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Chile: rising star of South American exporters.

Chile has emerged as the star of South American Agricultural exporters, according to economist John B. Parker, Jr., of USDA's Economic Research Service. Chile's agricultural exports, he notes, jumped from less than $400 million in 1980 to about $1.3 billion in 1990, a pace unsurpassed by any other South American nation.

Many factors boosted such spectacular growth, Parker notes, including overall economic policies that encouraged agricultural production, modernization of fruit marketing, and the Chilean's diligence in seeking export markets, report a recent issue of the Agriculture Department's FARMLINE magazine.

Chile leads South America as a fruit exporter. By volume and value, table grapes dominate its fruit exports. "Exports of excellent quality fresh grapes skyrocketed because of the reverse season," Parker says. Chile has carved out a market in Northern Hemisphere countries as a supplier of fresh fruit during the winter, when competitors depend on more expensive stored fruit. Grape exports jumped from 231,000 tons in 1986 to 491,000 tons in 1990. Judging by the vineyard expansion in Chile, Parker projects that they will continue rising.

In fact, Chile may soon lead the world in grape exports, surpassing even Italy. The United States buys more than half of Chile's grape exports, the European Community (EC) about a fifth, and the Middle East a sixth.

Chile's second largest fruit export by volume and value is apples. In the late 1980's. Chile surpassed the United States as the largest exporter outside Europe. Major markets are the EC, followed by the Arabian Peninsula, Colombia, and Sweden.

Exports of other commodities also jumped. From 1980 to 1990, wine exports tripled to reach $52 million, with other Latin. American countries and the United States the biggest markets. At the same time, fresh peach exports climbed from $10 million to $55 million. The United States, Saudi Arabia, and Sweden were the largest buyers.

The value of Chile's agricultural exports is more than four times as great as its imports of about $280 million annually. In its agricultural trade with the United States, the value of Chile's exports is more than eightfold that of its imports. The United States is Chile's largest market, receiving roughly 40 percent of its agricultural exports. The EC is the second largest export destination.

Many Reasons for Chile's Success

Traditionally, copper exports have led all other commodities in Chile's export earnings. But, as Parker notes, in the mid-1980's foreign demand for copper declined. The Chilean Government then strove to reduce its reliance on copper as the major export revenue earner by diversifying exports. The Government also tried to encourage employment, liberalizing banking procedures and adopting other measures to attract foreign investment for projects that required the hiring of labor.

Diversification of exports into agricultural crops was aided by Chile's climate, which resembles that of central California and favors the cultivation of fruit and vegetables. In the long, narrow coastal country, farms are often just a short distance from ports. Labor costs are low, and foreign exchange is readily available to import machinery, Parker says.

The Chilean Government took steps to encourage exporters, such as directing major expenditures for irrigation projects in the central valley, the key fruit-growing area. After being depressed from 1982 to 1986, copper prices rose in 1987, when total copper exports increased 18 percent to $5 billion. In the late 1980's and 1990 strong copper prices contributed to further gains. In 1990, total copper exports reached a record $8.6 billion.

Parker also attributes Chile's success to its modern banking policies, monetary reforms, devaluation of the peso, favorable investment climate, and market development techniques (such as advertising, service and quality control, and computer research and analysis to locate markets).

Chile's marketing strategies have also helped it succeed as an exporter. Exporters do computer marketing studies to evaluate opportunities, using the resources of the United Nations' International Trade Center (which evaluates markets for developing nations, often free of charge). Chileans also have made good use of information on computer systems about world trade and niche markets. And they obtain information about the world market by sharing technology with U.S. firms.

Parker explains that Californian firms see Chile as more than just a competitor - in fact, they view it as a "season extender." The Chileans help California's fruit industry profit by providing more work for preservation and distribution facilities which handle Chilean fruit during North America's off season.

Export Gains Likely To Continue

Chile's fresh fruit industry is expected to continue to expand, according to projections by the Chilean Ministry of Agriculture, the 2000 Study of the Food and Agriculture Organization of the United Nations, and the Inter-American Development Bank.

In the late 1980's, nearly 50 percent of fresh fruit exports were Thompson seedless table grapes. But, Parker says, the country is using the most up-to-date market development techniques to diversify into such products as plums, cherries, pears, kiwifruit, and strawberries.

Chile can supply fresh fruit when it is winter in the United States and Canada, and thus avoid competition with those countries. Mexico's grape exports reach their height in May and June following Chile's peak exports from February to April. Chile's success with fresh fruit exports demonstrates how farmers and investors can obtain rapid returns in a free market economy or under liberalized trading conditions. Parker says.
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Title Annotation:agricultural exports
Publication:Frozen Food Digest
Date:Apr 1, 1992
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