Negotiations will begin this month for a free-trade agreement between Chile and India. The deal is expected to include the reduction of tariffs for around 400 products from both countries and could provide a significant boost to bilateral trade, which amounted to around US$350m last year. It could also provide Indian companies with another investment base in Latin America and could act as a blueprint for an FTA between India and the Mercosur trading bloc, negotiations for which are already underway.

From Chile's point of view the most important issue will be the reduction of India's high tariffs on its copper imports. In 2003 Chile exported US$225m worth of copper to India, accounting for 87% of its exports there. The average tariff in India on imports from Chile is 28% but for certain high-profile items it is much higher, and on copper it is currently as high as 50.6% (for wine it as high as 212%). If the tariff is reduced under the terms of an FTA, Chile's government has estimated its copper exports to India could rise to US$600m. India's total exports to Chile in 2003 were worth US$70m.

If the deal is concluded it will mark Chile's second FTA with an Asian nation, having signed a trade agreement with South Korea in February this year. Negotiations with China for a similar deal are scheduled to begin in November. India, meanwhile, is looking to conclude an FTA with the Mercosur bloc - of which Chile is an associate member (see the Special Feature on page 2).  

Certain Indian companies are also looking to expand their operations within Latin America. In one of the highest-profile deals so far, in early July India's utility-vehicle manufacturer Mahindra & Mahindra Ltd opened a new assembly plant in Uruguay, from which it also plans to sell vehicles in Argentina, Brazil, Mexico, Peru, and Chile.