NCPA - National Center for Policy Analysis

Chile Pursues Free Trade

June 26, 1996

Efforts to add Chile to the North American Free Trade Agreement have been postponed, but South America's most economically advanced nation is pursuing other free trade pacts -- underscoring its resolve to become a world trading power, according to trade experts.

  • Chile recently joined Mercosur, a free trade group that includes Brazil, Argentina, Paraguay and Uruguay.
  • It is negotiating a separate trade agreement with Canada that is expected to be signed this year.
  • Under the Mercosur agreement, it will lower tariffs on the majority of its trade by 40 percent beginning Oct. 1, 1996 and gradually eliminate all duties in eight years.

Chile was the first country in the region to change to a market economy -- privatizing most state enterprises and opening itself to foreign investment. Such changes brought 12 years of steady growth, as well as record low inflation and unemployment.

Membership in Mercosur will open a vast market to Chile. Its cheap labor and low financing costs are expected to make it the low-cost producer of light industrial exports for the bloc. The other members hope to benefit from access to Chile's Pacific ports.

Source: Calvin Sims, "Chile Will Enter a Big South American Free-Trade Bloc," New York Times, June 26, 1996.


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