Canadian banks and insurance companies will gain greater access to Chile’s financial services market under a new expanded trade agreement, to be announced by the two countries Monday.
The original trade deal between Canada and Chile came into force in 1997, without any provisions involving financial services. Monday’s agreement adds a chapter that covers banking, insurance and asset-management in a country enjoying rapid economic growth.
International Trade Minister Ed Fast is announcing the upgraded agreement Monday in Toronto alongside Alfredo Moreno, Chile’s Minister of Foreign Affairs.
The revised accord also contains new rules for government procurement, dispute settlement and customs procedures. The treaty revisions are reciprocal, meaning Chile gains the same terms for its treatment in the Canadian market.
The new accord “will ensure that Canada’s world-class financial institutions and other Canadian businesses enjoy enhanced access to the Chilean market,” Mr. Fast said.
Chile’s financial services industry has expanded significantly in recent years – along with the country’s growing middle class – and Ottawa considers the South American economy a priority market for Canada’s banking and asset management firms.
Although mining is currently Chile’s largest industry, financial services account for about 16 per cent of annual economic input, according to KPMG.
Over the past decade, the middle class in Latin America has expanded by 50 per cent and now represents about one third of the population – a group with a growing need for financial services such as loans, credit cards and insurance. Chile’s per-capita gross domestic product rose to $15,356 (U.S.) in 2012, up 44 per cent from $10,672 (U.S) in 2008, according to World Bank data. That compares with a 16-per-cent increase for Canada’s per-capita GDP in the same time frame.
The upgraded Canada-Chile deal contains what government officials call a “treaty level guarantee” that Canada’s financial services providers will be treated in a non-discriminatory manner in Chilean markets. This ensures that Canadian financial services providers, including banks, insurance companies, and financial asset managers, can compete in Chile on a level playing field with competitors from other Chilean FTA partners such as the United States.
Similarly for access to Chile’s government purchasing market, the newly revised deal will ensure that Canadian goods exporters and services providers can compete for Chilean government contracts on a level-playing field with foreign companies from Chile’s other free-trade partners.
The Harper government is expected to release a study Monday underlining the benefits of trade with Chile, a report that estimates the annual economic boost to Canada from the commercial relationship amounts to $250-million annually.
The Conservatives are trying to expand preferential market access for Canada with major foreign jurisdictions, from the European Union to India. While these efforts have yet to bear fruit, Ottawa is also negotiating to expand and modernize existing trade accords like the one with Chile.
Two-way merchandise trade between Canada and Chile has more than tripled since the Canada-Chile Free Trade Agreement took effect 16 years ago. It stood at $2.5-billion in 2012.