.6 6.6
  Bank imputations -3.3 -3.3 -3.3 -3.3 -3.3 -3.3 -3.3
  Value-added tax 7.4 7.5 7.6 7.6 7.6 7.6 7.6
  Import duties 2.2 2.3 2.4 2.1 2.4 2.3 2.3
.. Not available.
a Includes financial services, insurance, building rent and services to companies.
b Includes education, public health, and private and other services.
Note: Data for 2000 and 2001 are provisional;  data for 2002 are preliminary.
Source: Central Bank of Chile.
2. Agriculture, including fisheries and forestry, retains a significant role in employment and the
generation of foreign exchange, as Chile is one of the world's largest exporters of fruit, fish and
fishmeal, and forestry products.  Tariff protection for agricultural goods has decreased since Chile's
last Review but three products (wheat, sugar, edib le oils) are subject to a price band system, and a
tariff rate quota is applied for sugar.  There is no specific protection for agricultural products,
although these have tended to be the focus of safeguard measures, and some are subject to longerWT/TPR/S/124 Trade Policy Review
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tariff phase-out periods under Chile's preferential trade agreements.  A number of measures are in
place to increase productivity in this sector.
3. The highly productive mining sector generates more than 42% of Chile's merchandise export
revenues and is the most important recipient of fore ign direct investment;  copper is its most important
single export product.  The manufacturing sector cent res around the processing of agricultural, forestry,
and mineral products.  In principle, Chile's uniform applied MFN tariff of 6% provides neutraltreatment for traded goods, although the existence of duty drawbacks and preferential trade
agreements could distort the structure of protection.  The use of trade-related investment measures in
the automotive sector was ended in February 2003, but the production of copper products still benefits
from the copper reserve programme, which gives it priority access to a limited volume of copper
inputs.
4. In terms of contribution to GDP and employment, services is the most important sector in the
economy.  Conditions for foreign participation in Chile's services sector are far more liberal than
implied by its GATS commitments.  Chile ratified the Fourth and Fifth Protocols to the GATS, on
Telecommunications and Financial Services, respectively.  Foreign participation in Chile's services
sector is substantial, most notably in the financial services and telecommunications sectors.
5. There are no major restraints on foreign direct  investment other than exemptions to market
access in fisheries and maritime transport, and exemptions to national treatment for radio and
television broadcasting.  State involvement in the economy is very limited, with the exception of the
mining sector, where the State owns the world's largest copper producer.  Since 1997, various seaports
have been given in concession to private operators as part of Chile's privatization policy.
(2) A
GRICULTURE , FORESTRY , AND FISHING
(i) Main features
6. Chile's agriculture sector (excluding the processing of agricultural goods) is important in
terms of production, employment, and trade.  Its contribution to GDP was 4.3% in 2002, about the
same as in 1996.  Depending on the season, Chile's agriculture sector employs between 12.5% and
13.8% of the economically active population.
7. In 2001, Chile exported agricultural goods (WTO definition) to a total value of
US$6,966 million, equivalent to some 37% of its total exports.1  Chile is an important exporter of
grapes, wine, and apples (Table IV.2).  Its main export markets for agricultural products are the
United States, the European Union, and Japan.  In 2002, Chile imported some US$1,404 million of
agricultural products, of which about 35% came from Argentina;  agricultural imports are led by
bovine meat and maize.
8. According to the 1997 National Agricultural Census, Chile had almost 330,000 farms,
including just over 100,000 subsistence farms and 176,000 small farms.  While the small-farming
sector tends to specialize in vegetables, flowers, and dairy farming, Chile's 17,000 medium-sized
farms and 9,500 large agricultural operations, which together control 77% of usable farmland, tend to
focus on forestry, fruit growing, and cattle raising.  Chile's total area used for farming, stock-breeding,
and forest plantations is about 17.7 million hectares.  The authorities note that, as a consequence of
trade liberalization, a diversification in agricultural production has taken place over the last few years,
including a shift from annual crops to fruit and vegetable production and stock-breeding (Table IV.3).
                                                     
1 Trade data are based on UNSD, Comtrade database, unless otherwise indicated.Chile WT/TPR/S/124
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Table IV.2
Chile's main agricultural exports, 1996-02
(US$ million, f.o.b.)
Product 1996 1997 1998 1999 2000 2001 2002
Grapes 612 628 603 597 663 580 674
Wine with appellation of origin 187 268 370 388 435 455 472
Apples 270 211 278 248 202 240 281
Avocados 23 32 82 101 74 80 141
C o r n  f o r  s e e d s 3 95 18 56 46 86 66 5
Kiwis 87 78 101 67 68 66 90
O t h e r  w i n e s 5 17 96 86 56 67 05 5
P l u m s 7 87 26 07 66 57 17 1
Wine in recipients of up to 2 litres 46 57 61 56 64 62 70
Pears 102 85 82 83 64 60 66
T o m a t o  p u l p  a n d  j u i c e 8 97 28 79 95 86 15 6
R a i s i n s 3 44 23 74 64 93 63 9
Apple syrup and juice 67 47 30 58 46 46 34
P o r k 52 33 02 44 56 9 1 0 6
Source: Chilean authorities.
Table IV.3
Changes in the use of farmland, regions III to IX, 1988-02
Category Surface ('000 ha) Total variation %
1988 1997 2002a1997 - 02 1988 - 02
Annual farming 1,075 834 810 -2.9 -24.7
Fruits and vineyards 237 284 334 17.8 41.2
Vegetables and flowers 70 80 126 57.0 79.0
Artificial pasturelands 375 424 500 18.0 33.5
Natural grasslands 3,854 3,235 3,200 -1.1 -17.0
Forest plantations 1,182 1,800 2,100 16.7 77.7
Total 6,792 6,657 7,070 6.2 4.1
aP r e l i m i n a r y .
Source: Data provided by the Bureau for Agricultural Policies and Studies.
(ii) Policy objectives and instruments
9. Policies for the agriculture sector are formulated by the Ministry of Agriculture.  The Ministry
supports the sector both directly and through a number of dependent organizations, including the
Institute for Agricultural Development (INDAP), the Office for Agricultural Research and Policy
Development (ODEPA), the Agricultural and Live stock Service (SAG), and the National Forest
Corporation (CONAF).  The authorities indicate that the penetration of new international markets isone of the main priorities of Chile's policy for the agriculture sector.
10. Reflecting the sector's economic importance, Chile has participated actively in the ongoing
WTO negotiations on agriculture.  Chile has made proposals in this regard as part of the Cairns
Group, of which it is a founding member.  At the Doha Ministerial Conference in 2001, Chile
reiterated the importance of agriculture for a new round.
2  It suggested that clear objectives should be
                                                     
2 WTO document WT/MIN(01)/ST/48, 10 November 2001.WT/TPR/S/124 Trade Policy Review
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established for the elimination of export subsidie s, for a substantial reduction in trade-distorting
domestic supports, and for substantial reductions in the barriers to market access.
11. Chile and other Members, proposed that, as a part of the agricultural negotiations, WTO
Members should agree to discipline the activities of governmental and non-governmental enterprises
and marketing boards which benefit from monopoly import or export rights, with a view to avoid
distorting effects on the market.3
12. Moreover, Chile and other Members proposed that agricultural export credits, export credit
guarantees and export insurance programmes should be brought under specific multilateral discipline
under the WTO with a view to ending government subsidization of such credits.4
13. Since Chile's last Review in 1997, tariff protection for agricultural products has decreased in
line with Chile's progressive liberalization of the trading regime.  An MFN tariff of 6% applies to allagricultural goods, with the exception of edible oils, sugar, wheat, and wheat flour;  for these products
a price band system (described below) is in place.  While Chile bound most tariff lines contained in
HS Chapters 1 to 97 at a uniform rate of 25%, various agricultural products are bound at 31.5%.  This
list of products in Chile's Schedule includes:  dairy products, wheat and wheat flour, oil-seeds and
oleaginous fruit, and vegetable fats and oils.  Following Article XXVIII negotiations, the bound ratefor sugar was increased to 98%.
14. Under most of Chile's preferential agreements, various agricultural products are subject to
longer phase-out periods and face higher average tariffs than non-agricultural goods.  The average
tariff rate for agricultural imports (March 2003) is 0.9% for Canada, 1.5% for Costa Rica, 1.8% for
El Salvador, 1.3% for the European Union, 0.8% for MERCOSUR countries, and 0.5% for Mexico
(Table III.2).  Sugar, wheat, and vegetable oils are subject to particularly long phase-out periods.
15. The majority of the definitive safeguard measures imposed by Chile since the enactment of its
safeguard legislation in 1999 affected agricultural goods and food products (see also
Chapter III(2)(ix));  the products concerned were wheat, sugar, edible vegetable oils, fructose and
fructose syrup, and powdered and liquid UHT milk.  Chile's definitive safeguard measure on sugar led
to consultations in the WTO requested by Colombia, later joined by Cuba, Guatemala, Nicaragua, and
El Salvador.
5  Argentina requested consultations on the provisional safeguard measure on mixtures of
edible oils and on the definitive safeguard measure on fructose.6  None of the consultations, however,
has as yet led to the establishment of a panel.
16. The role of the State in agricultural production and marketing is very limited.  Chile has
notified Comercializadora de Trigo  (COTRISA)  as state trading enterprise (Chapter III(4)(iii)).7  The
state does not own commercial agricultural land.
17. Chile has notified the WTO that it does not provide agricultural export subsidies.8  According
to the authorities, Chile provides domestic support for agricultural research as well as training,
inspection, infrastructure and other related services;  the total value of this support was about
Ch$59 billion in 2000 (about US$110 million).  The authorities further note that there are no price
restrictions or production controls and no direct income support is given for agriculture.
                                                     
