FOREIGN DIRECT INVESTMENT ( MINING)

Mining is the main activity of the Chilean economy. This activity represents a great opportunity to invest in this country. The Chilean mining market is the largest in the world, it produces 32% of the world's copper supply. This activity has been growing during the last 20 years and it has a lot of support of the government. Also, it is one of the most attractive markets to foreign investment in Chile. The mining business represent almost 8% of the GDP. Karen Poniachik, Executive Vice-president of the Foreign Investment Committee, says "The Government understands that its role is to provide an appropriate environment for private initiative within a context of political and economic freedom, strong institutions, fiscal discipline, a regulatory framework that promotes transparency and competition, as well as through an increasing network of international trade agreements." to approach these goals, the government works trough the Chile  Foreign Investment Committee (FIC). The FIC has  designed the Mining law  to enable foreign capital and technology transfer on a large-scale basis. Investors are provided both constitutional guarantees regarding private property rights as well as specific investment agreements on a per-project basic for the life of the mine. The investment contract, passed into law by the congress and known as the DL 600, provides investors with a level playing field against national firms and lays out tax rules far in advance.

As we can see in the graphic above, mining is the largest sector of the foreign investment in the country because of its natural wonders. This market has many advantages that benefit investors. The main Decree Law 600 (DL 600) is the main law that regulates all the Foreign Investment including mining operations in Chile. This law provides all the information about the mining business and all the legal procedures. It is important that investors read and understand all the information provided by this law. Some of these factors are:

•  The law specifically guarantees non-discriminatory treatment to foreign investors, access to foreign exchange for repatriation of capital and profits, the ability to hold assets indefinitely, and the option to receive national tax treatment

• Investors are allowed to own up to 100% of a Chilean Based-company and there in not limit of time.

• A maximum of 15% of the labor force can be formed by foreigners but there is an exception for specialized technical employees that can't be found in Chile.

• D.L. 600 guarantees investors the right to repatriate capital one year after its entry and to remit profits at any time. In practice, the one-year capital lock-in has not represented a restraint since most productive projects --in areas such as mining, forestry, fishing and infrastructure-- require more than a one-year start-up period.

• Foreign investors may request a maximum time-limit of three years to materialize their contributions. In the case of mining projects, the time-limit is eight years but, if previous explorations are required, the FIC is empowered to extend it to up to twelve years.

Once the decision to invest is made, the investor has to submit an application to the Executive vice-president as well as the project with all technical specifications. The project also has to be sent to the Chilean Commission of Copper, which will issue a report on the project. Because of the Nature of the activity, there is an impact on the environment so the investor is require to send the project to the National Environment Commission, which will evaluate the project and will send a report to to the FIC. When the project is approved the investor is ready to settle all the resources and run the business.

Sources:

http://www.businesschile.cl/sectors/fr_mining.htm

http://www.foreigninvestment.cl

Foreign Direct Investment- Technology

Although Chile is recognized as one of South America's most technologically advanced countries, only 1/5 of the population has Internet access. In the United States, over 50% of the population has access to the Internet.  Therefore, foreign direct investment by technology companies in Chile would be a good investment. 

Currently, the Chilean government is trying to adopt new legislation to make the telecommunications industry more friendly for foreign investors by allowing various licenses to be given to foreign companies. In May 2002, there were 52 Internet providers in Chile. Since over 80% of the population live in the city, Internet expansion would be relatively simple and cheap. The current problem is the number of providers that offer the Internet; no one provider can offer inexpensive and reliable service. In order to improve the efficiency and price of Internet access in Chile, the number of providers must be decreased. 

Decreasing the number of Internet providers would be a great opportunity for FDIs in Chile. An American, European, or Asian company could buy a few of the Internet providers and combine them into one. The combining of companies would lessen the overall costs and increase service capabilities.

Another investment opportunity for foreign companies is in computers themselves. There are simply not enough computers to go around in Chile as is illustrated by Computer Penetration, 2001. I believe that a computer company could make many lucrative deals in Chile. For example, a company like Dell or Gateway could sell computers to all the schools in Chile. The company would also have to offer service agreements to the school system. 

Sources:

http://www.cinver.cl/platform/wired. asp

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