Korean Products Take Chile By Storm

On March 9, two days before the inauguration ceremony of Chilean President Michelle Bachelet, the Intercontinental Hotel in the center of the capital city of Santiago was flooded with government delegations arriving to wish Bachelet well.

Every delegation arrived in a Hyundai Sonata.

The Chilean government has designated 160 white Sonatas from the Hyundai Motor Company as its official protocol vehicles.

Ricardo Lessmann, president of Gildemeister, a Chilean Hyundai since 1986, said, “This shows the status of Korean cars in Chile. Hyundai car sales increased 59 percent last year. Hyundai cars could outperform Toyota to rank second after Chevrolet in the Chilean market this year.”

April 1 marks the second anniversary of implementation of the Korea-Chile FTA, and its effects are clearly being felt.

Korea is positioning itself as a major player in the Chilean market, especially in high value added products, such as automobiles, mobile phones, camcorders, and plasma display panels (PDPs).

Samsung Electronics sharply increased its sales of mobile phones in Chile from 200,000 units in 2003 to 550,000 units in 2004 when the FTA took effect, and to 770,000 units last year.

Hong Sung-jik, president of Samsung Electronics Chile, explained, “The six-percent duties were abolished with the implementation of the FTA. We invested the amount in marketing, rather than reducing the product price,” adding, “This strategy contributed to expanding our market share in Chile.”

He also confidently said, “Our January sales exceeded that of Nokia, the top player. If this trend continues, we will be the leader in the Chilean market in terms of the annual sales.”

Park Nam-ki, president of LG Electronics Chile, said, “Our sales growth is the sharpest in Chile among Latin American countries,” adding, “As most of our products that sell well are advanced technology products, Korea’s national image is also improving.”

Indeed, logos of Samsung, LG, Hyundai Motor Company and Kia Motors are visible in many corners of Santiago. In particular, dealer shops of Korean companies are concentrated in the new town, which is known to be a wealthy community.

Ki Hyun-seo, Korean ambassador to Chile, said, “Korea is known better than Japan in Chile and the image of Koreans is very good. It seems because of the bilateral interchanges which became frequent after the implementation of the FTA and products of Korean companies.”

Such an atmosphere was also confirmed in the seminar titled “Assessment of Two Years of the Korea-Chile FTA and Future Tasks,” which was held yesterday in Seoul by Korea Institute for International Economic Policy and Korea International Trade Association.

According to the data released that day, Korea’s export growth to Chile was 9.6 percent as of April 1, 2004, in comparison with the previous year. But the figure soared to 58.2 percent in the first year after FTA took effect until March last year, and to 52.6 percent in the second year until February this year.

The market share of Korean goods in the Chilean import market has also been steadily growing from 3.0 percent in 2003 to 3.1 percent in 2004 and to 3.6 percent in 2005. In particular, Korean automobile’s share in the import market, which lagged behind Japan (29.5 percent) with 16.1 percent in 2004, closely followed Japan (29.5 percent) last year with 23.3 percent.

Korean mobile phone’s share in the Chilean market markedly increased for two years after the FTA took effect, from 9.5 percent in 2003 to 18.2 percent in 2004 and 19.4 percent in 2005.

The Impact on Farming: A “Yellow Light”-

Chilean goods’ share in the Korean market has also been steadily on the rise from 0.59 percent in 2003 to 0.86 percent in 2004 to 0.87 percent last year.

Korean grape and pig farmers are still nervous because the import duties are lowering every year and will be completely abolished in 2014. Some worry that Korea’s wine industry is losing ground.

Park Chul-jae, a manager of National Agricultural Cooperative Federation, said, “There were increasing numbers of small wine manufacturers, especially in the North Chungcheong region. But they are losing ground with imports of cheaper Chilean wine greatly growing.”

However, Choi Se-kyun, a researcher at Korea Rural Economic Institute, pointed out, “The market share of Chilean produce in Korea’s entire produce import market went up from 0.4 percent in 2004 to 0.6 percent last year. We need to wait and see to assess the impact of the Korea-Chile FTA on agriculture.”