3 WTO document G/AG/NG/W/104, 27 January 2001.
4 WTO document G/AG/NG/W/139, 21 March 2001.
5 WTO document WT/DS228/1, 22 March 2001.
6 WTO document WT/DS226/1, 22 February 2001, and WTO document WT/DS278/1, 8 January 2003.
7 WTO document G/STR/N/7/CHL,  10 October 2001.
8 WTO document G/AG/N/CHL/13, 15 May 2001.Chile WT/TPR/S/124
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18. Public investment in Chile's agriculture sector is mainly in irrigation projects, for which the
Chilean Government provides annual support of about US$70 million.  For the period from 2000 to
2010, the Government has plans for new irrigation projects covering an area of 300,000 hectares and
for improving existing projects on 400,000 hectares.9  The National Commission for Irrigation (CNR)
formulates, coordinates, and implements national irrigation policies.  The Commission is also in
charge of administering Law No. 18.450 of 30 October 1985, which provides for subsidies for small-scale private irrigation projects.
19. Agricultural producers with net annual sales below 14,000 U.F., equivalent to about
US$333,200, have access to the Guarantee Fund for Small Enterprises, which provides credit
guarantees for investment projects and exports (Cha pter III(3)(vi)).  In addition, ProChile's Food and
Agrobusiness Division helps agricultural companies to diversify their exports by providinginformation about trade opportunities and assistance in establishing contacts with foreign buyers.
20. INDAP and SAG are jointly implementing a prog ramme to support the recovery of exhausted
soil.  The programme has a budget of about US$35 million and provides financial support for the
purchase of fertilizers and soil conservation.
21. The Agricultural and Livestock Service (SAG) is responsible for all issues relating to animal
and plant health and has also been notified as Chile's national SPS enquiry point.
10  SAG is also
responsible for negotiating bilateral certification agreements.  The authorities emphasize the high
level of Chile's sanitary and phytosanitary standards and, most notably, that it is free of BSE and foot
and mouth disease.
22. The Ministry of Agriculture instituted an agricultural insurance scheme in 2002 that allows
farmers to insure against crop losses resulting from various weather phenomena.  The insurance is
offered by private companies, but the State contributes 50% to the premium plus a fixed sum of1.5 U.F., up to a maximum amount of 55 U.F. per agricultural operation.
11  The budget for 2003
provides for contributions of US$2.5 million to this scheme.
23. Agricultural research and development is supported by the Foundation for Agricultural
Innovation (FIA) of the Ministry of Agriculture.  The Foundation's objective is to stimulate
agricultural innovation;  it contributes up to 70% of the cost of individual agricultural R&D projects.FIA's budget for 2003 was Ch$4.4 billion (about US$6.2 million).  The Ministry of Agriculture also
has its own research institute, the Institute of Agricultural Research (INIA), with a budget of
Ch$7.3 billion for 2003 (US$10.2 million).
24. A number of policy measures are in place to improve the situation of small agricultural
producers.  The Institute for Agricultural Development (INDAP), as the main governmentalinstitution in this field, offers services such as micro-credits, programmes for irrigation and recovery
of depleted soil, support for cooperatives and general capacity-building measures.  INDAP's budget
for 2003 is Ch$107 billion (about US$150 million).
                                                     
9 Government of Chile (1999).
10 WTO document G/SPS/ENQ/12, 4 July 2001.
11 One U.F. (Unidad de Fomento) is equivalent to about US$23.80.WT/TPR/S/124 Trade Policy Review
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(iii) Key subsectors
(a) Agri-food
25. Chile is one of the world's largest exporters of fresh and processed fruits.  It has about 7,800
fruit producers, farming over 211,000 hectares in 2003, up from 187,000 hectares in 1996.
Production is concentrated on grapes, apples, avocados, and pears;  industry output expanded to
3.3 million tonnes in 2000.
26. Besides benefiting from a favourable climate and geography, Chile's location in the southern
hemisphere allows producers to target off-season northern hemisphere markets, giving exporters,
especially of fresh fruits, an important competitive edge.  Furthermore, about 35% of Chile's cropland
is irrigated, compared with an average of 13.7% in Latin America.
27. Farming in northern Chile (Regions I to VII), which and relies on artificial irrigation is
export-oriented.  On the other hand, producers in southern Chile (Regions VIII to XII), where cattle
farming and annual crops predominate, cater mostly for the domestic market.
28. Chile's production and exports of wine have continued to grow strongly.  The area planted
with wine grapes rose to 102,000 hectares in 2002, up from 54,000 hectares in 1995.  Exports of
wines with appellation of origin grew from US$187 million in 1996 to US$473 million in 2002;exports of other wine grew from US$46 million to US$126 million during the same period.
29. Foreign direct investment in farming and stockbreeding averaged US$30 million annually
between 1996 and 2002.  Foreign investors are granted the rights laid down in the Foreign Investment
Statute (Chapter II(4)).  The presence of overseas companies has helped to increase the sector's
productivity, contributing to far-reaching modernization that has included not only production
methods but also marketing and branding techniques , and has increased the industry's integration into
international trading and distribution circuits.  Foreigners may own agricultural land without limit.
30. Chile maintains a price band system (PBS) for edible oils, sugar, wheat, and wheat flour
(Chapter III(2)(v)).
31. In June 1997, the European Union requested consultations on Chile's taxation regime for
alcoholic beverages;  these did not reach a mutually satisfactory solution.  The WTO dispute
settlement panel, which was set up subsequently, concluded that Chile acted inconsistently withArticle III:2 of GATT 1994 (on national treatment) by according preferential tax treatment to pisco
vis-à-vis  certain other alcoholic beverages.
12  Chile's revised legislation, Law No. 19.716 of
9 February 2001, established a gradual adjustment of tax rates for various alcoholic beverages for a
transitional period ending in March 2003;  since then all spirits have been subject to the same specific
rate of 27%.
32. A tariff quota on refined sugar introduced as a result of Chile's Article XXVIII renegotiations,
entered into force in January 2002 (Chapter III(2)(vi)).  The applied out-of quota rate, which is
determined by the price band system, stood at 40.6% in March 2003;  the in-quota rate is 0% for an
annual quota of 60,000 tons.  The authorities indicate that in both 2002 and 2003 the quota was filled
within a few days.
                                                     
