The Republic of Chile is located in southern South America, stretching along the west coast of the southern half of the continent. Chile shares a 3,200-mile border to the east with Argentina and also borders Bolivia to the northeast and Peru to the north. Chile is roughly twice the size of Montana, and its population was estimated at 15.3 million in 2000, with a growth rate of 1.4%. There are 13 administrative regions in Chile, each of which is headed by an Administrator who is appointed by the central government; these administrative regions are further subdivided into 40 provinces, each administered by a Governor who is also appointed by the central government. The capital city, Santiago, is located near the center of the country, inland from the Pacific coast, and has a population of about 6.1 million. Chile's currency, the Chilean peso, has an exchange rate (as of October 2002) of about 740 pesos per U.S. dollar (1 peso = $0.0014). The Gross Domestic Product (GDP) in 2000 was $70 billion, and is growing by about 3-4% annually. Chile is a member of the Asia Pacific Economic Cooperation (APEC), the Inter-American Development Bank (IADB), the World Trade Organization (WTO), and the Organization of American States (OAS). Chile is also an associate member of the Mercado Comun del Sur (Mercosur).

Chile's National Energy Commission (CNE) has promoted a sustainable development program for energy. The four policy guidelines established are:

• Private investment will be the main source of capital for energy sector expansion, and the regulatory framework must be clear and stable to attract both local and international private investment.
• Policies must promote energy efficiency. Clean energy at the least cost is required to be competetive and to reduce the cost of energy for the nation's exporting industrial sectors.
• Energy development must ensure the protection of the environment. Prevention is critical and all new energy projects in Chile require an environmental assessment.
• Social equity must be an objective of sustainable energy development. Poverty can be overcome through employment in energy development and by providing basic energy services to the poorest sectors. To this end, Chile is implementing a rural electrification program. Renewable energy is an excellent tool to provide electricity to remote areas where the electricity grid is inaccessible.

Chile's long range electric power capacity expansion plan released in April 2002 shows a growing dependence on gas-fired electric power generation. The CNE foresees the development over the next decade of 10 new combined-cycle gas-fired power plants, but only one new hydroelectric facility in its Central Interconnected System (SIC), the central region's grid which serves 93% of Chile's population.

A new electricity law, Law No. 19,613, was passed in 1999 and gives the Superintendency of Electricity and Fuels the power to monitor power companies and impose fines on them for failing to meet their contractual supply obligations to distributors and large customers. The law was passed as a political response to Chile's power shortages, which began in November 1998. Article 99bis and Resolution 88 of the electricity law have been a source of contention in Chile's electricity sector. Article 99 requires generators to guarantee electricity supply in all circumstances, including during drought, under the threat of fines. Resolution 88 requires generators to sell electricity to distributors even without a contract.

In May 2002, fast track electricity legislation was sent before the Chilean parliament and will make some changes to the present regulations, above all in transmission. The bill modifies rates and tolls, defines and sets prices for complementary services, and modifies the rates system in the Aysén and Magallanes isolated grids. But it does not modify those aspects of the current legislation that have inhibited investment by generators -- Article 99bis or Resolution 88.

Chile's energy sector is largely privatized, particularly the electricity industry. Chilean energy demand has been growing rapidly (averaging more than 7% annually) since 1992. A significant portion of this growth has come from increased power demand by the mining sector, the country's single largest industry, and by large urban areas such as Santiago, which alone contains almost 40% of Chile's population. The increased demand combined with scant fossil fuel resources make Chile a net importer of energy.

An historical summary of Chile's Total Primary Energy Production (TPEP) and Consumption (TPEC) is shown in Table 1.

An historical summary of petroleum production and consumption in Chile is shown in Table 2.

Refineries and Downstream Processing
ENAP will invest almost $300 million in new projects in 2002, the largest annual investment budget in the company's history. This investment will go toward modernizing ENAP's refining operations, maintaining crude oil production, and beginning production of high-quality diesel fuel.

Chile has three crude oil refineries, all of which are operated by ENAP or its subsidiary companies. The largest of these is the Petrox SA refinery (100,640 b/d crude oil capacity), which is located at the port city of San Vicente in the Bío-Bío region of central Chile. This refinery is supplied oil from Argentina via the Estenssoro-Pedrals (formerly the Transandino) pipeline, and accounts for about 41% of Chile's refining capacity. The second-largest is ENAP's Refinería de Petróleo Concon (94,350 b/d), which is located near Santiago in the Metropolitan region. The smallest of Chile's refineries is ENAP's Gregorio refinery (9,859 b/d), located in far southern Chile, which is supplied crude oil from an independent pipeline system local to that region. The total refining capacity of Chile's three refineries is 204,849 b/d of crude oil.

