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Since the US-Chile Free Trade Agreement came into force in 2004, trade between the two countries has boomed. In the period between January and April this year, total bilateral trade, including imports and exports, reached a record US$7.5 billion – up from US$2.2 billion in the same period of 2003 - and has rebounded strongly after the economic crisis in 2008. But exports could grow much faster if Chilean companies seized the opportunities available to them.

This was the main theme of a seminar organized by AmCham and the Chilean manufacturers’ association SOFOFA in June, with the participation of the US Embassy and Direcon, the Foreign Affairs Ministry’s international trade office.

In 2010, Chile imported more goods from the US than from any other country and the US was the third most important destination for Chilean exports after China and Korea. Excluding exports of copper and related products, which make up the bulk of exports to Asia, the US is Chile’s main trading partner. But there is plenty of room to grow.

“Despite our efforts to enter the US market, we are still on the surface and US imports from Chile are a tiny fraction of its total imports,” said Sofofa’s president, Andrés Concha.

In fact, Chile has become a net importer since the FTA was signed. Imports – led by refined petroleum products - have grown at double the rate of exports since 2004 and today Chile imports more from the US (US$4 billion in January-April this year) than it exports (US$3.4 billion).

Chile’s exports are still dominated by mining products, which accounted for 39% of exports in 2010, up from 22% in 2004. Of the more than 2,000 Chilean companies that exported products to the US in 2010, the top 15 accounted for 43% of exports and most of these are in the mining industry.

But it’s not just about copper and the US is one of Chile’s most diversified markets. Through the FTA, Chile has access to 50 US states each with an economy equivalent in size to a small country (Chile’s is the size of Oregon) and they all share the same business culture. “This is an important advantage because it makes doing business easier,” said AmCham’s president, Javier Irarrázaval.

Record trade levels in the first quarter this year show that Chile-US trade is “healthy, buoyant and growing,” said Irarrázaval. But many opportunities are still unexplored.

One is the US system of government procurement tenders. Chile is the only country in the world allowed to participate in these tenders worth a whopping US$500 billion in 2010, but Chilean companies have yet to participate in even one.

The reasons are complicated. “At AmCham we believe this is due to the lack of information about these opportunities,” said Irarrázaval.

Chilean companies simply don’t know which products are needed. Sofofa and Direcon are working to create a system to identify opportunities on a state by state basis and match them to products produced in Chile, said Hugo Baierlein, Sofofa’s head of international trade.

Chilean products are already used in US government buildings. Some furniture in the Whitehouse, for example, was produced by the Chilean company CIC, but it was sold to a US company that won the tender. “We are indirect suppliers,” said Baierlein.

One obstacle is the different product codes and standards used by US companies, but many small Chilean businesses do not have sufficient economies of scale to produce the volumes necessary to make a bid.

“Chilean companies don’t have the culture of forming associations,” said Baierlein.

Niche markets for things like furniture could be good opportunities for Chilean companies, but first they need to understand how the procurement system works and be able to guarantee sufficient volumes.

Meanwhile, exports of agricultural products are booming led by blueberries, grapes and salmon. After mining, agriculture is the next most important sector with exports of food products now representing 26% of total exports, up from 23% six years ago.

Around 98% of Chilean exports currently enter the US tariff-free but Direcon is negotiating to include more fruits and vegetables in the FTA and 100% of exports should be covered by 2015, said Sandra Ramos, head of the North America division at Direcon.

Another issue is quotas. Chile’s quotas for some products like olive oil, condensed milk and avocados are almost fully used and Direcon is negotiating to increase quotas by 30% for these and other products. But quotas for some products like textiles and cheese are barely used.

For example, Chile has negotiated a textile quota with flexible rules of origin, which means that cotton and synthetic fibres can be imported and used to be make clothing in Chile. But wool is not included in the quota which has discouraged wool-producing countries from investing here.

Then there is cheese. Chile’s dairy industry exports large volumes of condensed milk and manjar to the US, but only 15% of its cheese quota was used in 2010. This was mainly due to strong competition and lack of information about packaging rules, said Skania Geldres, manager of international business at the dairy producer Mulpulmo.

“We need to be in the US to understand the market better, it’s difficult but not impossible,” she said.

Chilean exporters must also comply with US food safety norms which are increasingly stringent. Some Chilean products like poultry have already been successful due to their high quality, but standards need to be improved for all products.

In terms of services, Chile has an important advantage over other trading partners. It is one of only two countries – the other is Singapore – awarded special US working visas. Chile has a quota of 1,400 visas annually for professionals to work in the US, but less than a third of these are currently used. These H1B1 visas can be used to train workers in the US, improve their language skills and, most importantly for export-oriented companies, learn firsthand how the US market works.

Finally, there is the issue of intellectual property protection. Chile has remained on the USTR priority watch list of countries that do not protect IP adequately for five years. Some progress has been made in increasing penalties for copyright violation, but more progress is needed to fully comply with the FTA.

Overall, the FTA has been a staggering success for both countries. But taking advantage of new export opportunities requires creativity, cooperation and, in some cases, higher quotas and more flexible rules of origin. The good news is that help is available through AmCham, Sofofa, ProChile and other institutions. When it comes to penetrating the US market, the challenges are great but so are the rewards.