Southern Exposure

Southern Exposure

Chile’s fast-rising world trade challenges Washington state’s.
"We realized we could do anything we wanted."

from the Seattle Post-Intelligencer
P-I Special Report A1
By Imbert Matthee P-I Reporter

Chiloe Island, Chile – Juan Carlos Rivera proudly holds up a 9-pound Atlantic salmon.

"It took just two years to grow this big," Rivera says of the fish he pulled from a cluster of pens bobbing gently in the calm, glittering waters off this island in southern Chile.

Atlantic salmon take at least 2 1/2 years to raise in the Pacific Northwest.

"We have made big advances in salmon farming," the bearded aquaculture engineer says. "Fifteen years ago, no one was in this business. Now Chile is a major global player."

Rivera’s description of his silvery fish and the industry that raised it may sound magical. But here in the southeast comer of the Pacific Rim, on the hemispheric flip side of Washington state, entrepreneurship and ideal growing conditions for fish, fruit and forests have created powerful exporters all too real to competitors in world markets.

To many Washington businesses and industries, looking at Chile is like looking in the mirror.

"You’ve got to hand it to them," says Pete Granger, executive director of the Washington Farmed Salmon Commission. " Chileans are enterprising, and they have made the most of things."

Chile, South America’s most prosperous nation, has risen from virtual obscurity to become a continental model for economic development.

Sometimes referred to as Latin America’s jaguar, Chile has had an average economic growth rate of 6.3 percent since 1989, making it the highest on the continent and the fifth -highest in the world, just behind the Asian tigers of Thailand, 8.9 percent; Malaysia, 8.7 percent; China, 8.3 percent; and Singapore, 7.6 percent.

As a badge of its success, Chile now boasts membership in such organizations as the Asia-Pacific Economic Cooperation forum and is being groomed for membership in the North American Free Trade Agreement with the United States, Canada and Mexico. Chile is part of a Clinton administration plan to create a free-trade area from Alaska to Tierra del Fuego.

But with or without Chile in NAFTA, Washington companies are already exposed to southern competition.

"For many years, people here thought: ‘We’re only Chile, tucked away at the bottom of the world,’" says Sergio Lopez Pugh, foreign trade manager for the Association of Chilean Exporters in Santiago.

"The growth of our companies changed people’s mentality," he says. "We realized we could do anything we wanted, and we went for it."

Most people in the United States still connect the world’s longest nation – whose geography spans the equivalent distance from Alaska to Baja California – with the 1973 military coup in which Gem Augusto Pinochet forced the socialist government of Salvador Allende from power and put in place a dictatorship that lasted 17 years.

Cruel and bloody as it was, Pinochet’s regime created the economic stability necessary to draw foreign investment and laid the foundation for an export-driven economy that has brought prosperity to many of Chile’s 14 million people.

After a 1988 referendum in which Chileans voted Pinochet out of office, a democratically elected government took power in 1990.

New governments under Patricio Aylwin and now Eduardo Frei have stuck to the economic policies that turned the nation into a big exporter and caught the attention of investors worldwide.

But Chile isn’t waiting around for recognition from the world community or for money to pour in from abroad.

As one industry after another outgrows its small domestic market and looks beyond the rest of South America, Chile’s exports keep taking up more and more room on store shelves and restaurant tables around the globe.

In the Puget Sound area, Concha y Toro and Santa Rita wines fill aisles at Price/Costco warehouses, Pike Place Market vendors sell Chilean sea bass, and Puget Consumers Cooperative stores regularly feature avocados grown near Santiago.

The list goes on – apples, radiata pine, table grapes, trout, asparagus, pears, eucalyptus, cherries, blackberries and raspberries – all products or commodities that meet exports from Washington state head on in markets at home and overseas.

Chile’s unusual geography, well-developed infrastructure and low production costs give it a comparative advantage in the cultivation of natural resources, a notion that hasn’t escaped Washington investors.