Other petrochemical manufacturing in Chile includes one of the largest methanol production facilities in the world, owned by Methanex, at Puntas Areans in Magellanes region of far southern Chile. In 1999, Methanex commissioned its third methanol production unit at Punta Arenas, which has an annual capacity of 975,000 tons. This unit brings the total nameplate methanol production capacity of the complex to 2.7 million metric tons per year.

An historical summary of Chile's output of refined petroleum products by fuel type is shown in Table 3.

Natural Gas
Chilean natural gas reserves were estimated in January 2000 to be approximately 3.5 trillion cubic feet (tcf). Chile produces only a relatively small amount of natural gas, and until the mid 1990s, this was sufficient for its needs. However, following power shortages in the late 1990s resulting from a severe drought that greatly reduced hydroelectric power generation, CNE called for increasing the use of natural gas in Chile's energy mix (the goal is approximately 43% by 2020). New electricity generating capacity is beginning to come online that utilizes natural gas as fuel. Also, many industries in Chile now have access to natural gas, and there is a program to connect residential users in the larger cities to the gas transmission system as well. All this has resulted in Chile becoming a natural gas importer.

Gas import and production of natural gas in Chile is the responsibility of ENAP. Argentina currently is Chile's exclusive source of gas imports, which are supplied primarily through the GasAndes pipeline. Chile is also interested in obtaining gas from Bolivia, and in February 2000 opened discussions with the Government of Bolivia for that purpose.

An historical summary of natural gas production and consumption in Chile is shown in Table 4.

Coal
Coal production in Chile is mostly handled by Empresa Nacional del Carbón (ENACAR), which was privatized in 1985. Recoverable reserves of coal in Chile were estimated at 1.302 billion tons in 1999; the coal is of low quality and has high production costs. Coal production has greatly declined over the past decade; the country's largest coal mine was closed in 1997. Coal is now produced only in the Lota/Coronel area of Chile and at the extreme southern part of the country, in Tierra del Fuego; there are presently only two small commercial mines in operation in the country and much of the coal that is consumed in Chile is now imported, mostly from Australia.

Coal in Chile is primarily consumed in the electricity generating sector (72%) and for inputs to coke ovens in the steel sector (14%). The remainder is burned directly by industry, with the cement, food products and iron and steel sectors being the largest consumers. An historical summary of coal production and consumption in Chile is shown in Table 5.

Hydroelectric and Other Renewables
Hydroelectric Power
Because of the short distance between the Andes and the Pacific Ocean, there are no major river systems in Chile; instead, there are many relatively short-length rivers which rise in the Andes and flow west to the Pacific. The most important of these (from north to south) are the Loa, the Elqui, the Aconcagua, the Maipo, the Maule (with its largest tributary, the Melado), the Bío-Bío (with its largest tributary, the Laja), and the Imperial. The rivers of Chile, for the most part, are unnavigable because of many rapids and cascades; however, they are very important to the country because of the irrigation waters and hydroelectric power they furnish.

Hydroelectric power plants presently represent about 40% of the installed generating capacity of Chile, and, in 2000, provided about half of Chile's electricity. The amount of electricity generation from year to year has been extremely variable due to climate conditions in the country. The largest hydroelectric facility in the country is the 500 megawatt (MWe) Pangue Power Plant, located on the Bío-Bío River in central Chile. There are presently ten other hydroelectric facilities in Chile with at least 100 MWe capacities. A listing of Chile's largest hydroelectric power plants is shown in Table 6.

Hydropower development in Chile is still progressing rapidly, but not without controversy. The 570 MWe Ralco hydroelectric dam, planned for the Bío-Bío river in central Chile, was the focus of violent clashes between police and the Pehuenche Indians in May 2002. Chilean aboriginal groups oppose the construction, as the reservoir impounded by the dam will flood land to which they claim historical ownership rights. The dam's owner, Endesa-Chile, has said the protests will not delay construction, which is scheduled to be completed by the end of 2003.

