Copyright 2007© TradeChile Chilean Representative Office of the Ontario Ministry of Economic Development & Trade

Copyright 2007© TradeChile

Chilean Representative Office of the Ontario Ministry of Economic Development & Trade


TradeChile S.A.TradeChile S.A.

Leader in international consulting services in Chile Over 10 years of experience Assisted over 2,000 SMEs and over 33,000 matchmaking meetings Clients:

Ontario Ministry of Economic Development and Trade PEI, STEP Council of Great Lakes Governors (CGLG): NY, PA Ohio in Chile, Peru and Argentina Chilean Economic Development Agency (CORFO)

Member of relevant organizations and business associations: Chile Canada Chamber of Commerce, Canadian Commercial

Service in Santiago, Santiago Chamber of Commerce, Corporation of Capital Goods, industry associations

www.tradechile.cl


Strategies & Services Provided

Agent/Distributor Searches and Matchmaking Trade event organization and participation Business referrals and advising Maintenance and development of trade contacts database Identification and submitting of trade contacts and leads Arrangement of business appointments and logistical support Participation in Seminars and Conferences / Annual State Trips Organization of Group Trade Missions Promotion of foreign client’s industry and economic information

Objective: “To achieve a measurable increase in the exports of the Ontario products and services to Chile.”



Area: 293,000 m2

Population – 16.8 M (Growth rate: 0.94%) Language: Spanish Capital: Santiago Urban Centers:

Santiago 6.5M Valparaiso 1M Concepcion 1M

Workforce - 7.2 M (~41% women) Life expectancy – 78.5 yrs Mobile phone penetration: 97%

Chile at a Glance


Sustained Economic Growth


Declining Poverty Rates(as percentage of population)

3,8

15,7

3,2

13,7

4,7

18,8

5,3

20,6

5,6

21,7

5,8

23,2

7,6

27,5

8,8

32,6

12,9

38,6

17,4

45,1

0

10

20

30

40

50

1987199019921994199619982000200320062009

Below PovertyLine

Indigent


South America Rank World Rank1 28

Institutions 1 37Infrastructure 1 30Macroeconomic Stability 1 14Health and Primary Education 6 73Higher Education / Training 1 50Goods Market Efficiency 1 26Labour Market Effciency 1 17Financial Marke Sophistication 1 29Technological Readiness 1 42Market Size 6 47Business Sophistication 1 31Innovation 2 56

Global Competitiveness Index

12 Pillars

Global Competitiveness Index

2008-2009


Inflation Comparison

100

120

140

160

180

200

220

240

260

280

2005 2006 2007 2008 2009* 2010*

Ind

ex(2

000

= 10

0)

Chile Colombia Brazil Argentina

Chile has had the lowest inflation rate among the major Latin American economies

Source: IMF World Economic Outlook Database: October 2008



Country FactsCountry Facts

*PPP = Purchasing Power Parity

Chile Peru

GDP growth 2009 -1.5% 1.1%

GDP growth 2010 (est.) 5% - 5.5% 7% - 9%

GDP (PPP*) US$257 billion US$243 billion

GDP per capita (PPP*) US$14,939 US$8,646

Population 17 million 30 million

Inflation 2010 (est.) 3.9% 2.5%

Unemployment rate 2009 9.6% 8.1%

Total trade 2009 US$93.5 billion US$47.9 billion

Trade balance 2009 +US$14 billion +US$5.9 billion

Main trade partnersUnited States, China,

Japan, ArgentinaUnited States, China,

Canada, Ecuador


Country Ratings & RankingsCountry Ratings & RankingsChile Peru

S&P 2010 AA BBB+

Fitch 2010 A BBB-

Moody's 2010 Aa3 Baa3

Global Competitiveness Index 2010-2011 (out of 133 countries)World Economic Forum

30th 73rd

Doing Business 2011 (out of 183 countries)World Bank

43rd(3rd, after Peru &

Colombia)

36th(1st in SA)

Number of days for starting a business

22 days 27days

Cost to import (US$ per container) 795 730

Enforcing contracts68th

480 days118th

842 days


Public Debt vs GDP

0

10

20

30

40

50

60

70

Urugu

ay

Argen

tina

Colom

bia

Bolivia

Brazil

Peru

Parag

uay

Mex

ico

Venez

uela

Chile

% o

f G

DP

Chile’s public debt to GDP ratio is the lowest in South America and 4th lowest in the world.