12 WTO documents WT/DS87/R and WT/DS110/R, 15 June 1999.Chile WT/TPR/S/124
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(b) Forestry
33. Chile has large softwood plantations, consisting mostly of pine trees and eucalyptus.  Its
forest plantations cover 2.1 million hectares, equivalent to 18% of the total surface covered by forests
and 2.8% of the national territory.
34. According to estimates provided by the authorities, the forestry sector contributed about 0.7%
to GDP in 2001.  In addition, the processing of wood and wood products contributed about 1.4%, and
the production of paper accounted for another 1.9% of GDP.  In 2001, Chile's exports of wood
products amounted to US$968 million.  Chile is the world's third-largest exporter of w oodchips and
also exports nearly 50% of its saw timber, panels, and softwood pulp production.  Paper production is
mostly consumed domestically.
35. Chile's forestry sector is regulated by the National Forest Corporation (CONAF) of the
Ministry of Agriculture, in accordance with th e Forest Law (Supreme Decree No. 4363) of 1931,
Decree Law No. 701 of 1974, and Law No. 19.300 of 9 March 1994.  In addition, the Forest Institute
(INFOR) of the Ministry of Agriculture undertakes research with a view to promoting a sustainableuse of Chile's forests.
36. Pursuant to Decree Law No. 701, CONAF must authorize the use of land for forest
plantations following a request by an enterprise and an analysis of the territory.  The Law also
provides for re-afforestation requirements for the exploitation of planted forests.  There are special
provisions for small-scale enterprises engaging in forestry;  for example they are exempt fromproviding re-afforestation studies and utilization plans but not from re-afforestation requirements.
Law No. 19.300 lays down the principles of environmental protection in Chile.  In addition, the
authorities indicate that legislation is before Cong ress (as at June 2003), with a view to make a more
sustainable use of Chile's native forests.
(c) Fishing and aquaculture
37. The contribution of fishing and aquaculture to GDP increased from 1.2% in 1996 to 1.5% in
2002.  Compared with other sectors of the economy, foreign direct investment is relatively limited
in the fishing sector, with annual FDI averaging less than US$27 million between 1996 and 2002.
While the importance of aquaculture has tended to increase, the Chilean catch has decreased since themid-1990s (Table IV.4).  According to the authorities, this decline reflects overexploitation of
dwindling stocks in some highly migratory species,  mainly due to fleets from third countries operating
near Chilean territorial waters;  more stringent controls;  and shrinkage in the national large-scale fleetto 370 boats from around 900 at the beginning of the 1990s.
38. Exports of fishery products increased from US$1,772 million in 1996 to US$1,959 million in
2002 (Table IV.5).  Chile remains the world's second largest exporter of fishmeal and farmed salmon.
39. Aquaculture has become increasingly importa nt;  by 2001 more than 2,250 concessions had
been issued for the cultivation of fish, molluscs, and seaweed.  Fish cultivation (711 concessions) takes
place mainly in Regions X and XI in southern Chile;  salmon and trout are the most important cultivated
species.  The cultivation of molluscs (740 concessi ons) and seaweed (693 concessions) is concentrated
in Region X.  Based on a favourable geographic lo cation and low-cost inputs, Chile has become the
world's second-largest producer of farmed salmon after Norway, with a world market share of 20%.WT/TPR/S/124 Trade Policy Review
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Table IV.4
Catch of principle species, 1997-01
(Thousand tonnes)
1997 1998 1999 2000 2001
Fish 5,904 3,362 5,118 4,485 4,151
  Anchovies 1,757 523 1,983 1,701 853
  Mackerel 212 72 120 96 365
  Jack mackerel 2,917 1,613 1,220 1,234 1,650
  Sardine and common sardine 481 346 1,028 783 347
  Hake 71 354 310 91 162
Mussels 93 109 110 110 138
S h e l l f i s h 3 74 03 93 7 2 6
Algae 282 266 261 281 300
Others 49 48 58 58 48
Total 6,365 3,826 5,587 4,971 4,663
Source: Ministry of Economy, Sub-secretary of Fishing.
Table IV.5
Main exports of the fisheries sector, 1996-02(US$'000)
Item 1996 1997 1998 1999 2000 2001 2002
Frozen 621,908 724,353 748,642 900,745 951,137 948,628 953,751
Fresh 257,994 286,290 332,071 339,305 419,175 404,993 419,680
Fishmeal 612,339 552,350 348,152 281,795 235,198 257,308 319,888
Preservatives 112,535 143,045 121,805 128,271 133,322 123,033 115,174
Agar-agar 44,581 42,483 24,085 32,371 39,044 33,891 32,575
Smoked 6,807 10,883 8,979 13,179 19,594 19,337 29,198
Carragenina 13,578 16,373 20,741 18,775 21,988 21,379 25,023
Dried algae 25,212 26,863 26,280 26,297 21,721 22,013 22,208
Salted 26,153 45,925 25,833 17,913 17,902 17,495 19,204
Oil 43,623 14,779 3,495 14,166 4,271 2,416 12,873
Dehydrated 1,016 1,562 1,393 2,692 3,364 4,577 3,332
Total 1,771,917 1,872,603 1,673,751 1,784,005 1,874,739 1,861,102 1,959,408
Source: Chilean authorities.
40. In accordance with the Law on Fisheries and Aquaculture of 21 January 1992, the fisheries
sector is regulated by the Sub-secretary of Fisheries, a dependency of the Ministry of Economy.  The
National Fisheries Service (SERNAPESCA) is responsible for issuing and enforcing technical
regulations and sanitary requirements in the fisheries sector.
41. In order to attain a sustainable level of exploitation of the existing resources, the Law on
Fisheries and Aquaculture establishes specific systems to limit access to fishing: (i) a general accessregime;  (ii) a regime for species in full exploitation;   (iii) a regime for fisheries that are replenishing;
and (iv) a regime for incipient fisheries.  Permits to exploit species classified under the general access
regime or the full exploitation regime are generally granted automatically, but may not be if,  inter alia ,
the request is made by a factory ship.  Licences to e xploit species that are incipient or in the process of
regeneration are granted for ten years through public  bids.  The licences are transferable and are
specified as a share of a global quota.Chile WT/TPR/S/124
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42. New legislation on fisheries is before Congress (June 2003).  The authorities indicate that the
draft law provides for a revised quota system with  quotas based on installed hold size and average
historic catches.
43. The first five maritime miles off the Chilean coast, as well as the fjords and channels of the
Austral zone, are reserved for small-scale fishing, defined as vessels with a length not exceeding
18 metres and a size below 50 gross tonnage.  In addition, the small-scale fisheries sector has accessto the Guarantee Fund for Small Enterprises and to the Fund for Small-Scale Fishing, which finances
investment in equipment of up to Ch$15 million (U S$21,200). The fisheries sector is excluded from
the benefits of the free-trade zone regime and the public export-credit programmes.
44. Foreigners are not permitted to fish in Chilean waters or own aquaculture centres, unless they
are registered as a Chilean company or are permanent residents. To register a fishing company in Chile,
more than 50% of the capital must be of national or igin and the investment must be approved by the
Foreign Investment Committee (Chapter II(3)).  However, under Article 11 of Decree Law No. 2.222 of
31 May 1978, foreign ownership in the fisheries sect or is possible without capital restrictions on
condition of reciprocity.
45. Pursuant to Article 80 of the Law on Fisheries and Aquaculture, concessions for enterprises
engaging in aquaculture are issued by the Ministry of Defence.  These concessions are transferable;
any new concession or transfer thereof is published in the National Registry of Aquaculture.  A
concession, issued by SERNAPESCA, is required for a quaculture.  The law further establishes that the
aquaculture industry has exclusive rights to use certain territories (portions of water or of the ocean bed).
46. For sanitary reasons, imports of fish products require authorization by SERNAPESCA if they
are to be used as inputs to produce exportables, or as  bait. Chile's sanitary norms in the fisheries sector
are published online.
13  SERNAPESCA recognizes all official test results and certificates provided by
the country of origin.
47. Fishing vessels are among the 95 tariff lines that can be imported duty-free.  A luxury tax of
15% is levied on caviar (Chapter III(2)(vii)).
48. The Fisheries Research Fund (FIP) finances rese arch activities with a view to improving the
administration of fisheries and aquaculture.  The Fund is financed by public budget allocations andfees for fishing and aquaculture licences.  It is administered by the Council for the Administration of
Fisheries, which establishes the annual research programme.  Individual research projects are
announced in the Official Gazette  and in a newspaper of major circulation.  Research institutions that
wish to receive funding must participate in a public competition.  The Fund is financing 30 projects
worth Ch$2 billion, equivalent to about US$2.9 million.
49. In January 1998, the United States imposed provisional anti-dumping duties on Chile's
exports of fresh and chilled Atlantic salmon;  the measure became definitive in July 1998 with anti-
dumping margins ranging from 0.16% to 10.69%.  The European Union initiated anti-dumping
investigations on Chile's salmon exports in July 2002;  no measure has been taken to date
(mid 2003).
14
50. In April 2000, the European Union (EU) requested consultations with the Chile regarding
measures affecting the transit and importation of swordfish, claiming that under Chilean legislation
                                                     
13 SERNAPESCA online information.  Available at:  http://www.sernapesca.cl/paginas/regulacion_
sectorial/listado.php?c=001006003.
14 WTO document G/AD/N/98/EEC, 12 March 2003.WT/TPR/S/124 Trade Policy Review
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EU fishing vessels were not allowed to land their swordfish in Chilean ports either for warehousing or
for transhipment onto other vessels.15  As no mutually satisfactory solution was reached, the European
Union requested the establishment of a panel in November 2000.16  In March 2001, both parties
communicated to the WTO that they had reached a provisional arrangement and agreed to suspend the
process for the constitution of the panel.17  The provisional arrangement provides for a joint
investigation of the issue while temporarily allowing four EU vessels access to Chilean ports forunloading or transhipping swordfish.
51. Together with other Members, Chile has submitted an issues paper to the Negotiating Group
on Rules, calling for an improvement of WTO disciplines in the fisheries sector.
18  In addition, Chile
and other Members have submitted a communication outlining different approaches to classification
of fisheries programmes and subsidies.19
(3) MINING
52. The mining sector contributed 8.2% to Chile's GDP in 2002, up from 6.7% in 1996.
Employment in the sector decreased from 1.8% of the labour force to 1.3% over the same period,
reflecting a strong increase in the sector's labour productivity.  Foreign direct investment in mining is
substantial;  annual FDI flows averaged over US$1.3 billion between 1996 and 2002.  Chile's mining
exports amounted to US$7.9 billion in 2001, equivalent to 42.1% of total exports.
53. With a wide variety of high-quality minerals, and well over a century of mining experience,
Chile has one of the largest and most-developed mining industries in the world.  Chile is the
world's leading supplier of copper and copper ores and concentrates, with 165 million tonnes of
proved copper reserves.  Chile is also an importa nt producer of gold, manganese, molybdenum, silver,
and zinc.  Production of most minerals has continued to increase since Chile's last Review in 1997
(Table IV.6).
54. Chile's total copper production reached around 4.6 million tonnes in 2002 (Table IV.7).
Exports of copper products in 2001 totalled US $6.5 billion, including US$4.1 billion of copper
cathodes and US$2 billion of copper concentrates.  Chile's main export markets for copper are
the United States, Japan, China, Italy, and France.
Table IV.6
Production of selected minerals, 1996-02
(Tonnes)
1996 1997 1998 1999 2000 2001 2002
Refined copper ('000 tonnes) 3,116 3,392 3,687 4,391 4,602 4,739 4,581
Refined molybdenum 17,415 21,339 25,297 27,309 33,187 33,492 29,466
Refined lead 1,374 1,264 337 608 784 1,193 2,895
Refined zinc 36,004 33,934 15,943 32,263 31,402 32,762 36,161
Manganese mineral 62,887 63,673 48,931 40,505 41,716 31,320 12,195
Refined gold 53.2 49.5 45.0 48.1 54.1 42.7 38.7
Refined silver 1,147 1,091 1,340 1,380 1,242 1,349 1,211
Source: Chilean Copper Commission.
                                                     