Other large dams are also being planned. Australian power company Pacific Hydro and Germany's Lahmeyer called for bids at the end of May 2002 to construct a $200 million, 240 MWe hydroelectric project in Libertador Region in central Chile. Construction is expected to start in 2003, with operations beginning in 2006. The Canadian-owned mining and metals company Noranda is planning to build three hydroelectric dams that would supply a total of 758 MWe for its Alumysa aluminum smelting project in southern Chile. These and other hydroelectric facilities in planning or construction phases in Chile could add more than 2,500 MWe to Chile's electricity generating capacity. A summary of some of these planned hydroelectric facilities is shown in Table 7.

Other Renewable Energy
In an effort to increase rural electrification in Chile, the United Nations Development Program and the Global Environment Facility launched a project that will establish technical rules and certification processes for the implementation of renewable energy sources in rural areas, promote renewable energy and provide training in project design, installation and management, draw up a national wind map, and create a financial mechanism to reduce investment risks. Some of the plans for the project include wind projects on Robinson Crusoe island, and biomass and geothermal projects at other locations. Solar power projects that will benefit 5,000 families in the north and center-south of the country are also being explored.

No geothermal electricity generation yet exists in Chile, though there is an installed thermal capacity of 0.4 megawatts-thermal (MWth) that produces about 7 terajoules per year of direct-use heating. A new geothermal concessions law in Chile gives preference to groups that can demonstrate they have already undertaken exploratory work at proposed concession sites. Applications for 23 sites were submitted in January 2001 to win preferential rights to geothermal concessions at locations in northern, central and southern Chile. AES Gener is planning to partner with ENAP to develop a 50 MWe geothermal power generation project. AES Gener has undertaken basic geothermal studies, and is waiting for the U.S. Trade and Development Agency to visit the country to determine funding for conducting a more detailed feasibility study.

Energy Transmission Infrastructure
Oil Pipelines
Chile contains 471 miles of crude oil pipelines and 490 miles of petroleum product pipelines. The most significant crude oil pipeline in Chile is the Estenssoro-Pedrals pipeline (formerly called the Transandino pipeline) that supplies petroleum from Argentina's Neuquén basin to the Petrox SA refinery in central Chile. Sonacol is Chile's domestic oil and products pipeline operator; Sonacol is owned by Copec, Esso, ENAP, and Shell Chile.

Gas Pipelines
Chile imports the natural gas it consumes from Argentina. Gas imports are delivered through the GasAndes pipeline in central Chile, as well as three newer lines. One of these is the 330-mile Gasoducto del Pacifico line that opened in November 1999 and can transport up to 140 million cubic feet per day (mmcf/d) of natural gas to southern Chile. Gasoducto del Pacifico is owned by a consortium of TransCanada Pipelines (operator), El Paso International, Chile's Gasco, ENAP, and the Spanish/Argentine company Repsol-YPF. Presently, there is not enough demand to satisfy the pipeline capacity, as electricity generation in southern Chile is mostly non-thermal (i.e., hydropower).

The 584-mile GasAtacama pipeline, co-owned by Endesa-Chile and the U.S.-based CMS Energy, came onstream in July 1999. GasAtacama's only customer at present is the Nopel power plant of the same owners, which uses less than one-third of the pipeline's 300 mmcf/d capacity. The pipeline, which runs from Argentina's Salta province to Chile's Norte Grande province, has been extended northward to Endesa-Chile's Paposo power plant. Another northern Chile pipeline, which came onstream in November 1999, is the 280 mmcf/d Norandino pipeline, which transports natural gas from northwest Argentina to supply Electroandina's Tocopilla power plant and other gas-fired power plants in Chile's northern Antofagasta region that provide energy for Chile's mining sector; the pipeline is owned by Belgium's Tractebel (79%) and the U.S.-based Southern Company.

Electricity Transmission
Power generation in Chile is organized around four grid systems: 1) Sistema Interconectado del Norte Grande (SING), the northern grid, which accounts for about 19% of national generation; 2) the Central Interconnected System (SIC), the central region's grid, which accounts for 68.5% of national generation and serves 93% of Chile's population; 3) the Aysén Grid in southern Chile (0.3% of total generation); and 4) the Magallanes Grid, also in southern Chile (0.8% of total generation). Electricity transmission and distribution takes place through the four grids, as well as 36 electricity distribution companies. Endesa-Chile, either directly or through its subsidiaries (Pehuenche SA, Pangue SA, and San Isidro SA), is the principal supplier to the SIC grid, accounting for 57% of the installed capacity and about 49% of electricity sold in 2001. On the other hand, SING is dominated by independent producers, though Endesa-Chile, through its subsidiary Celta SA, still accounts for about 20% of the installed generating capacity connected to that grid.