Source: CIA The World Factbook 2008



Trade Agreements with more than 50 markets: Canada, Mexico, USA, Central America, South Korea, EU, India, Singapore, New Zealand, China, Japan, Peru, Colombia, China

Negotiating with Malaysia, Nicaragua, Thailand, Vietnam…and numerous Double Taxation Agreements including Canada and the USA.Became an OECD member in January, 2010!

Chile: World’s most open economy

Chile: World’s most open economy

FTA, Economic Complementary

Agreement, or Association Agreement

Chile

Duty-free access to 86% of the world’s GDP


Chile: Leader in Free Trade

FTAs: Canada 1997 Mexico 1998 Central America 1999 European Union 2003 S. Korea & USA 2004 P4 2005 China 2006 Japan, India 2007 Peru, Aus., Colombia 2008

CEAs: Bolivia

1993 Venezuela

1994 Colombia

1994 Ecuador

1995 Mercosur

1996

P4 = New Zealand, Singapore & Brunei Darusalam



Entered into force in July, 1997: Chile’s first FTA

Comprehensive covers trade in goods and services (including professional services), and

investment

As of January 1, 2003, 98.8% of products are free from custom duties for both countries

Results Canada’s bilateral merchandise trade with Chile has flourished and

diversified. Two-way trade has more than tripled growing to $2.5 billion in 2008 since signing of FTA.

Total trade in 2008 reached US$126 B, 16% increase over 2007.

Canada is the third largest investor in Chile and accounted for C$ 2.19 B in FDI in 2008, mainly directed towards the mining, electricity, gas and water.

In addition, Canadian companies have invested in other key sectors including electricity transmission, methanol production, telecommunications, utilities and banking.

Key BenefitsKey Benefits


POWER13,87%

MANUFACTURING0,08%

ENVIRONMENT0,01%

SERVICES0,03%

REAL ESTATE0,09%

MINING SUPPLIERS2,15%

WATER10,20%

ACQUACULTURE0,17%

PRINTING0,15% ICT

0.26%

CHEMICAL10,51%

TELECOM0.29%

AGRIFOOD0,31%

FORESTRY0,61%

RETAIL0,31%

FINANCIAL10,82%

OIL & GAS1,36%

MINING48.81%

US$ 13.2 billion (2008)

Canadian Investment in ChileCanadian Investment in Chile


EDC is very active in Chile: conducted $900 billion of business in 2008 (increase of 300% compared to 2006)

Chile is EDC’s second largest market in South America.

EDC deployed a Regional (Country) Manager in Santiago as of January 2008: Mr. Christian Daroch ([email protected])

EDC in ChileEDC in Chile



Figures Went into effect 2009

More than 90% of tariffs on both countries’ exports will be eliminated.

Provisions on cross-border trade in services will also benefit Canadian business

Two-way merchandise trade with Peru: $2.8 billion (2008)

Canadian merchandise exports to Peru: $390.8 million (2008), including cereals, pulses, paper, technical instruments and machinery

Canadian merchandise imports from Peru: $2.5 billion (2008), including gold, zinc and copper ores, oil, animal feed and vegetables

Canadian direct investment in Peru: $2.35 billion (2008)- 4th largest investor

EDC also has an agreement with the Corporación Financiera de Desarrollo S. A. (COFIDE), one of Peru’s major financial development agencies.



Ontario- Chile Trade

Ontario Exports to Chile(Value in Thousands of Canadian $)

2007 2008 2009

$125,009 $146,201 $112,903

Ontario Imports from Chile(Value in Thousands of Canadian $)

2007 2008 2009

$468,906 $480,046 $810,061

Source: Statistics Canada, International Trade Division, May 2010


Top Exports & Imports

Top 5 Ontario Exports to Chile

Machinery parts Machinery for sorting/screening

minerals, etc. Moving, grading etc. machinery;

snow ploughs Telephone equipment (includes

modems) Electric transformers, static

converters, etc.