"That area is made for cranberries," says Don Mowatt, who grows the fruit on Bainbridge Island and has invested in a 125-acre cranberry farm just north of Puerto Montt in southern Chile.

"The temperature and water quality are unusually good," he says.

Geographically, Chile is isolated from the rest of the South American continent – and the world.

The Atacama Desert, one of the driest places in the world, separates it from Peru and Bolivia, while the tall peaks of the Andes form a natural border with Argentina.

To the south of Chile is Antarctica, where no plant life exists. And the country’s western boundary is the 2,650-mile Pacific Ocean coastline.

Together, those features create a cordon sanitaire around Chile, protecting it from plagues, exotic diseases, fungi and other pests. Hence, fruit growers use fewer expensive pesticides to produce healthy crops.

Chile’s exposure to the mild maritime climate of the South Pacific also keeps water and air temperatures stable. The country lacks the kind of North Pacific extremes that send salmon into hibernation and slow down the growth of certain tree species.

But isolation bears a price. Chilean exporters pay more to have their goods shipped overseas because they are far from major markets in Europe, Asia and North America.

Advances in refrigeration and cold storage, however, ensure that perishable products such as fish and fruit stay fresh until they arrive in the Northern Hemisphere.

In addition, Chile’s 12,000 fruit growers harvest during the Northern Hemisphere’s winter and spring, so they can offer their products counter-seasonally and meet a rising consumer demand for year-round fresh foods, says Ronald Bown, president of the Association of Chilean Exporters.

As a result of its high productivity and the introduction of new technologies during the past two decades, Chile’s exports have grown exponentially -from $1.5 billion in 1975 to $11.4 billion last year, according to the country’s central bank.

By comparison, Washington state exported $11.1 billion worth of products in 1994, not including Boeing aircraft.

Washington and Chile share other similarities. While Washington is the nation’s most trade dependent state, with at least 20 percent of its jobs tied to exports, Chile ranks as the world’s third most trade dependent country after the Netherlands and Norway. About 40 percent of Chile’s economic output is related to exports.

Chile, whose foreign sales of fish, fruit and forest products barely registered on the international radar screen a decade ago, now ranks as the world’s second largest producer of farmed salmon and ninth-largest exporter of wine.

It also is the largest fruit producer in the Southern Hemisphere, where it competes with Australia, New Zealand and South Africa, Bown says.

Traditionally dependent on the export of copper and other minerals, Chile’s trade has become much more diversified.

In 1975, mining exports represented nearly 70 percent of exports from Chile, with industry contributing 25 percent and agricultural crops 3.8 percent.

By 1993, mining exports had dropped to 43 percent, while manufactured products accounted for 44 percent and farm products 10.7 percent.

Like Washington state, Chile exports many of its raw materials and semiprocessed products to Asia. In 1994, 22.7 percent of its goods went to Japan, 14 percent to the United States and 8 percent to Brazil. It is one of the few countries in the world that has a trade surplus with Japan.

Because of its position on the Pacific Rim, Chile regards itself as Asia’s gateway to the rest of the South American continent. "Their strategy is to be the Singapore of South America," says Stan Laegreid, associate principal at Callison Architecture, a Seattle-based firm that gets about $1 million, or 3.3 percent, of its annual fees from design projects that are part of Chile’s construction boom.

Valparaiso, the port west of Santiago that handles most of Chile’s trade, "wants to become the Seattle of the southern cone," Laegreid says.

"To Callison, Chile is our threshold into an emerging economy that has been vastly overlooked," he says. "It’s one of the truly bright spots in the world economy."

  Washington Chile
Population 4.8 million 13.9 million
Size 66,572 square miles 292,135 square miles
Average annual wages $25,331 $3,200
Unemployment 6.4 percent 5.9 percent
Total exports $26.1 billion* $11.4 billion
Fish exports $573 million $1.1 billion
Forest products exports $3 billion $1.5 billion
Total farm exports $1.9 billion $1.6 billion
Wine sales in the U.S. $51.8 million $19.4 million

*Includes $15 billion aircraft exports.

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