A diagram of Chile's SIC electricity grid is shown in Figure 1.

Figure 1: Chile's SIC Electricity Grid


(Click on Image to View a Much Larger Version)
Source: Transelec

Electricity transmission in Chile's SIC grid is largely the responsibility of Transelec, which was acquired by HydroQuebec from Endesa-Chile in October 2000 as a result of deregulation of Chile's electricity industry. Transelec provides electric power to 93% of all electricity customers in Chile; its system includes about 7,300 kilometers of electricity transmission lines, of voltages from less than 66 kilovolts (kV) up to 500 kV, and about 350 substations. Transelec owns 100% of the 500 kV transmission lines and about 72% of the 220 kV lines in the SIC grid. Other companies that own part of the SIC grid include Colbún SA, which owns and operates a 270-kilometer line from Colbún to Santiago.

The SING grid, on the other hand, has no dominant player. Several different companies own and operate parts of that grid, including AES Gener SA, whose TermoAndes line links a new gas-fueled power plant in northwestern Argentina to the SING grid, and Endesa's subsidiary Celta. A summary of the companies who operate the SING grid is shown in Table 8.

A high voltage interconnection between Argentina and central Chile is being contemplated by Transener, controlled by the United Kingdom's National Grid Co., and Argentina's energy conglomerate Pecom Energia. In December 2001, Transener proposed a 320 kilometer, 500 kV line from Mendoza, Argentina, to Polpaico, some 40 kilometers northeast of Santiago. Better electricity interconnections could help both Chile and Argentina, from an electricity import/export perspective. Argentina's generation is largely thermal-electric, whereas Chile has heavy reliance on hydroelectric power. Ideally, Chile could export electricity to Argentina in the summer, when hydropower is plentiful, and Argentina could then export electricity from fossil fuel power plants to Chile during the winter. Transelec and Endesa of Spain have also shown an interest in developing an Argentina-to-central Chile interconnection.

Electricity
Generation and Consumption
Significant growth in electricity consumption has occurred over the past decade, and is expected to continue, given the country's rapidly growing industrial base, especially in the copper mining and chemical industries, and also in the residential and commercial sector. Electricity generation has seen a similar increase (about double the total for 1990); the largest increase has been in thermal-electric generation, which is about two-and-a-half times what it was in 1990.

An historical summary of electricity generation and consumption in Chile is shown in Table 9.

Installed Capacity
Chile has dramatically ramped-up its electricity generating capacity, especially for conventional thermal-electric generation. The severe drought in Chile from late 1997 to 1999 crippled the country's electricity sector. As a result, Chile is committed to diversifying its electricity generation sources. Natural gas has already become an increasingly important electricity source, but even it is not without critics. A petroleum industry workers strike in Argentina, which supplies all of Chile's gas, shut down the GasAndes pipeline for several hours in February 2002. Proponents of increased hydroelectric investment argue that natural gas is not a panacea, claiming the strike in Argentina shows just how susceptible the country is to Argentine volatility.

A summary of Chile's electricity generating capacity by type of technology used, for the years 1998 and 2000, is shown in Table 10.

An historical summary of installed electricity generating capacity in Chile is shown in Table 11.

Industry Overview
Over the past decade, Chile has privatized 100% of its electricity industry and unbundled the national generation, transmission, and distribution systems. Empresa Nacional de Electricidad (Endesa-Chile) is Chile's largest electricity producer, producing over 50% of the country's power. Endesa-Chile was created in 1943 as a subsidiary of Corporacion de Fomento de la Producion (CORFO), which remained its majority shareholder until 1988. At that time, Endesa-Chile divested itself of its northern sector (including Edelnor), the Colbún and Machicura power plants (these became part of Colbún SA), and all the distribution areas in central and south Chile along with two small power plants. Today Endesa-Chile is part of the Enersis Group which is majority-owned by Endesa of Spain.