Top 5 Chilean Imports to Ontario

Precious metals waste/scrap Gold unwrought Silver unwrought

Grapes - fresh/dried

Fish fillets - fresh/frozen/chiled


Ontario Trading PartnersOntario Trading Partners

Sources: Statistics Canada

Goods Exports 2009

(% of total Ontario exports)

United States 79.8%

United Kingdom 6.0%

China 1.3%

Norway 1.2%

Mexico 1.1%

Chile (32) 0.09%(In 2008 Chile was in the 33rd place)

Goods Imports 2009

(% of total Ontario imports)

United States 58.6%

China 10.2%

Mexico 6.2%

Japan 3.6%

Germany 2.1%

Chile (18) 0.39%(In 2008 Chile was in the 29th place)




NEW ROYALTY

Companies have until Dec. 28 to choose Voluntary- social cost New royalty:

4-9% according to operational margins (companies that currently have tax invariability)

5-9% for new projects b/w 2010 and 2012 For companies that have 35-70% margins From 2018 companies pay b/w 5-14% for margins of 35 to

100%; invariability until 2023 (currently until 2017) Companies currently pay 4-5% but can voluntarily choose

new system. Monies go to the reconstruction of the country Government hopes to collect US$1B b7W 2010-2012:

health, education, housing and jails


Not part of invariability scheme

Applicable to new mine exploits y current ones that are not part of invariability scheme


Royalty: Period 2010-2012

Applicable to mining exploits that are part of invariability scheme, can opt for new royalty






Total Taxes to Mining Industry


Mining Industry Sector will grow 6% in 2011 reaching 5.9M tons and US$45B in exports 2010-2013: US$50B from Codelco and royalty (if copper over

US$3.2/lb) New mines found could signify 8.5M tons by 2020

BHP: Pampa Escondida Codelco: La Americana Anglo: Los Sulfatos PBX Intl (CA)- Copaquire

Challenges: older mines- 35% more than 50 yrs old More complex operations lower ore grade Stricter environmental laws Higher E & fuel costs Quality demands of the product Insufficient qualified workforce


Investment in Mining

Investment by 2015: US$50 to 60B Foreign Investment Committee authorized US$11B to nov 2011 Investment 2010-2014: mining represents 30% (2nd after energy)* Largest in history

Mine Company US$ DescriptionLa Escondida BHP 2.5B desalination plantLa Escondida BHP 3.0B New concentratorLa Escondida BHP sulfur Bioleach padLa Escondida BHP relocation of Truck shopLos Bronces Anglo 2.5B expansion

CollahuasiAnglo, Xstrata, Mitsui 750M

expansion; increase production by 20%

Sierra Gorda, Antucoya, Mirador,

Antofagasta Minerals NA

double production to reach 1M tons by 2017

EsperanzaAntofagasta Minerals 2.2M Expansion

Ministro Hales* Codelco 2.2B

construction; only to develop new deposit; begin production 2013; major player in silver 287 T b/w 2014-2027; top 10 in copper

Chuquicamata Codelco 2.0B undergroundAndina Codelco 5.3B expansionEl Teniente Codelco 1.7B new level for exploitationBellavista JSW&Farkas 30M iron; 2.5M tons/yr for 25 yrs

700M


Opportunities in Mining

Automatization Virtualization Cloud computing Wireless systems- vibration, pressure & temp measurement

(Codelco/Ventanas); maintenance of equip when it requires it; how bioleaching is working (Zaldivar)

Intelligent sensors GPS/RFID Processing of digital imaging Photonic transmission Mitigation of emissions (95% in greenhouse gas 01-09) Fluid bed roasting plant for reduction of arsenic Mine safety- “the 33” Instability of deep ground rock: Reinforced shotcrete; hitensile mesh

(Chuqui, Teniente); fortication systems for high stress mines Mine closures: new law


Opportunities: SQM*

New and used equipment: front loaders, bulldozers

Tubing and pumps for high altitude

High tension towers

Interested in engineering, procurement and construction

companies (EPC)

Rail transport: 12M tons/year for 27 km

New technologies in exploration

Valves that resist corrosion

Polymers

Need to be registered with SQM

Like to work with foreign companies via subsidiary in Chile

Rodrigo Vera, Technology Manager: [email protected]

Produce iodine, lithium, nitrates


Opportunities: Minera Esperanza

Energy sources and renewable energy alternatives Water treatment Modular camp systems: Tecnofast US$50M in 1 yr Smart access: installation of towers for celular signals; cards with

chips for location of personnel- need to put antenna in mine cause 80% of staff is there

Smart communication of warehouses with HQ for inventory purposes

Truck hoppers for 380T for the Caterpillar 797 If equip needs after sales then require foreign company to

have a distributor or rep in Chile Work only with Quadrem Crucial for Canadian cos to do due diligence- have to approach

them with a value added proposal- have to differentiate themselves from the competition: why change the equip? What is the value? Is it necessary? What are advantages?