15 WTO document WT/DS193/1, 26 April 2000.
16 WTO document WT/DS193/2, 7 November 2000.
17 WTO document WT/DS193/3, 6 April 2001.
18 WTO document TN/RL/W/3, 24 April 2002.
19 WTO document TN/RL/W/58, 10 February 2003.Chile WT/TPR/S/124
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55. The State still plays a crucial role in Chile's mining sector, especially in the production of
copper.  State participation in production is thr ough the National Copper Co rporation (CODELCO) and
the National Mining Company (ENAMI);  these state-owned enterprises are the world's first and the
eighth exporters of copper products.  According to th e authorities, there are no plans to privatize these
enterprises.
Table IV.7
Production of copper, 1996-02
(Thousand tonnes, refined copper)
By product National consumptionc
RefinedaBlister In bulkbTotal Refined
1996 1,748 243 1,125 3,116 91.0
1997 2,117 154 1,121 3,392 79.7
1998 2,335 176 1,176 3,687 83.6
1999 2,666 170 1,555 4,391 75.2
2000 2,668 164 1,769 4,602 83.0
2001 2,882 159 1,698 4,739 90.0
2002 2,850 323 1,408 4,581 81.5
a Includes electrolytic copper from Tres Estrellas and Mantos Blancos.
b Includes cement copper, concentrates, slag, and ores.
c Copper deliveries to national manufacturing industries (i.e. production of tubes, wire, etc.) for domestic consumption and
manufactured exports.
Source: Central Bank of Chile, Chilean Copper Commission (COCHILCO).
56. CODELCO continues to be the world's largest si ngle producer of copper;  it is also one of
the main producers of molybdenum.  In 2001, C ODELCO produced 1.7 million tonnes of copper
(Table IV.8), equivalent to about 12.5% of worl d output, up from 1.2 million tonnes in 1996.  A fixed
10% of the value of CODELCO's external sales is allocated to the Armed Forces, whereas
CODELCO's profits are paid into  the general State budget. CODELCO also has joint ventures both
with national and foreign companies, in Chile a nd abroad, for exploration, production of electricity,
production of mining equipment,  and production of manufactured products such as metal wires.
Table IV.8
Production and sales of CODELCO, 1996-02
Copper productiona ('000 tonnes) Sales (US$ million)
CopperbTotalc
1996 1,246 2,684 2,940
1997 1,326 3,097 3,426
1998 1,501 2,117 2,730
1999 1,615 2,292 2,944
2000 1,612 2,742 3,610
2001 1,699 2,585 3,422
2002 1,630 2,990 3,490
a Includes CODELCO's share of El Abra.
b Includes sales of copper acquired from third parties.
c Includes sales of copper acquired from third parties, and sales of by-products.
Source: Corporation Nacional del Cobre (CODELCO), Chilean Copper Commission (COCHILCO).
57. As in other sectors, foreign investors in Chile's mining industry can opt to conclude a contract
with the State of Chile under Decree Law No. 600, which authorizes and protects the investment
(Chapter II(4)).  Under this statute, investors in the mining sector have eight years to bring in theWT/TPR/S/124 Trade Policy Review
Page 70
capital;  in other sectors the period is three years.  The period may be extended by the Foreign
Investment Committee to up to twelve years when prior exploration is required.
58. Policies for the mining sector are formulated by the Ministry of Mining.  In addition, each
regional government has its own Regional Ministerial Secretary for Mining.  The Ministry has two
main advisory bodies, the Chilean Copper Co mmission (COCHILCO) and the National Service of
Geology and Mining (SERNAGEOMIN).  COCHILCO advises the Government on mining policy,supervises and evaluates the performance of the state-owned mining enterprises, and advises the
Foreign Investment Committee on approvals of investment contracts.  SERNAGEOMIN is
responsible for the geological survey of Chile, for updating data on mineral resources, for keeping and
updating a registry of all mining concessions and the official mining land registry, and for monitoring
safety conditions in the mining sector.
59. The Mining Council, founded in 1998, represents Chile's major mining companies.  It
comprises 17 foreign and national enterprises, including state-owned companies.  The privately
owned mining enterprises are united in the National Mining Society.  The Mining Metallurgic
Research Centre (CIMM), a private institution specialized in applied research, serves both the state-
owned and private mining companies.
60. Article 19, No. 24 of the Chilean Constitution stipulat es that the State is the sole owner of all the
minerals in situ , independently of who owns the surface land.  However, under a system of concessions,
foreigners are allowed to explore for or exploit minerals, and are granted national treatment;  the price of
these concessions is unrelated to actual production.
61. Procedures for the granting of exploration and exploitation licences are laid down in the
Constitutional Organic Law on Mining Concessions (Law No. 18.097) of 21 January 1982 and the
Mining Law (Law No. 18.248) of 14 October 1983.  Concessions may be granted on all mineralsubstances, including minerals that lie under the ocean and are accessible from land through tunnels.
62. However, concessions may not be granted for th e exploitation of lithium, hydrocarbons in any
state, and for any deposits located under the ocean  and not accessible from land.  The State can,
however, extend an operating contract, which allows an individual (national or foreign) to exploit
minerals for which concessions are not granted.  These contracts allow exploitation of a specific mineralfor a fixed period for which the State provides the ne cessary permits and licences;  such contracts are
being granted to exploit petroleum.
63. Imports of minerals are subject to the usual tariff of 6%.  Mining companies are excluded
from the benefits of the free-trade zone regime, the export finance programmes, and the simplified
duty drawback system.  However, as establishe d by Supreme Decree No. 135 of the Ministry of
Finance of 18 April 1983, mining and petroleum refi neries may import raw materials at concessional
duties and taxes, provided these are exported after processing.  Furthermore, Law No. 19.707 of
10 January 2001 established the free-trade zone of Tocopilla, which has a system of benefits similar
to the existing free-trade zones;  these are confined to enterprises of the mining sector
(Chapter III(4)(iv)).
64. The authorities indicate that there is no special tax treatment for the mining sector.  With a
view to reducing the volatility of fiscal income , the Government operates a Copper Stabilization Fund
(Chapter I(2)(ii)).
65. Law No. 16,624 of 15 May 1967 established the Copper Reserve.  Pursuant to this law, all
mining companies with an annual output of more than 75,000 tonnes of refined, electrolytic or blister
copper are obliged to supply the national manufacturing industry at prevailing international f.o.b.Chile WT/TPR/S/124
Page 71
prices.  To this end, national manufacturing enterprises submit an annual request specifying their
copper demand to COCHILCO, which administers the Reserve.  According to  the authorities, the
volume of copper administered under this scheme is about 80,000 tonnes annually.  The authorities
further indicated that the draft law on miscellaneous WTO-related matters provides for the abolition
of the Copper Reserve (Chapter II(2)(iii)).
(4) ENERGY
66. Chile's electricity sector is regulated by the National Energy Commission (CNE) in
accordance with the Electricity Law (Decree with Force of Law No.1 of 1982).  The CNE is
responsible for policy formulation for the energy sector and for regulating electricity tariffs;  its
Ministerial Council is composed of the Minister s of the Economy, Mining, Finance, and Defence,
and the Secretary-General of the Presidency.  The Economic Load Dispatch Centre (CDEC) isan autonomous organization that groups the main generating companies in each regional grid;  it
coordinates the operation of the generators and transmission lines. The Superintendency of Electricity
and Fuels (SEC) is in charge of setting and enfo rcing technical regulations in the energy sector.
Market behaviour in the electricity market is supervised by Chile's competition authorities
(Chapter III(4)(i)).
67. About 38% of Chile's installed power generation capacity is hydroelectric.  Chile's generating
capacity is around 11,146 MW;  actual electricity production reached 45,483 GWh in 2002.  The
copper industry is by far the most important indust rial energy consumer.  Chile's energy sector was
privatized in the 1980s;  this process was completely finalized in 1998 when the State sold its
controlling share of the generating company Edelaysen S.A. to a private investor.
68. Most Chilean power generation companies are organized around four separated grid systems:
the Northern Grid (SING), which has about 33% of Chile's capacity;  the Central Grid (SIC), withabout 61% of installed capacity;  and the Aysen and Magallanes Grids in the South, with less than 1%
of installed capacity each.  In addition, self-producers account for about 5% of generating capacity.
Private-sector companies transmit electricity sold by the generating companies to power distribution
companies, final customers, and other power generating companies.  Chile has 13 major power
distributors.
69. Under the Electricity Law, a concession is required for the construction of hydro-electric
power plants and transmission lines.  Antitrust resolutions establish that generators are not allowed to
own transmission assets.  Foreign investment is allowed in all activities, including transmission
and hydroelectric generation.  The authorities indicate that the main share of the generation and
transmission capacity is foreign-owned.
70. There are two types of consumers in the Chilean market, classified by their power
requirements.  Those that require 2 MW or more are considered free consumers – about 100 large
industrial and mining companies – and are eligible to negotiate power purchase agreements with
generators.  Consumers that require less than 2 MW are considered regulated consumers and pay a
fixed tariff calculated by the CNE.  Every four years, the distribution value component of the tariff isdetermined and node prices are updated.
71. Chile's Central Grid's dependence on hydro-pow er was severely tested by a 1998-99 drought,
when, instead of producing their normal 80% of  energy consumption, hydro-power plants produced
only 60%.  Prior to that crisis, the CNE had already considered increasing the share of fuel
alternatives, and imports of Argentinian natural gas started in 1997.  The use of natural gas in Chile's
energy mix is expected to be approximately 33% by 2010.WT/TPR/S/124 Trade Policy Review
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72. In 2001, Chile imported 1,386GWh of electricity worth US$32.6 million;  all of it was
imported by the Northern Grid and came from an isolated Argentinian power plant.  The CNE has
announced that it will facilitate private investments in interconnections between the Northern and
Central Grids, and, if economically feasible, an interconnection between the Central Grid and
Argentina's grid.  A transmission line to export power to a mining project in Bolivia is also under
consideration by the private sector.
73. Expanding rural electrification has been one of the government's priorities since 1994, when it
established the Rural Electrification Programme (PER), coordinated by the CNE.  The original
objective of the programme was to reach 75% of rural households by 2000.  The CNE surpassed this
goal, by achieving a 78% national coverage rate by December 2000, and has revised its target to 90%
by the end of 2005.
74. A draft law on electricity is currently before Congress.  The Law is expected to modernize
Chile's electricity sector, addressing issues such as the regulation of transmission prices and
complementary services, and the procedures for the calculation of the node price.
75. Companies engaging in the transport, storage, or sales of combustibles must register with the
Superintendency of Electricity and Fuels.  In 2001, Chile imported crude petroleum and derivativesfor about US$2.1 billion.  Chile's domestic production of petroleum is equivalent to about 3% of
national demand.  The import tariff on crude petroleum and petroleum products is 6%, although the
actual tariff paid is much lower as most petroleum is imported from countries with which Chile has
preferential trade agreements.
76. About 90% of Chile's demand for fuels is met by  local refineries owned by the state-owned
National Petroleum Company (ENAP).  The authorit ies emphasized that ENAP's refineries compete
with imported products and that any interested investor can enter the refining market.
77. With a view to stabilizing internal prices of petroleum products, the Government created
the Fund for the Stabilization of Petrol Prices (FEPP) in 1991.  The Fund operates on the basis of a
price band for five petroleum products (gasoline, kerosene, diesel, fuel oil, and liquid gas).  The limits
of each price band are 12.5% above and below a central reference price, which is set weekly.  The
limits of the price band are compared to a parity price, which is based on relevant averageinternational prices plus cost, insurance, freight, and customs duties.  When the parity price exceeds
the upper limit of the price band, this difference is fully compensated by disbursements of the Fund.
If the parity price falls below the lower limit of the band, this difference is fully paid into the Fund.
As of mid 2003, the Fund is endowed with US$10 million.
78. Some vehicle fuels are subject to specific taxes in addition to VAT.  The tax on gasoline is
currently equivalent to about US$171 per cubic metre (about US$0.17 per litre), and the tax on diesel
is equivalent to US$28.5 per cubic metre (about US$0.28 per litre).  Fuels used in the production
process by the industrial sector and electricity generators are not subject to these specific taxes.
(5) M
ANUFACTURING
79. Although its value added in real terms has increased, the contribution of manufacturing to
GDP has declined, from 17.5% in 1996 to 16.0% in 2002.  The authorities indicate, however, that this
percentage does not include the activities of smelting, refining, and alloying, which are imputed to the
value added of the mining sector.  Employment in the sector decreased from 16.3% in 1996 to 14.2%
in 2002.  Chile's manufacturing sector makes intensive use of local natural resources, specifically
within the fishing, forestry, and mining sectors.  The most important manufacturing activities include
agricultural processing and packaging and product ion of chemical goods, paper, and steel productsChile WT/TPR/S/124
Page 73
(Table IV.9).  Annual foreign direct investment in the manufacturing sector averaged US$567 million
between 1996 and 2002.
Table IV.9
Value-added in the manufacturing sector, 1996-02
(Per cent and CH$ billion)
Sector 1996 1997 1998 1999 2000 2001 2002
Contribution of manufacturing to GDP
(1996, Ch$ billion)5,468 5,727 5,595 5,567 5,788 5,815 5,979
   Food, beverages and tobacco 31.3 30.4 30.7 31.4 31.2 32.6 ..
   Textiles 8.9 8.7 8.4 7.9 7.3 6.1 ..
   Wood and wood products 7.8 8.5 8.3 8.5 8.8 8.6 ..
   Paper 11.6 11.3 11.6 12.2 12.1 12.3 ..
   Chemicals and petroleum 19.7 19.9 20.5 21.0 21.1 21.4 ..
   Mineral products 5.5 5.5 5.8 4.9 5.2 5.3 ..
   Raw metals 3.6 3.7 3.3 3.4 3.3 3.2 ..
   Steel products 11.2 11.6 11.0 10.5 10.7 10.2 ..
   Others 0.4 0.4 0.4 0.3 0.3 0.3 ..
.. Not available.
Source: Central Bank of Chile.
80. Based on the SITC classification of goods, Chile exported manufactured goods for
US$3,184 million and imported manufactured goods for US$11,804 million in 2001.  The most
important export destinations for Chile's manufactures include the United States (20.9%), Argentina
(10.6%), Peru (9.1%), Mexico (8.9%), and Brazil (8.7%).  Manufactured imports originate mainly in
the United States (28.7%), Brazil (8.9%), Germany (5.5%), and Argentina (5.3%).  Chile is a net
importer of all major categories of manufactured goods;  its most important manufactured exports arechemicals and other semi-manufactures.  Imports centre around machinery, transport equipment, and
chemicals.
81. The State's involvement in manufacturing activities is very limited.  There are three
manufacturing enterprises:  ASMAR, a military shipyard, with annual sales of about US$70 million in
2002;  ENAER, the national aeronautical enterprise, with annual sales of US$100 million in 2002;and FAMAE, which fabricates mainly firearms and other products related to national defence, with
annual sales of US$1 million in 2002.
82. Chile has generally restricted the use of trade policy measures as instruments of industrial
policy.  Based on the ISIC definition, the average tariff for the manufacturing sector is 5.9% (as of
March 2003).  With the exception of 95 tariff lines that are duty-free, all manufactured goods aresubject to an MFN tariff of 6%.  In the Uruguay Round, Chile bound all its manufactured goods at a
uniform rate of 25%, with the exception of six items that already had lower bound rates as a result of
pre-Uruguay Round Commitments (Chapter III(2)(iv)(b)).  Like other activities, the manufacturing
sector is eligible for two duty drawback systems and a system of deferred payment of customs duties
and tax benefits (Chapter III(3)(v)).
83. Since its last Review in 1997, Chile has taken four definitive anti-dumping actions against
imports of various steel products from Russia and the Ukraine;  however, none of these measures is
still in place.  Since its adoption of legislation on  safeguard measures in 1999, two of the six definitive
measures taken by Chile affected manufactured goods:  socks of synthetic fibre;  and various steel
products (Chapter III(2)(ix)(b)).WT/TPR/S/124 Trade Policy Review
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84. In addition to the value-added tax of 18%, specific taxes apply to some manufactured
products.  The goods affected include jewellery, alcoholic and non-alcoholic beverages, vehicles, and
tobacco products (Chapter III(2)(vii)).  The taxes apply to national and foreign goods alike.
85. Since 1997, no major changes have taken place in the legal framework governing foreign
direct investment in the manufacturing sector. Chil e's FDI regime is generally based on the principle
of non-discrimination between nationals and foreigners (Chapter II(4)).
86. Chile's automotive industry is relatively small, consisting of two minor motor vehicle
assembly plants.  Production, which has been falling since 1996, consists of pick-up trucks and
passenger motor vehicles;  12,524 and 1,468 units were produced, respectively, in 1999, the last year
for which data were available.  Chile maintained trade-related investment measures in the automotive
sector until February 2003 (Chapter III(3)(vii)).  Since then, no special programme for the automotive
industry has been in place.  Other measures that apply to the automotive sector include:  (i) a specific
tax on vehicles applicable above a specific c.i. f. value, and (ii) an import prohibition on used
automobiles (Chapter III(2)(vii) and (v iii)).
(6) SERVICES
(i) Principal characteristics
87. In 2002, the service sector contributed 52.7% to GDP, up from 51.7% in 1996.20
Employment in the sector grew faster than in others;  in 2002, 62.8% of the economically active
population worked in the services sector, up from 57.9% in 1996.  In 2001, Chile's services exports
amounted to Ch$2,342 billion and imports amounted to Ch$1,884 billion.
88. According to figures provided by the Foreign Investment Committee, annual foreign direct
investment in the services sector averaged US$1,762 million between 1996 and 2002.  Foreign
investment in Chile's services sector is subject to the provisions of the Investment Law or ofChapter XIV of the Central Bank's Compendium of Foreign Exchange Regulations (Chapter II(4)).
Sectoral exceptions to market access remain in maritime transport.
89. As a consequence of Chile's long running privatization policy, state involvement in services is
limited.  The State retains ownership of BancoEstado, the postal and railway services, and public
television.  The State also owns major seaports and airports;  however, these have been increasinglygiven in concession to private operators.  The authorit ies indicate that involvement of the State in any
of the sectors mentioned does not in any way preclud e private participation.  Since Chile's last Review
in 1997, the privatization process has focused on water management and seaports.
90. In the context of preparations for the 1999 Ministerial Conference, Chile, together with
Australia and New Zealand, proposed that the services negotiations should improve market accesssignificantly for developed and developing countries.  To this end, the negotiations should achieve
higher levels of liberalization in all services sectors, including air and maritime transport;
simplification of schedules, and greater transparency in commitments;  limitation of scope and
number of MFN exceptions;  and the development of binding rules on domestic regulation.
21
91. In the ongoing negotiations on services, Chile has emphasized the importance of eliminating
the lack of symmetry in the commitments undertaken by Members in respect of the different modes of
                                                     