Several other electricity generating companies also hold significant market shares. Electroandina SA (which is about 22% owned by Tractebel) is the largest generating company in the SING grid of northern Chile, with about a 40% market share there. Electroandina currently operates four coal-fueled units, three heavy oil-fueled units, three diesel oil-fueled gas turbines, and recently brougnt online a 400 MWe natural gas-fueled combined cycle power plant in Tocopilla. Colbún SA (which is about 33% owned by Tractebel) is the third-largest generating company in the SIC grid area, with five hydroelectric power plants (780 MWe cumulative capacity) and a new 370 MWe natural gas-fueled combined cycle power plant at Nehuenco.

Chile's second-largest electric power generator, and largest thermal producer is AES Gener SA (formerly Chilgener). which owns 1,447 MWe of thermoelectric generating capacity in Chile, including the new Nueva Renca gas-fired plant which had been built by General Electric. In March 2002, AES announced informally that it is considering selling Gener in an attempt to shed assets to restructure the company's finances; AES had acquired Gener at about the beginning of 2001. Possible bidders for Gener include Duke Energy Corporation, which does not have a presence in the Chilean market and had previously unsuccessfully tried to buy Endesa. Belgium's Tractebel may also make a play for Gener. Besides its investment in Gener, AES also has a 49% stake (also acquired in 2001) of Empresa Electrica Guacolda SA, which owns and operates fossil-fueled power generation facilities that provide electricity to the SING grid.

Other relatively recent electricity industry events in Chile include the majority acquisition (85%) of Iberoamericana de Energía SA (Ibener) by the Spanish company Iberdrola in September 2000. Ibener SA owns and operates two hydroelectric power plants on the Duqueco River in central Chile.

A summary of Chile's electric power generation companies is shown in Table 12.

The largest thermal-electric power plant in Chile is the 629 MWe Electroandina facility at Tocopilla in the northern Antofagasta region that generates electricity both by single-cycle gas turbine and conventional thermal (i.e., boiler and steam turbine). A new 400 MWe combined cycle power plant there has now raised Electroandina's installed capacity in Tocopilla to more than 1,000 MWe. A summary of Chile's thermal-electric power plants is shown in Table 13.

Besides these, other thermal-electric power plants are in construction and planning stages, as Chile has strong incentive to diversify its power generating infrastructure. With the completion of natural gas pipelines from Argentina, several high-efficiency, natural gas-fueled combined-cycle projects have already been constructed and/or planned. Additionally, cogeneration of combined-heat-and-power (CHP) appears to be gaining favor in Chile, and several smaller CHP facilities are also in the planning stages. A summary of some of these planned thermal-electric facilities is shown in Table 14.

The larger Chilean generators belong to Centro de Despacho Economico de Carda (CDEC), which is responsible for determining the safe prices of electrical energy among the generating companies. Sale prices are regulated by a marginal tariff system established in 1982 whereby marginal energy costs are determined in relation to the optimal operation of the various generators on the system. Since 1992, marginal costs have been calculated hourly. Sales prices charged to distributors correspond to so-called "node prices" which are determined by the CNE. Node prices in Chile's central grid were reduced recently by 4.6% for the May through October 2002 period. The cut in node prices breaks a two-year period of semi-annual price hikes. Generators in Chile, however, continue to complain about the CNE's node price-setting system. Generators argue that the uncertainty embedded in six month resets, as well as the low level of the prices, restrains them from committing to build new power plants and discourages them from supplying regulated customers. CNE cites capacity constraints in Chile's central grid as the primary reason for continuing the node pricing scheme.

Carbon emissions from energy-related enterprises for the year 2000 were estimated at 15.14 million metric tons, or 0.24% of the world's total and 5.64% of the total for Latin America and the Caribbean. Chile ranks as fifth-most carbon emitter, just behind Colombia, for the Latin America/Caribbean region; its carbon emissions are about 16% of the Brazil's.

An historical summary of CO2 emissions from fossil fuel use in Chile is shown in Table 15.

Chile is party to numerous international environmental agreements, including initiatives on Antarctic-Environmental Protocol, Antarctic treaty, Biodiversity, Climate Change, Endangered Species, Environmental Modification, Hazardous Wastes, Marine Dumping, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, and Wetlands. Environmental issues facing Chile include air pollution from industrial and vehicle emissions, water pollution from untreated sewage, deforestation contributing to loss of biodiversity, soil erosion, and desertification.

Environmental policy and regulations are developed by the Comision Nacional del Medio Ambiente (CONAMA), the National Environmental Commission. An Environmental Law was passed in March 1994, and regulations for its implementation have been approved. The regulation for Environmental Impact Assessment (EIA) requires all new projects to conduct an EIA which must be approved by CONAMA before implementation.