Guillermo Teare, Purchase & Contract Manager: [email protected]


Opportunities: Molymet

Process molybdenum

Need to diversify the final product

Need to add value to molybdenum

Need technology to reduce emissions- plant close to a city

Have no problems in working with foreign companies

No requirements to work with them

Edgar Pape, Finance Manager: [email protected]


Codelco Incorporation of Technology

Monitoring systems for grinders, SAG, conventional and flotation mills, with more than 8000 variables (All divisions).

Particle Imaging processing and cathode quality (All divisions).

Automated monitoring of operational variables in concentration plants (Codelco Norte, El Teniente, Andina).

Advanced control of smelters (Codelco Norte, El Teniente).

ProcessingExtractionRemote supervision of operational variables for critical equipment (All divisions).

Information System for drilling and blasting for operational control (All divisions).

Automatic and controlled ventilation systems (El Teniente, Salvador & Andina).

Remote control of Operation of hammers (El Teniente y Andina).

Semiautomatic trains (El Teniente).

Autonomous LHD (El Teniente).

Satellite control of trucks, shovels and drills (Codelco Norte y Andina).

Autonomous trucks (Gaby).


Recommendations to Recommendations to Ontario CompaniesOntario Companies

Have a clear objective and projected vision Be committed to the market Define what format of business activities would be viable for the Chilean market,

differs by company and product type Define type of product/service with value-added characteristics that could be of

interest for Chilean clients Chile is a very price-sensitive market. Develop a thorough and aggressive

marketing campaign and pricing strategy appropriate for the local market Strong competition: Chile has FTAs with 19 countries, plus other types of

trade agreements with 35 more countries Be proactive in communications and follow-up activities with interested Chilean

companies Provide strong support to the local counterpart (ie. after sales) Visit the market Chilean will ask for exclusivity Use Chile as your Springboard Free services: Make use of the services provided by the Ontario Representative

Office in Chile




Current Major Mining Hot Spots

CAJAMARCA AND LA LIBERTAD Gold, Copper and Silver

MADRE DE DIOS Gold

ANCASH Copper, Gold, Silver, Lead, CUZCOMolibdenum and Zinc Copper

PASCO, LIMA AND JUNIN PUNOCopper, Gold, Silver, Lead and Zinc Gold, Tin

ICAIron AREQUIPA MOQUEGUA AND TACNA

Gold, Copper Copper and Molibdenum

Peru is one of the most diversified mineralized regions in the world.


Mining Industry

Only 10% of territory with mining potential has been explored in Peru, and 6% is currently being mined.

The Fraser Institute describes Peru as one of the most attractive destinations for mining exploration in Latin America, stating that US$ 350 million were invested in this activity in 2009.

The Peruvian Geological, Mining and Metallurgical Institute provides complete cadastre information of projects via internet.

Additionally, there are still diverse investment opportunities in nonmetal mining, particularly borates, diatomites, bentonite, rock phosphate and travertine.

i


Mining Exports Exports have become significantly dynamic during the last

decade, going from an annual average of US$ 4.4B from ´99 to ´04 to an average of US$ 15.5B from ´05 to ´09.

Diversification of mining exports: gold (42% of total exports in 2009), copper (36%), zinc (7%) and lead (7%).

1999-2009

US$ Millions


Leading Export CompaniesIn 2009, 5 mining companies exceeded US$ 1.25B annually in exports. Many of these deposits are polymetal; although the most exported metals were gold and copper.

Other 28 companies show exports over US$ 100 million.


Investments showed an increasing trend, reaching its highest level to date in 2009 with US$ 2.77 B.

Result of growing interest by multinational companies in exploring new deposits & expansion of projects

Investment Projects


Investment Projects Growth perspectives in the mining sector are increasing:

announced or under evaluation projects exceed US$ 37B

Among the announced investments are the copper Project expansions of Antamina and Cerro Verde, and the iron ore project of Shougang Mining in Marcona; and the Quellaveco (Anglo American) and Tía María (Southern) projects.