20 Following the UN System of National Accounts, the construction, electricity, and water industries
are part of the industrial sector.
21 WTO document WT/GC/W/204, 14 June 1999.Chile WT/TPR/S/124
Page 75
supply recognized by the GATS.22  It noted with concern that commitments in mode 4, i.e. the supply
of services through the presence of natural persons, are primarily horizontal and these horizontal
commitments are subject to many kinds of limitations.  Further, they are bound for only a small subset
of service personnel related to commercial presence and at higher levels, and very few commitments
extend to independent movement.  Chile indicated as main sectors of interest:  professional services,
construction and engineering, transport services, telecommunication services, distribution services,and energy services.
(ii) Overall commitments under the GATS and other agreements
92. Chile's Schedule of Specific Commitments under the WTO General Agreement on Trade in
Services (GATS) includes commitments in seven of the twelve categories of services (Table IV.10).
23
In general, Chile's GATS commitments tend to bind the policy framework in place at the time of the
Uruguay Round negotiations.  In most cases, however, the policy applied is more liberal than those
commitments.
93. Chile's horizontal limitations contain a provision under which authorization for foreign
investment in service industries may be contingent on a number of factors, including employment, the
use of local inputs, and competition.  Under the horizontal limitations, foreign investors are notallowed to transfer their capital abroad until the el apse of three years.  However, in practice, the
Foreign Investment Statute (Decree Law No. 600) allows for the transfer of capital one year after it
has been brought to Chile, and capital brought to Chile under Chapter XIV of the Central Bank's
Compendium on Foreign Exchange Regulations can be transferred at any time (Chapter II(3)).
Table IV.10
Summary of Chile's commitments under the GATSa
Market access National treatment
Modes of supply:
Cross-border supply 1 1
Consumption abroad 2 2
Commercial presence 3 3
Presence of natural persons 4 4
Commitments (■ full;  ◨ partial;  □ no commitment; – not appearing in Schedule)
Horizontal limitations No No Yes Yes No No Yes Yes
Commitments in specific sectors
1. Business services
A. Professional services
Legal services: solely advice on matters of public international law
and international commercial law.□□■◨□□■◨
Accounting and auditing: financial auditing, accounting review. □□■◨□□■◨
Architectural services: advisory and pre-design architectural
services, architectural design.□□■◨□□■◨
Engineering services: engineering design services for industrial
processes and production, engineering design services relating tosanitary works, mechanical engineering design services, electrical
engineering design services, chemical and process engineering
design services, environmental engineering design services.□□■◨□□■◨
Table IV.10 (cont'd)
                                                     
