Chile, US Talk on Trade, Debt

CHILE and the United States are now negotiating toward a free-trade agreement, and Chile hopes to renegotiate its $480 million debt to the US, according to Chilean Finance Minister Alejandro Foxley. The talks come on the heels of the Bush administration's Latin America initiative, announced June 27. Chilean officials hope to take advantage of President Bush's plan, which includes $12 billion in potential debt reduction or forgiveness of Latin debt to the US government, incentives for improving the climate for foreign investment in Latin America, and ultimately a free-trade zone that spans the entire Western Hemisphere.

The timetable for US-Chile talks on a framework agreement was set during Mr. Foxley's visit to Washington the first week of July. Foxley is the first Latin leader to visit Washington since the Bush initiative was launched. It was also his first time here as finance minister in President Patricio Aylwin's newly elected democratic government.

``Chile is in a privileged position to enter into a free-trade agreement with any country,'' Foxley says. ``We have a uniform tariff structure, no hidden subsidies or nontariff restrictions on our trade.''

Peter Hakim, director of the Inter-American Dialogue recalls that Chile was ``one of the most badly damaged economies from the Latin debt crisis'' of the 1970s. Today, he says, ``Chile looks very good compared to other Latin American countries.''

Chile's economic adjustment period is ``basically finished'' asserts Foxley, pointing to the robust export sector and the steady stream of foreign investment. Thirty percent of Chile's gross domestic product is exported, Foxley says. ``We intend to export 35 percent by 1995 and we are concerned about protectionist tendencies'' in a world of emerging trade blocs.

Foxley says that Mexican President Carlos Salinas de Gortari has already met with President Aylwin in Chile to discuss Mexico's experience in its current free-trade negotiations with the US.

The US already has similar bilateral agreement with Canada.

Chile's export earnings are derived largely from copper and commodities, fruits, forestry, and fishery products. Twenty percent of Chile's trade is with the US, Santiago's largest single trading partner; bilateral trade registers about $3 billion a year. The European Community accounts for 30 percent of Chile's trade.

``We are interested in free trade, strengthening foreign investment, and setting the groundwork for renegotiation of our $480 million debt to the US,'' Foxley says. Despite his talk of a strong Chilean economy, the minister seeks relief on this debt.

``We do not have a dramatic debt problem,'' Foxley says. Chile's external debt is $17 billion, of which $12 billion is official debt owed to governments, multilateral banks such as the International Monetary Fund, the World Bank, and the Inter-American Development Bank, short-term trade lines, and supplier credits. The remaining $5 billion is owed to commercial banks.

``We're looking forward to a round of talks with [commercial] banks, and we're looking for a voluntary agreement'' to reschedule those debts, Foxley says.

After his talks with US and multilateral bank officials, the minister noted that members of the international financial community were pleased with Chile's free-market progress.

Sen. Richard Lugar (R) of Indiana, a ranking member of the Senate committees on foreign relations and agriculture, stresses the importance of US relationships with Chile and neighboring Argentina and Brazil. With freely elected governments in all three, Senator Lugar notes ``a mood that's changing dramatically. Just a few years ago there was a strong antipathy toward the US.''

By expanding US export markets and reducing the price for imports, free-trade agreements ``extend the possibilities for our own wealth,'' he says.

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