The good olive: like its wine, Chile hopes its olives tackle on old Europeon market stronghold.

Olives are the rage in Chile. The Universidad de Chile doesn't have enough space to meet the demand for the country's first class on producing olive oil. Others are turning long-forgotten plots of land into olive groves. Those already producing olives are scooping up top honors at the world's olive-oil contests. U.S. specialty goods stores, accustomed to olive oils from Italy, Spain and Greece, are starting to make a bit of room for Chilean brands. Exports have been small, but growth is clearly the trend.

Chilean olive-oil exports to the United States surged 3,700% to US$100,000 from basically zilch during the first half of 2004; annual olive oil exports should reach 1,000 tons by the end of 2004 and grow to 7,000 tons by 2010, according to Chile's National Association of Olive and Olive Oil Producers (Anpao). Aceites Borges, a Spanish olive oil producer that sold $227 million during the first quarter of 2004 and exports to 60 countries, saw potential in Chile. It is spending $19 million to farm 40,000 hectares of olive plantations throughout the country. Today there are about 20 companies in the industry, compared with two just five years ago, according to Anpao.

A flurry of factors set the conditions for the domestic olive industry to ripen. For one, European subsidies have been drying up, spurring those elsewhere to compete. The well-documented health benefits of consuming olive oil have boosted demand in countries like the United States, Chile's top client and the world's largest olive-oil importer. Finally, Chile's central region has a Mediterranean climate--80% of the world's olive oil is produced in the Mediterranean--where a mix of heat and humidity leads to aromatic, flavorful oils.

Despite such advantages, Chilean growers will have to battle for brand-recognition that European producers have enjoyed for centuries. "There is a certain resistance from people who have bought olive oil in Spain or Italy--which have sold olive oil for more than 200 years--and we have to overcome that resistance," says Alfredo Schiappacasse, CEO of TerraMater, a Chilean grower.

Chile has been down this road before. Europe and California have long been the world's traditional supplier of wines. In recent years, countries like Chile, Australia, South Africa and Argentina have snapped up healthy chunks of the global wine market. As has been the case with wine, Argentina will give Chile a run for its money in the olive-oil race. Average per-capita consumption of olive oil is 100 to 150 grams per year in Chile, a figure dwarfed by the 10 to 15 liters consumed in many European countries.

Chile's fledgling producers hope to spend in technology to produce expensive but low-volume premium olive oils. They say they must take advantage of the country's climate to make higher-quality oils. "The Argentines have a lot of plantations but they normally export to Brazil, and in Brazil they mix the olive oil with other oils," says Ignacio Garcia, CEO of the Chilean olive oil maker Bethania and president of Anpao. Premium olive-oil producers may be on to something. Chilean growers Agricola Valle Grande and TerraMater recently won awards for outstanding olive oils at the renowned Sol d'Oro International Competition in Verona, Italy. The two also are leading the export drive, introducing high-end products, mainly extra-virgin olive oils, into the United States, Asia and Europe. Extra-virgin oils account for 15% of the global market, says Ernesto Dattari, executive secretary of Anpao. "We can place our olive oil in the niche that demands quality," he says. "It's very profitable selling it at those prices."

Buying in. The government sees potential in the budding sector. The Agricultural Ministry's Foundation for Agrarian Innovation plowed $550,000 into olive-oil initiatives in 1995, which included paying experts from Italy, Spain and Argentina to advise local producers on growing methods and technology, says Soledad Hidalgo, coordinator of the ministry's olive program. While the government doesn't expect to catch up with the Spaniards and Italians any time soon in terms of export volume, they feel there is a domestic industry for higher-end products. "We can't compete by making olive oil a commodity as the Spanish do;' says Hidalgo. "We're trying to produce premium olive oil."

At the Universidad de Chile in August of 2004, more than 40 students applied for 20 openings in the country's first class on producing olive oil, says Maria Hurtado, an agronomist at the university. Hurtado is also creating a panel that seeks accreditation by the Spain's International Olive Oil Council. Chile thus would have its first official olive-oil experts.

"Olive oil needs certain attributes: it must be fruity, spicy, and have a measure of bitterness," says Hurtado. "It needs to have an equilibrium of the three, and Chile's oils achieve this."