22 WTO document S/CSS/W/88, 14 May 2001.
23 WTO documents GATS/SC/18, 15 April 1994, GATS/SC/18/Suppl.1, 28 July 1995, GATS/SC/18/
Suppl.2, 11 April 1997, and GATS/SC/18/Suppl.3, 26 February 1998.WT/TPR/S/124 Trade Policy Review
Page 76
Market access National treatment
Modes of supply:
Cross-border supply 1 1
Consumption abroad 2 2
Commercial presence 3 3
Presence of natural persons 4 4
Commitments (■ full;  ◨ partial;  □ no commitment; – not appearing in Schedule)
E. Leasing services (without operator)
Leasing or rental services concerning private cars, leasing or rental
services concerning aircraft, leasing or rental services concerning
agricultural machinery and equipment, leasing or rental services
concerning construction machinery and equipment.□□□◨□□■◨
F. Other business services
Management consulting services: general management consulting
services, financial management consulting services, marketingmanagement consulting services, production management
consulting services, human resources management consulting
services.□□■◨□□■◨
2. Communications services
C. Telecommunications services.
Telephone services, packet-switched data transmission services,
circuit-switched data transmission services, telex services,
telegraph services, facsimile services, private leased circuitservices, domestic and international satellite services and satellite
links/capacity, mobile/cellular services, personal communications
services, paging services, mobile data transmission services.■■◨□■■■□
4. Distribution services --------
5. Education services --------
6. Services related to the environment --------
7. Financial services
A. Insurance and reinsurance
Sale of health insurance (excluding insurance related to social
security institutions), sale of direct general insurance, credit
insurance.□□■◨□□■◨
Reinsurance and retrocession ◨□■◨◨□■◨
Broking and agency services ■□◨◨■□■◨
Securities services: intermediation of publicly offered securities
except shares, intermediation of publicly offered shares in
corporations, securities risk rating; securities custody undertakenby securities intermediaries, financial advisory services provided
by securities intermediaries, financial portfolio management by
security intermediaries, general deposit warehouses (warrants)□□■◨□□■◨
B. Banking services
Acceptance of deposits, purchase of publicly-offered securities,
operation of credit cards, discounting or acquisition of bills ofexchange and promissory notes, endorsement and guarantee of
third party liabilities in Chilean currency, securities custody,
financial leasing, advisory and other auxiliary financial services.□□■◨□□■◨
Credit granting, issue of credit cards, ■□■◨■□■◨
8. Social and health services --------
9. Tourism and travel-related  services
A. Hotels and restaurants
Table IV.10 (cont'd)Chile WT/TPR/S/124
Page 77
Market access National treatment
Modes of supply:
Cross-border supply 1 1
Consumption abroad 2 2
Commercial presence 3 3
Presence of natural persons 4 4
Commitments (■ full;  ◨ partial;  □ no commitment; – not appearing in Schedule)
Hotel lodging; motel lodging, apartment-hotels; camping services,
full restaurant services, meal serving service in self-service
facilities, caterer services, bars without entertainment, bars withentertainment.□■■◨□■■◨
B. Travel agency and group travel services
Travel agencies and tour operators, tourist guide services □■■◨□■■◨
11. Transport services
C. Air transport services
Opening of offices, issue and sale of air-transport fares and tickets,
ground operation of support equipment, aircraft maintenance.□□■◨□□■◨
Computer reservation systems. ■□■□■□■□
12. Other services --------
a The only authentic source of information on these commitments is Chile's Schedule of Specific Commitments contained in
documents GATS/SC/18 (15 April 1994), GATS/SC/18/Suppl.1 (28 July 1995), GATS/SC/18/Suppl.1/Rev.1 (4 October 1995),
GATS/SC/18/Suppl.2 (11 April 1997) and GATS/SC/18/Suppl.3 (26 February 1998).
Note: Subsectors not listed under each sector do not appear in the Schedule either.  Horizontal limitations apply even in case o f full
specific commitments.
Source: WTO Secretariat.
94. Horizontal limitations also cover the temporary presence of natural persons.  Restrictions
apply to the presence of senior and specialized foreign personnel, who must have worked in their
company for at least two years and must be domiciled in Chile.  Limits are also set on the proportion
of foreigners allowed to work in foreign companies:  foreign natural persons may not make up more
than 15% of the total staff employed in Chile.  A ll providers of services are admitted on a temporary
basis for a renewable period of two years.  Temporary admission also applies to foreign personnel inother sectors of the economy.
95. Chile's MFN exemptions include measures establishing dispute settlement procedures
contained in existing or future bilateral treaties on the protection of investment, reciprocal measures
concerning access to freight by Chilean vessels, international maritime freight transportation
exceeding 900 tonnes with Brazil, the taxation of ma ritime freight rates and commissions, maritime
cabotage, international land transport, and audiovisual services.
24
96. In addition, most of Chile's preferential trade agr eements contain provisions to facilitate trade in
services.  The bilateral agreements with Colombia, Ecuador, and Venezuela establish the commitment to
facilitate trade in services, and there are specific commitments regarding maritim e and air transport. The
agreements signed with Canada, Mexico, Costa Rica, and El Salvador contemplate a NAFTA-type
liberalization of services with a negative list, while the agreement with the EU contains a positive list of
sectors to be liberalized.  Chile's agreement with MERCOSUR provides for the liberalization of services
based on the parties' respective GATS commitments.
                                                     
24 WTO document GATS/EL/18, 15 April 1994.WT/TPR/S/124 Trade Policy Review
Page 78
(iii) Financial services
97. In 2002, financial services (including rent of buildings) accounted for 12.4% of GDP, up from
12.1% in 1996.  Employment in financial services increased from 6.8% of the labour force in 1996 to
7.8% in 2002.  Foreign direct investment plays a crucial role in the sector and totalled US$12.9 billion
between 1996 and 2000.25  According to the Central Bank, Chile's imports of financial services
were Ch$684 billion in 2001, equivalent to about US$1.08 billion;  exports amounted to
Ch$274 billion (about US$432 million).
(a) Banking
98. As of December 2002, Chile's banking system he ld about US$63 billion in assets, equivalent
to about 98% of GDP.  Chile's banking sector comprises fifteen private banks (of which six are
controlled by foreign banks), one Government-owned bank (BancoEstado), and nine branches offoreign banks.  Foreign-owned or controlled banks and branches account for about 45% of total
deposits and loans.  BancoEstado is a commercial bank subject to the same regulatory environment as
privately owned banks;  it seeks to ensure bankin g services to all regions, maintaining a large volume
of passbook savings accounts and making a substantial amount of low-income housing loans.
99. Chile's banking sector has undergone significant changes in recent years, most notably
various mergers and acquisitions, which has led to increasing concentration in the sector.  The ten
largest banks account for some 85% of deposits and loans.  Interest rates have been decreasing since
1998 (Table I.1).  The average spread between lending and deposit rates has ranged between 3.7% and
5.7% since 1996.  As at March 2003, the lending rate stood at 5.7% and real interest rate at about
1.6%.  Dollarization of Chile's banking system remains relatively low;  by the end of 2002, 10% of
bank deposits were dollar-indexed.
100. Chile's banking sector is regulated by the Superintendency of Banks and Financial Institutions,
an autonomous institution linked to the Ministry of Finance, and the Central Bank of Chile.
101. Registration and approval procedures for banks ar e laid out in Articles 27 to 39 of the Bank Law
of 26 November 1997 (Decree with Force of Law N o. 3/1997), which consolidates a number of former
legal instruments.  An application to establish a bank must be submitted to the Superintendency;  a
prospectus must describe the f undamental characteristics of the project and be accompanied by a
business plan for the first three years and a guarantee for 10% of the joint capital.  The minimum
capital requirement is 400,000 U.F.
26  Under Article 28 of the Bank Law, founding shareholders with
a significant participation must meet the requirements of solvency and integrity.  The
Superintendency may reject the brochure, within a period of 180 days, by means of a resolution
stating that the founding shareholders do not meet these requirements.  There is no economic needstest.
102. There are no limits to the shares a single investor may own in a bank, or to the overall
percentage of the banking system an investor may control.  For public interest reasons, however, any
person acquiring, directly or through third parties, more than 10% of a bank's capital must obtain the
prior authorization of the Superintendency.
103. Foreign banks may establish subsidiaries or branch offices in Chile.  Pursuant to Article 29, the
home country of the parent company must enforce adequate supervision of the bank's operations.
                                                     
