Chile, located on the other side of the world from Korea, is a very distant country from us. There are no direct flights, so even if you fly, it takes 26 hours to travel halfway around the world. The time and seasons are opposite. However, if we narrow it down to the economic field, Chile and Korea are quite close countries. The Korea-Chile Free Trade Agreement (FTA), which was signed in February 2003 and took effect in April 2004, played a decisive role in narrowing the distance between the two countries. Since then, Chilean wine and pork belly have become part of the Korean diet, and speeding Korean cars have become a familiar sight on Chilean streets.
Chile's population is approximately 20 million, so it is difficult to say that it is a large market. However, Chile has recently been receiving a lot of attention from around the world. This is thanks to lithium, which is called ‘white oil’. Lithium is a key raw material used in almost all types of batteries, and its price has recently risen as electric vehicles have gained popularity.
On April 18, I met Ambassador Matthias Franke at the Chilean Embassy in Jung-gu, Seoul. He said that Korean cars are competing with the world's leading brands in the Chilean market and are showing off their high status in terms of reliability and reputation, and that "the elimination of tariffs on Korean products through the conclusion of the FTA may have also helped." In addition, he said that the current global economy is very different from when the Korea-Chile FTA was negotiated, and conveyed the Chilean government's desire to conclude supplementary negotiations within this year, which marks the 20th anniversary of the FTA's entry into force.
Ambassador Franke, a former lawyer, majored in international law at the Catholic University of Chile and received a master's degree in international studies from Georgetown University in the United States. Before taking office as Chile's ambassador to Korea in July 2022, he served as Chile's permanent representative to the World Trade Organization (WTO) and Chile's deputy ambassador to the United Kingdom.
How do you evaluate the performance over the past 20 years since the Korea-Chile FTA was signed?
“I am looking at it very positively. According to the Korea International Trade Association, the amount of trade between the two countries increased more than five-fold between 2003 and 2023. Results were seen quickly, with the number more than doubling 20 months after signing the contract. Korea is Chile's fourth-largest export market. Last year, exports to Korea amounted to $7.5 billion (about 10.3 trillion won). “Exports of Korean products and services to Chile more than doubled from $517 million (about 700 billion won) in 2003 to $1.25 billion (about 1.7 trillion won) last year.”
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| Matthias Franke , Chilean Ambassador to Korea, Bachelor of International Law from the Catholic University of Chile, Master of International Studies from Georgetown University, Former Permanent Representative of Chile to the World Trade Organization (WTO), Former Deputy Ambassador of Chile to the United Kingdom Photo by Reporter Lee Yong -seong |
After the conclusion of the FTA, the popularity of Chilean wine in Korea and Korean cars in Chile increased significantly.
“Chilean wine ranks first among Korean imported wines in terms of volume. Chilean pork belly is also popular in Korea. Automobiles from Korea's Hyundai Motors and Kia are competing with the world's leading brands in the Chilean market, showing off their high status in reliability and reputation. This is a significant achievement considering that competition among global brands is very fierce because Chile does not have its own automobile industry. “The elimination of tariffs on Korean products through the conclusion of the FTA would certainly have helped.”
Chilean wine has been ranked first in the country in terms of imported volume for several years. Considering that Chile ranks 6th and 5th, respectively, in global wine production and export, it can be said that the FTA with Korea has had a significant effect. Hyundai Motor Company and Kia Motors have the largest share of the Chilean automobile market. As of August last year, Hyundai Motors was in third place, behind Toyota and General Motors (GM), but when combined with Kia in fifth place, monthly sales of about 25,000 units far exceed Toyota (17,857 units). Korean smartphones, televisions, and home appliances such as washing machines and refrigerators are also popular.
I think the global craze for Korean culture, including K-pop, may have played a role in the rise in the status of Korea and Korean companies in Chile.
“In the 1980s, Koreans began immigrating to Chile, especially in the capital Santiago. At that time, most of those who immigrated to their home country (Korea) for trade successfully settled down, and as a result, Korean culture began to become known in Chile. In addition, the K-pop and K-drama craze that broke out in the 2010s served as an opportunity for Chilean youth to become more familiar with Korean culture. “Today, Santiago has become a city where K-pop bands on international tours must stop by.”
I am curious whether there are any signs that interest in Korea, sparked by the popularity of Korean Wave cultural content, will shift to new industrial fields.
“In Chile, interest in K-food has recently increased significantly. The number of Korean restaurants has rapidly increased everywhere, and efforts to adapt to local tastes by using Chilean ingredients based on traditional Korean food are also noticeable. I think K-beauty will take over the baton next. Several Korean related companies have already opened stores in Chilean shopping malls. It is expected that more Korean companies will enter related fields in the future. “I think the next epicenter of the Korean Wave in Chile will be cutting-edge technologies such as biopharmaceuticals.”
As the spread of electric vehicles increases worldwide, the status of Chile as a lithium powerhouse has also increased.
“Chile holds about 40% of the world’s lithium reserves. It is responsible for 24% of global production, ranking first in this sector. Although the Atacama Lake is the only place in Chile where commercial lithium production is currently taking place, there are 45 other salt lakes in Chile with various chemical and geological characteristics. The Chilean government recognizes the importance of Chile in the production and distribution of major minerals, including lithium, and is making efforts to help the growth of related industries. “The announcement of the national lithium policy last year is part of such efforts.”
What is the core of the national lithium strategy?
“The government and the private sector are working together to promote the growth and development of Chile’s lithium industry. Government participation will be through Codel-co, Chile's state-owned mining company and one of the world's largest copper producers, and Enami of Chile. Economic growth is not the only thing that is important. Local communities and experts also participate to ensure environmentally, politically, and socially sustainable development. The Chilean government is trying to attract Korean companies interested in Chile's lithium resources. “We hope to one day become part of the Chilean lithium ecosystem and will continue to collaborate with them.”
Currently, three domestic battery companies (LG Energy Solutions, Samsung SDI, and SK On) are producing batteries with lithium hydroxide made by processing lithium carbonate. These companies receive most of their lithium carbonate imports from Chile. Previously, Chilean lithium producer SQM signed long-term lithium purchase contracts with LG Energy Solutions and SK On.
Negotiations are underway to supplement the Korea-Chile FTA. What direction do you think we should move in?
“The current global economy looks very different from the early 21st century (when Korea-Chile FTA negotiations were underway). The role of small and medium-sized businesses and the importance of global supply chains in trade have increased, and things to consider, such as the environmental impact of production and trade, have also increased. For this reason, the two governments agreed to supplement the existing FTA in 2018. The Chilean government hopes to finalize the supplementary agreement within the year. If that happens, it will be the best event for both countries to celebrate the 20th anniversary of the FTA.”
What kind of Chilean imports would you like to see more of in Korea in the future? Conversely, is there any Korean export product you would like to introduce to Chile?
“I hope that many Chilean agricultural products, which were excluded from the first FTA agreement, will come into Korea. Chile is a producer and exporter that boasts world-class competitiveness in the agricultural sector. After concluding an FTA with Chile, Korea also gave preferential treatment to other countries (with which it signed an FTA). I just hope that we can compete with them on an equal footing and allow Korean consumers to make choices. The focus of the Chilean Embassy in Korea on trade is to help export Chilean products to Korea, but it also provides opinions on the export of Korean products to Chile. “Korean seaweed, persimmons, meat, and some seafood are likely to be very popular with Chilean consumers.”