In regards to exploration: 23 projects programmed. The most important are copper, the Las Bambas (Xstrata) and Galeno (Jiangxi) projects; in iron, Hierro Apurímac (Strike) and Pampa de Pongo (Nanjinzhao); and in gold, Minas Conga (Newmont).

These new investments along with the ongoing project operations will allow Peru to consolidate its leadership as global mining producer.


Investment Projects: 2010-2015


Opportunities In 2008: 60% of Peru´s exports were minerals; 50% of imports

destined for mining Table shows product´s shares of total imports

HTS Codes Description %

8704230000Dumpers designed for off?highway use G.V.W. exceeding 20 MT 14.1

842951 Front end shovel loaders 10.9

84148020

Air or vacuum pumps, air other gas compressors and fans ventilating or recycling hoods incorporating a fan, whether or not fitted with filters, over 262.5 kw, and parts thereof 10.2

842952

Mechanical shovels, excavators and shovel loaders: machinery with a 360º revolving superstructure 6.0

84291100Bulldozers and angle dozers, track laying, self propelled 5.7

870410 Dumpers designed for off highway use 5.0

84749000Parts of sorting, screening, separating or washing machines 4.5

8431410080

Other parts suitable for use solely or principally with the machinery of headings 8426, 8429 or 8430 3.8

Purchase of equipment, machinery and services:

Totaled US$2.8B in 2009; 65% over 2008

Reached US$1.7B 1st semester of 2010

Expect to reach US$3.0B by end 2010


Opportunities

Prospecting activities (mapping, sampling and drilling), Feasibility and/or environmental studies. Potential for non-metal mining products such as limestone, which

represents approximately 53% of the nonmetal mining production, as well as travertine, diatomite, bentonite, borates, uranium and lithium

For the mine exploration stage: manual remote sensors. For the mine production stage: design and construction, drilling

and blasting, loading, hauling, backfilling, ventilation, drainage and pumping, roof supporting, and communications.

For the processing stage: crushing, milling, flotation, leaching, and tailings disposal.

During operation, the mine requires supplies such as tires, explosives, mill balls, reactives and spare parts


CHILEAN BUSINESS CHILEAN BUSINESS CULTURECULTURE


Socio-Business CultureSocio-Business Culture

Interacting with Others

Which of the following situations do you find most difficult to handle?

...complain ...ask others

for help

...express my feelings to other

people

...establish limits and say

no

...talk about intimate subjects with my partner

No answer

18.5% 27.3% 21.9% 22.5% 7.2% 2.4%

A sort of “shy attitude”


Chileans & Conflict

When conflict arises, what should one do?

Let conflicts show so that problems are discovered

Try to avoid conflicts so that they don’t become a serious problem

No answer

27.5% 69.9% 2.6%

Chileans AVOID CONFLICT!



Attitude towards Foreigners

During recent years, the Chilean economy has received the influence from foreign companies and investment. Do you think that this

represents...

...an opportunity to develop for our country

...a threat for the autonomy of our country

No answer

60.8% 35.6% 3.6%

Chileans welcome FOREIGN COMPANIES!



...an item of a better brand

...three pieces for the same price as

one

No answer

36.5% 62.1% 1.5%

Price & QualityWhen you need to buy a blouse or a shirt, you prefer to buy...

If you had to choose between two products, you would choose the...

...most beautiful

...cheapest No answer

28.2% 69.6% 2.1%

Regarding consumable products, PRICING is key!



THE CHILEAN ENTREPRENEUR

HIGH LEVEL OF INDIVIDUALISM

HIGH LEVEL OF FORMAL EDUCATION ( POST-GRADUATE STUDIES)

ASSERTIVE & ENTREPRENEURIAL

OPEN-MINDED AND CONSISTENTLY SEARCHING FOR NEW BUSINESS

LOOKING TO MAXIMIZE PRODUCTIVITY AND PROFIT MARGINS

INTERESTED IN OBTAINING A LONG TERM RELATIONSHIP WITH RELIABLE FOREIGN SUPPLIERS



Verónica MedinaDirector

Ontario Representative Office in ChileC/O TradeChile

Tel.: +(56-2) 2442435Fax.: +(56-2) 2442436

E-mail: [email protected]

Documents

Copyright 2007© TradeChile Chilean Representative Office of the Ontario Ministry of Economic Development & Trade