25 Due to the use of different methodologies, Central Bank figures do not match those provided by the
Foreign Investment Committee.
26 As at August 2003, one U.F. (Unidad de Fomento) was equivalent to US$23.80.Chile WT/TPR/S/124
Page 79
Foreign banks incorporated in Chile and branch offices are allowed to undertake the same range of
activities as national banks and are subject to the same regulations.   The authorities indicated that since
Chile's last Review in 1997 no request by foreigners to establish a bank or branch office in Chile has
been denied.
104. The Bank Law also contains prov isions on the activities of Chilean banks abroad.  Pursuant to
Article 76, Chilean banks may open branch or repres entation offices abroad, but must to obtain the
approval of the Superintendency and the Central Bank.
105. Chile participated in the extended GATS negotiations on financial services, and signed the
Fifth Protocol to GATS.  Under Chile's specific GATS commitments, for financial services no
limitations are entered on market access and national treatment for the commercial presence of
foreign suppliers for a number of individual banking services (Table IV.10).  However, Chile'sschedule provides for the right to use an economic needs test, limit individual shareholdings, and
oblige foreign banks to localize capital.
106. In addition to the horizontal measures in Section I of Chile's Schedule of Specific
Commitments its new section on financial services provides for an economic needs test for foreign
investment in financial services.
27  Foreign financial services providers that wish to establish a
commercial presence in Chile must obtain authorization from the Superintendency of Banks and
Financial Institutions in the case of banking servi ces and from the Superintendency of Securities and
Insurance in the case of insurance services.  Aut horization depends on market conditions and national
interest.  Furthermore, foreign as well as national banks are allowed to offer insurance services only
through specially incorporated subsidiaries, with  own capital and following authorization by the
Superintendency of Banks and Financial Institutions.
107. Chile's schedule of commitments permits foreign investors in the financial services sector to
transfer their capital abroad two years after bringi ng it into Chile.  In practice, however, the Foreign
Investment Statute (Decree Law No. 600) allows for th e transfer of capital one year after it has been
brought to Chile;  no such restriction exists for capital brought under Chapter XIV of the Central
Bank's Compendium on Foreign Exchange Regulations (Chapter II(3)).
(b) Insurance
108. At the end of 2002, there were 55 insurance companies operating in Chile, of which 23 were
providers of property insurance and 32 were life insurance companies.  Since 1997, three new general
and nine life insurance companies have been incorporated,  and four general and nine life insurance
companies have closed down or were absorbed through mergers and acquisitions.
109. Chile's insurance sector is governed by the Insurance Law (Decree with Force of Law
No. 251 of 1931).  The Superintendency of Securities and Insurance is res ponsible for the enforcement
of the Law and for regulating the Chilean sector.
110. Licences for insurance and reinsurance providers are granted by the Superintendency of
Securities and Insurance.  Any interested le gal or moral person must meet a minimum capital
requirement of U.F. 90,000 (equivalent to US$2.7 m illion) for an insurance company, and U.F. 120,000
for a reinsurance company (US$3.6 million).  The Superi ntendency must be informed of the identity of
any shareholders with a participation of 10% or mo re, who must fulfil the requirements of integrity and
solvency.  Foreign insurance providers that wish to offer insurance or reinsurance services in Chile must
incorporate a Chilean company.  In addition, foreign providers establishing a Chilean reinsurance
                                                     
27 WTO document GATS/SC/18/Suppl.1, 28 July 1995.WT/TPR/S/124 Trade Policy Review
Page 80
company must have an international risk rating of at least BBB.  Companies providing life insurance
are not allowed to offer property insurance and vice versa.  Insurance premiums are set freely by the
individual companies and are not subject to approval by the Superintendency.
111. Chilean nationals may buy insurance abroad with the exception of compulsory insurance,
such as automobile liability and pension and invalidity insurance, which must be contracted with
companies established in the Chilean market.  The authorities note that there are no obligations ondomestic enterprises to employ specified insurance companies.
112. According to Article 46 of the Insurance Law, the business of insuring or covering risk based
on premiums can be undertaken only by insurance and reinsurance corporations that are exclusively
dedicated to carrying out insurance and other related activities.
113. Chile's Schedule of Commitments lists no limitations on market access and national treatment
for the commercial presence of foreign suppliers for a number of individual services (Table IV.10).
However, the Schedule also establishes that insurance services may be supplied only by incorporated
capital companies that provide either life or property insurance.
(c) Capital markets
114. Since Chile's last Review in 1997, the Government has taken a number of measures aimed at
modernizing the domestic capital market and allowing for greater financial integration.  In particular,
Law No. 19.769 of 11 October 2001 introduced a number of institutional and fiscal reforms.  The law
provides for a deregulation of the rules governing mutual funds, most notably by improving the
flexibility of investment limits and thus allowing the design of more efficient portfolios.  It also
created the post of the General Fund Administrator, which allows asset managers to simultaneously
manage mutual funds, investment funds, and housing  funds.  The law introduced various tax reforms,
reducing stamp taxes, capital gains taxes, and interest taxes for foreign investors.
115. The authorities indicate that a draft law for venture capital is under preparation.
(iv) Telecommunication
116. The Chilean telecommunications industry has expanded rapidly in recent years.  The
contribution of the communications subsector to Chile's GDP increased from 1.9% in 1996 to 3.1% in
2002.  Growth rates have been particularly high for mobile connections, which increased more than17-fold between 1996 and 2002 (Table IV.11).  There are 14 fixed-net service providers, five
providers of mobile services, and 20 companies providing international telecommunications services.
Telefónica CTC has a dominant market position as a fixed-net provider in 10 of Chile's 13 regions.
Since the early 1990s, Chile's telecommunication sector has been fully privatized;  the State is not
involved in the provision of telecommunications services.
117. The telecommunication sector is regulated by the Sub-secretary of Telecommunications
(Subtel).  Subtel is in charge of implementing and overseeing the application of the
Telecommunication Law (Law No. 18.168 of 2 October 1982).
118. Pursuant to Article 8 of the Telecommunication Law, a concession is required for offering
public telecommunications services.  Concessions are granted by Subtel by means of supremedecrees.  Once granted, a concession to provide telecommunication services is valid for 30 years.  A
concession or licence is required for the use of the radio-wave spectrum;  the fees for the different
types of concessions or licences are set out in Article 32 of the Telecommunication Law.Chile WT/TPR/S/124
Page 81
Table IV.11
Telephone connections in Chile, 1996-02
(Number of lines/subscriptions and per cent)
1996 1997 1998 1999 2000 2001 2002
Fixed
   Number of lines 2,264,342 2,693,286 3,046,698 3,108,799 3,302,506 3,478,490 3,531,734
   Penetration (%)a15.6 18.3 20.4 20.6 21.6 22.4 22.7
Mobile
   Number of subscriptions 319,474 409,740 964,248 2,260,687 3,401,525 5,271,565 5,714,088
   Penetration (%)a2.2 2.8 6.5 15.0 22.2 34.0 36.7
a Defined as the quotient between number of lines/subscriptions and population.
Source: Sub-secretary of Telecommunications (Subtel).
119. Service providers are free to set prices or rates for telecommunication services.  Article 29 of
the law provides for the possibility of official price setting by the regulatory authorities when market
conditions are considered insufficient;  according to  the authorities this provision has been applied
several times since the law entered into force.
120. In accordance with Articles 25 and 30 of the Telecommunication Law, interconnection
charges are set by Subtel through decrees.
121. In 1994, the Chilean Government established the Telecommunications Development Fund to
encourage improved telecom service to rural and low in come areas.  The original goal of the fund was
to provide public telephone service to about 6,000 unserved localities, a target that was met over the
five-year period 1995-99.  After this objective was achieved, the government redefined the fund tosupport community telecenters, which offer various kinds of communication services, including
internet access, to the public.  An initial target is to install telecenters in about 90 municipal towns
with over 8,000 rural inhabitants.  By 2006, there would be telecenters in all 341 municipalities.  The
Fund is administered by Subtel and financed  by contributions from the government budget.
122. The Telecommunication Law provides for a number of exceptions to national treatment for
television and broadcasting companies.  Pursuant to Article 22 of the law the presidents, managers,
administrators, and legal representatives of such companies must be Chilean nationals.  The Law
further establishes that, while directors may be of foreign nationality, the majority must be Chilean
nationals.  However, there are no equity limits to foreign investment.
123. Chile participated in the Negotiating Group on Basic Telecommunications and has signed the
Fourth Protocol to the General Agreement to Trade in Services.  The adoption of the Fourth Protocol
expanded Chile's commitments for numerous telecommunication services, most notably for mode
2 supply (consumption abroad).  Chile's Schedule of Commitments in telecommunications services
allows the commercial presence of foreign companies, provided that they obtain a concession issued
by Subtel, but excludes basic local telecommunication services.
28  In the context of this Review the
authorities indicated that this exclusion reflected policy considerations at the time of the negotiations.
Long-distance telephone services may be provided only by listed companies.  In addition, the
Schedule includes measures to prevent major telecommunications service providers from engaging in
anti-competitive practices.
                                                     
