The evolution of foreign trade in Chile from 2018-2022

The evolution of foreign trade in Chile from 2018-2022

Camila I. Jiménez and Camila P. Rodríguez

International business school, University of Valparaíso

INI316: Academic English

Ms. Evelyn Dysli Nuñez Evelyn Dysli Nuñez

November 15, 2023

The evolution of foreign trade in Chile from 2018-2022

Abstract:

This study examines the evolution of Chile's foreign trade between 2018 and 2022, analyzing its strategic importance and economic implications. Chile, with a highly open economy that accounted for 64.4% of its GDP in 2021, has experienced significant changes in its international trade. From global challenges such as the COVID-19 pandemic to geopolitical tensions, each year is explored in depth, highlighting the determinants of its performance. In 2018, trade exchange grew by 18%, led by silvoagricultural and industrial exports. The decline in 2019 was reversed in 2020 with signs of recovery. The 41% growth in 2021 is attributed to free trade agreements, and in 2022, despite global uncertainties, Chile achieved positive figures. This analysis underscores the vital importance of foreign trade for Chile's economic development and stability, proposing strategies such as market diversification, fostering innovation and improving infrastructure to ensure sustainable growth in the future.

Keywords; import, export, evolution, trade, international.

Introduction:

In the complex world of international business, foreign trade is a fundamental pillar for countries to move forward and remain viable. Within this scenario, it is correct to ask the question: Why does foreign trade matter? According to what it exposes (World Bank, 2021), Chile is characterized by having a highly open economy, strongly linked to international trade, which represented 64.4% of the country's GDP in 2021. In addition, it has experienced a significant evolution in its foreign trade during the period from 2018 to 2022. Throughout this period, the Chilean economy has experienced significant changes that have impacted the way it conducts trade transactions beyond its borders.

In this study, a comparative analysis of Chile's foreign trade between 2018 and 2022 will be carried out, with the aim of shedding light on the quantitative impact of global events on the Chilean economy. During this period, the world faced significant challenges, from the COVID-19 pandemic, to the geopolitical tension resulting from the war between Russia and Ukraine. This report will address the main indicators of foreign trade in the years indicated, highlighting changes in exports and imports. Each year will be explored in depth, analyzing the determinants of its performance and highlighting the key trends that have impacted the Chilean economy in this period. Through this exploration, it is intended to provide a comprehensive view of the evolution of international trade in Chile over the last five years, thus allowing an understanding of the context in which the Chilean economy currently finds itself.

Theoretical Framework:

In order to closely examine the transformation of foreign trade in Chile during the last five years, we conducted an exhaustive bibliographic research. This analysis offers us a clear vision of the importance for us, students of international business and future professionals in the field, generating interest and revealing projections that can be identified in these concepts.

For the opening of this study, it is required to establish the basis of what are the Commercial Transactions beyond its Borders, are those that take place between two different countries. These international trade transactions may include the export and import of goods and services, foreign direct investment, technology transfer, among others. International trade transactions are important for the economic growth of countries, as they allow them to access new markets and increase their productive capacity.

In addition, everything related to Geopolitical Tension and Global Events is of great importance, since it impacts Chile's foreign trade mainly due to its dependence on exports. "Chile's international trade was severely affected by the crisis derived from the Covid-19 pandemic, especially by the non-pharmacological measures for its containment. Exports were generally affected by a slowdown and a fall in shipments to China. Industrial shipments fell to Latin America and Europe, in line with the worsening of the world cycle. Imports fell sharply with domestic demand in 2020, before recovering first with consumption and then investment. Again, China and the rest of Asia have played a very relevant role in this last stage". (M. Marcel, 2021, 16-24).

Similarly, the concept of Open Economy, this type of economy is one that actively participates in international trade, allowing the free movement of goods, services and capital across its borders. It will be relevant for this study since Chile has an open economy that is highly dependent on international trade.

The Gross Domestic Product (GDP) is the total value of goods and services produced in a country in a specific period. Chile's GDP reflects the sum of national economic production, covering sectors such as mining, agriculture, services and manufacturing. This indicator is key to assessing the country's economic health and growth.

These concepts are fundamental to understanding the dynamics of foreign trade in Chile, providing international business students and future professionals with a solid foundation for analyzing the challenges and opportunities that arise in a globalized and constantly changing environment.

The evolution of foreign trade in Chile from 2018-2022

Chile's early international trade was very different from what it is today. In the second half of the 19th century, the Chilean economy experienced two major expansionary cycles linked to the export of certain products to world markets. "In 1860, Chile exported mainly wheat, flour and copper, and in 1930, the main export products were copper, silver, saltpeter and wheat." (Memoria Chilena, 2023).

Currently, Chile is characterized by an open economy that is highly dependent on international trade. 56% of the gross domestic product is due to foreign trade, which means that there are more than 43 thousand Chilean export and import companies that generate 2.8 million jobs. A comparison of Chile's foreign trade in the years 2018 and 2022, quantitatively demonstrates the impact of global events on the Chilean economy. During this period, the world has faced significant challenges, from the COVID-19 pandemic, which disrupted trade dynamics, to the geopolitical tension resulting from the war between Russia and Ukraine.

2018:

In the first seven months of 2018, Chile's trade exchange experienced an annual growth of 18%, reaching US$87,212 million. Exports increased by 20%, reaching US$45,386 million, driven by silvo-agricultural and industrial shipments. Mining exports also had an outstanding performance, registering their best numbers since 2013. Copper, which makes up 91% of mining exports, experienced growth of 25%. Of particular note was the steady growth of lithium carbonate shipments, which reached their best historical performance with US$571 million and an annual growth of 51%. As can be seen in Table 1.

Table 1.

Foreign trade values in chile 2017/2021

Source: World Trade Organization (WTO)

2019:

In 2019, Chile's international trade reached US$139,275 million, suffering a year-on-year decrease of 7.4%. This was due to a 7.6% drop in exports and a 7.2% drop in imports, resulting in a reduction of the trade surplus to US$4,179 million. Chilean exports totaled US$69,682 million, experiencing a 7.6% decrease compared to 2018. Non-copper exports accounted for 52.1% of the total and reached US$36,281 million.

"This decrease resulted in a decrease in the amount of trade exchange of 9,486 million dollars FOB, with respect to the previous year." (National Customs Service, 2020).

2020:

In 2020, the COVID-19 pandemic had a significant impact on Chile's international trade, generating declines in imports and exports. However, as of September of that year, there were already signs of recovery, with an increase in export shipments from several regions of Chile. As can be seen in Figure 1.

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