Canada-Chile Business Ties Flourish With FTA
Twenty years ago, Solmax International Inc. saw an opportunity and seized it, says Dominic Bérubé, the company’s general manager of operations in San Bernardo, Chile. Today the Canadian company is a well‑established entity within Chile’s mining and construction industries.
As the Canada‑Chile Free Trade Agreement (CCFTA) celebrates its 20th anniversary this month, Bérubé is amongst company representatives from both countries who say the deal has helped businesses flourish.
“Our journey in Chile started no doubt thanks to the FTA agreement,” Bérubé says, explaining that the company took part in a trade mission to Chile in December 1996 organized by Global Affairs Canada (GAC), at a time when the Canadian and Chilean governments were finalizing the agreement. “The trade mission was to show Canadian entrepreneurs the potential of the Chilean market. We participated and we were convinced that we needed to be part of this new, opening market.”
The CCFTA came into force July 5, 1997. It is one of Canada’s oldest trade deals, and the first with a South American nation. For Chile, it was the first comprehensive trade agreement concluded with a developed nation.
The following month—August of 1997—Bérubé moved to Chile to set up a branch of Solmax there. Headquartered in Varennes, Que., near Montreal, the company started as a construction firm in 1981 and was using geomembrane liners in its construction work. In 1996 it began manufacturing the geomembrane liners, which are used to protect the environment from contamination from processes related to mining, energy, waste management, water, and civil engineering. Today, Solmax is one of the world’s largest manufacturers of polyethylene geomembrane, exporting to more than 60 countries.
“When we began manufacturing that’s when Solmax began putting a lot of emphasis on international development and we started looking at exporting as part of our strategic business plan,” Bérubé says, adding the company established a presence in Houston, Texas, and a plant in Malaysia. “We definitely would have been less interested in Chile as a market had it not been for the free trade agreement.”
Having a free trade agreement in place instilled confidence in Chile as a market, for Solmax, Bérubé says, explaining the FTA created a sense of confidence in that market and of stability for the business environment.
“Solmax established its first branch here in Chile to distribute geomembrane liners—we came into this country together with the FTA even though our products were not actually covered under the agreement at first,” he says.
The company made a case to the FTA negotiating committee to have its products specifically included under the Agreement. After careful consideration, the geomembrane products were added later that year, Bérubé says. He adds that even without specific reference to their products within the Agreement, Chile would still have remained a good choice for Solmax.
“Since Canada has such a good profile here and mining is such an important industry and with the FTA and so many Canadian companies here, that has helped our business,” he says. “The market continues to flourish—mining has certainly flourished—and commercializing our products for this industry has been profitable. The FTA has played an important role, the stable political and economic situation and the ease of doing business here has helped.”
Bérubé stayed in Chile for three years before returning to Canada. Solmax has since expanded its business interests in Chile, acquiring a piping company a few years ago. Bérubé returned to Chile to run that part of the operations.
“I can definitely say that this is a good free trade agreement success story: today Solmax is a well‑known brand in Chile both for its geomembrane liners and its piping products.”
As Chile’s first free trade agreement with a developed nation, the Agreement with Canada helped Chile attain a certain standard in the international business community, says Andrés Kuhlmann, president of the Chile‑Canada Chamber of Commerce. It paved the way for other bilateral free trade agreements Chile later negotiated with Mexico and the United States, he adds.
“One of the most important aspects of this FTA is the protection of foreign investors—this is absolutely key for attracting investment from Canada,” Kuhlmann says. “I’m sure that without the FTA it would not be possible for some investors to invest in Chile. The legal framework in Chile and the FTA’s binding legal framework provide enough certainty for investors in our country.”
The Agreement has been especially important in instilling confidence in Chile for foreign business partners and investors in general, says Kuhlmann, who is also the CEO of Transelec, the main energy transmission company in Chile, providing service to 98 percent of the population across nearly 10,000 km of transmission lines.
“For investors a free trade agreement marks a basic standard. Chile has a very good reputation amongst Canadian investors and part of that reputation is that there is a very high standard,” Kuhlmann says. “Infrastructure and mining are the two main investments from Canada and these are very long-term investments. I think the FTA has been key for a small economy like ours to attract such large investments.”
Kuhlmann’s company, Transelec, has been directly impacted by this sense of confidence in doing business with Chile. The company was operating in Chile when the utilities sector was privatized in the 1980s, Kuhlmann explains. In 2000 it was purchased by Hydro Québec which then sold it to four Canadian shareholders in 2006.
“We have a long history of Canadian investment and today Transelec is still in Canadian hands,” he says. “When we speak about investment, the advantages under a free trade agreement are not always specific, but I can say for sure the FTA was important in helping this investment to materialize.”
Kuhlmann says the FTA has also fostered the development of strong Canada‑Chile ties in sectors related to infrastructure and mining such as in engineering, for example, where several large Canadian corporations have established operations in Chile. On a smaller scale, the Agreement is also encouraging Chilean investment into Canada, he says.
Business between Canada and Chile has flourished since the CCFTA came into force, says Geoff White, senior trade commissioner with the Canadian Trade Commissioner Service (TCS) in Santiago, Chile. Two‑way merchandise trade between the two has more than tripled since 1997, with bilateral trade reaching $2.4 billion in 2016.
“The Agreement has been beneficial for business for both countries,” says White. “I think that Chile has been a good choice for Canada. There are good conditions for doing business here such as a stable political environment, strong adherence to the rule of law and a solid economy.”
The Agreement has been a boon for both trade and investment, says White. Canada is now the fourth largest investor in Chile (after the United States, Spain and the Netherlands) and the top foreign investor in Chile’s mining sector.
Canada’s top exports to Chile include machinery; mineral fuels and oils—principally coal; pharmaceutical products; cereals; and meats. Canada’s top imports from Chile are precious stones and metals—mostly gold and silver to be refined in Canada; copper—Chile is the world’s largest copper producer; fruits; beverages—mainly wine; and fish and seafood.
A 2013 study conducted by Global Affairs Canada’s Office of the Chief Economist on the Economic Impact of the Canada-Chile Free Trade Agreement concluded that Canada’s overall economic welfare gains from this Agreement were approximately $250 million annually.
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