28 WTO document GATS/SC/18/Suppl.2, 11 April 1997.WT/TPR/S/124 Trade Policy Review
Page 82
124. In the ongoing service negotiations, Chile has supported extensive liberalization of all basic
telecommunication services, based on the principle of non-discrimination.29  In Chile's view, such
liberalization must be effected by each Member as an extension of its current commitments, within
the framework of its legal system and its institutional regulations.
(v) Transport
(a) Introduction
125. Chile's transport sector accounted for 5.0% of GDP in 2001, up from 4.5% in 1996.  The
Ministry of Public Works, through the Subsecretary of Transport is responsible for regulating Chile's
transport sector.
126. Chile's GATS commitments for transport services are relatively limited, but no limitations are
listed on market access and national treatment for the commercial presence of foreign suppliers for anumber of services related to air transport (Table IV.10).  In the ongoing WTO negotiations on
services, Chile expressed its hope that substantial progress would be achieved in the liberalization of
air and maritime transport services, which have remain ed subject to weaker disciplines with little or
no liberalization.
30
(b) Maritime transport
127. Chile's main maritime ports in volume terms are San Antonio, San Vicente, Patillos and
Huasco/Guacolda (Table IV.12).  Chile's national merchant fleet has about 8 00,000 gross registered
tonnes.
128. Since Chile's last Review in 1997, the State has further reduced its role in maritime transport.
As part of its privatization policy, the Chilean st ate gave various seaports in concession in 1999 and
2000.  These include the ports of Valparaíso, San Anto nio, Iquique, and San Vicente.  Furthermore, the
ferry company Transmarchilay was privatized in 1999.
Table IV.12
Major Chilean ports, handled cargo, 1996-01('000 tonnes)
1996 1997 1998 1999 2000 2001
Ports Import Export Import Export Import Expor t Import Export Import Export Import Export
San Antonio 3,233 1,696 3,154 1,554 3,583 1,863 3,885 2,197 4,305 2,376 3,731 2,464
San Vincente 2,493 2,894 1,961 2,798 2,036 2,558 2,245 2,142 2,783 2,434 2,587 2,873
Patillos .. 3,822 .. 3,037 .. 2,058 .. 2,827 .. 2,559 .. 4,195
Valparaíso 2,494 2,090 1,909 2,068 1,714 2,178 1,389 2,220 1,372 1,781 1,338 2,569
Huasco/Guacolda 605 3,491 547 3,568 544 3,785   699 3,258 725 3,757   526 3,422
Quintero 3,096   121 3,113 121 3,409   216 3,892   434 4,079 870 2,465   686
Guayacán    20 3,394    44 3,074 .. 3,062 .. 2,381 .. 2,747 .. 2,774
.. Not available.
Source: General Directorate of the Maritime Territory and Merchant Marine .
129. Maritime transport is regulated by the Subsecretary of Transport of the Ministry of Public
Works, the Merchant Marine Commission, and the General Directorate of the Maritime Territory and
                                                     
29 WTO document S/CSS/W/88, 14 May 2001.
30 WTO document S/CSS/W/88, 14 May 2001.Chile WT/TPR/S/124
Page 83
Merchant Marine of the Ministry of Defence (DIRECTEMAR). The Subsecretary of  Transport
regulates commercial aspects of international transport and cabotage.  The Merchant Marine
Commission is in charge of ensuring that the pr inciple of reciprocity is enforced.  The General
Directorate of the Maritime Territory and Merchant Marine is in charge of safety at sea, and grants
licences to crew members.
130. Maritime transport is governed by Decree Law  No. 2.222 of 31 May 1978 and the Maritime
Transport Law (Law No. 3059 of 21 December 1979).  Chile has been a member of the International
Maritime Organization since 1972 and has signed several international conventions on maritime
transport.31  Chile has made no GATS commitments on maritime transport.
131. Article 11 of Decree Law No. 2.222 establishes that only a Chilean national or company
incorporated in Chile is allowed to register a ship in Chile.  However, ship s, other than for fishing,
owned by foreigners may be registered as Chilean sh ips if the foreigners are domiciled in Chile, if the
principal location of their business is Chile or if th ey exercise permanently a profession in Chile.  The
chairperson, managers, and directors of such a sh ipping company must be Chilean, and more than
50% of the capital of the company must be owned by Chileans.
132. Pursuant to Article 3 of the Maritime Transport Law, national maritime cabotage is reserved for
Chilean enterprises.  However, foreign vessels may participate in normal coastal trade when the volume
concerned exceeds 900 tonnes;  prospective carriers must participate in a public tender for a concession.
For cargo inferior to 900 tonnes, foreign vessels may also be used when no Chilean vessel is available.
Furthermore, foreign vessels are allowed to engage in cabotage of empty containers under the principle
of reciprocity.  Transport from and to the har bour of Aríca is not cons idered national cabotage.
133. In the WTO ongoing service negotiations, Chile has stated that the negotiations should seek to
promote an international maritime transport system based essentially on market competition betweenshipping companies, with a minimum of interference and regulation.  Negotiations should thus focus
on international maritime transport services, auxiliary maritime services, and access to and use of port
infrastructure and services.
32  Chile is a proponent of meaningful liberalization of maritime transport
services.33
134. Chile signed a bilateral maritime transport agreement with Brazil in 1974, under which all
maritime transport between the two countries must be carried on vessels flying the Chilean or Brazilian
flag;  oil and its by-products and natural liquid gas are exempt from this provision.  Transport in vessels
that are neither Chilean nor Brazilian is allowed onl y if no other means of transportation is available;
cabotage is excluded from the agreement.
(c) Air transport
135. Air transport in Chile is governed by the Law on Commercial Aviation (Decree Law
No. 2.564) of 22 June 1979.  The air transport policy laid down in this law is based on the principles
                                                     
31 Chile has signed the International Convention for the Safety of Life at Sea (SOLAS), the Convention
on the International Regulations for Preventing Collisions at Sea, the International Convention for thePrevention of Pollution from Ships (MARPOL), the Convention on Facilitation of International MaritimeTraffic, the International Convention on Load Lines, the International Convention on Civil Liability for Oil
Pollution Damage, the International Convention for Safe Containers, the International Convention on Maritime
Search and Rescue, the Convention for the Suppression of Unlawful Acts against the Safety of MaritimeNavigation, and the International Convention on Oil Pollution Preparedness, Response and Co-operation.
32 WTO document S/CSS/W/88, 14 May 2001.
33 WTO document TN/S/W/11, 3 March 2003.WT/TPR/S/124 Trade Policy Review
Page 84
of open skies, free competition between airlines, and freedom of price-setting.  Chilean and foreign
airline companies are allowed to supply commerci al air transport services both domestically and
internationally. However, pursuant to Article 2 of  the Law on Commercial Aviation, the participation
of foreign companies is allowed only on the basis of reciprocity.
136. Commercial air transportation is supervised by the Civil Aeronautics Board (JAC) of the
Ministry of Transport, while the General Directorate of Civil Aeronautics (DGAC) is responsible foroperational matters.  The JAC and the DGAC approve the entry of new airlines to the Chilean market;
approval is contingent on compliance with technical requirements and reciprocity conditions.  The
National Directorate of Airports (DAP) supervises investments in Chile's airports.
137. The DGAC supervises 35 airports.  The most important is Santiago international, which
receives more than 90% of all international passengers and cargo.  In 2002, there were more than3 million international passenger arrivals and departures, up from 2.4 million in 1996.  National air
transport also carried over 3 million passengers in 2002.  Out of 27 airlines operating in Chile, six are
private national companies.
138. Chile's airports are state-owned, but their construction and administration, including the
provision of terrestrial auxiliary services, has been given in concession to private enterprises.  Withthe exception of air traffic control, the State is not involved in the provision of air transport or
auxiliary services.  The State fixes and collects the fees for the use of airports and air traffic control.
139. Chile's GATS commitments for air transport services lists no limitations on market access and
national treatment for the commercial presence of foreign suppliers for the opening of offices, the
issue and sale of air-transport fares and tickets, ground operation of support equipment, and aircraft
maintenance (Table IV.10).
140. Chile has concluded international air transport agreements with several countries
(Table AIV.1);  14 further agreements have been negotiated but not yet ratified.  Provisions on
international air transport are also contained in Chile's preferential trade agreements with Costa Rica,
El Salvador, and Mexico.
141. In 2002, a Multilateral Agreement on the Libera lization of Air Transportation concluded by
seven APEC members entered into force.  The Agreement eliminates the traditional ownershipprovisions found in most bilateral agreements and creates a multilateral process for dealing with
issues like accession, amendments to the agreement, dispute resolution and outside relationships.  In
2003, Chile, together with Brunei, New Zealand, and Singapore, also signed an optional protocol to
the agreement allowing national cabotage and the 7
th freedom for passenger transport.Chile WT/TPR/S/124
Page 85
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