Chile is a leading country of the privatization movement in the South American region. Chile adopted a progressive pricing mechanism during the 1980's, similar to the long-term marginal cost pricing schemes implemented by some developed countries. Over the past decade, Chile largely has privatized its electricity industry and unbundled the national generation, transmission, and distribution systems. Besides the CNE, which is responsible for central planning and tariff regulation, Chile's power sector is totally private. Privatization has increased efficiency and reduced distribution losses (including theft) in half over seven years. Electric companies operating in Chile are for the most part unregulated, with two major exceptions: 1) they must coordinate their operations through the Economic Load Dispatch Center (CDEC), whose function is to ensure efficiency and security of the electric system; and 2) prices for consumers whose demand is 2 MWe or less are set by the CNE for six-month periods.

Chile is often cited as a role model for countries considering privatizing their utilities. Privatization has worked in Chile for many reasons, including the country's stable investment climate; the government's commitment to minimize red tape; a large and globally-viable industrial customer base and, perhaps most importantly, an apolitical regulatory framework that rewards productivity and operating efficiency with reasonable tariff rates. With much of the sector in private hands, the government will next need to turn its attention to tracking the construction of new generating capacity and ancillary facilities to prevent a capacity glut.

Chile's economy grew rapidly in the years 1991-1997, averaging 8% during that period. Chile's economic success is owed at least in part to its policies of liberal market economics, including free trade and openness towards foreign investment, along with prudent monetary and fiscal policies. However, in 1998, GDP growth fell to 3.2% because of tight monetary policies implemented to keep the current account deficit in check and lower export earnings -- the latter a product of the global financial crisis. A severe drought exacerbated the recession in 1999, reducing crop yields and causing hydroelectric shortfalls and electricity rationing, and Chile experienced negative economic growth for the first time in more than 15 years. By the end of 1999, exports and economic activity had begun to recover, and growth rebounded to 4.4% in 2000. Unemployment remains high, however, putting pressure on President Lagos to improve living standards.

Meanwhile, Chile has launched free trade negotiations with the European Union and the United States. Chile's negotiations for a free trade agreement (FTA) with the European Union are in an advanced stage, while the approval of trade promotion authority by the U.S. Senate signals that Chile may be able to complete a FTA with the United States in late 2002.

An historic summary of some of Chile's macroeconomic indicators is shown in Table 16.

The United States is Chile's most important trade partner; other principal trading partners are the European Union, Japan, Argentina, and Brazil. While solid opportunities for U.S. products abound in Chile, competition is stiff, especially from countries with which Chile has already negotiated free trade agreements, such as Canada and Mexico. Chile also has an association agreement with the MERCOSUR block (Argentina, Brazil, Paraguay, and Uruguay), bilateral treaties with Venezuela, Colombia, Ecuador, and Peru, and an agreement with the Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua).

On April 26, 2002, Chile and the European Union reached a FTA deal, to be ratified during the year. Meanwhile, negotiations on FTAs with the United States and the EFTA countries (Iceland, Liechtenstein, Norway, and Switzerland) had made substantial progress and Chile was also holding exploratory trade talks with South Korea, Japan, and New Zealand. In addition, Chile actively supports efforts to establish a Free Trade Area of the Americas and is an active member of the APEC forum.

Chile has one of the simplest and most transparent regulatory systems in the region to deal with trade and business activities. Careful review of applicable regulation and full compliance with its guidelines will guarantee more successful and trouble-free operations in the Chilean market. Chile does maintain import and export licensing requirements, but they are more for statistical purposes rather than control. For all except agricultural products and a few sensitive items, virtually anyone is free to import anything.

Officially, Chile maintains a single 8% import tariff, but the effective average rate is lower (around 5.5%) due to bilateral and multilateral trade agreements. Chile maintains tariff-free trade for many goods with (among others) Mexico, the Mercosur bloc, Venezuela, Colombia, Ecuador, and Canada. In 1998, Chile and Peru signed a trade agreement that allows tariff-free access for 35% of Chile's exports and 60% of Chile's imports from Peru.

U.S. companies currently investing in the Chilean energy sector are relatively few, especially in the electric industry. AES and Entergy are two U.S. firms that have invested in power generation in Chile. Edelnor, the electric utility operating in northern Chile, is two-thirds owned by the U.S.-based Southern Company.

More U.S. companies are involved in oil and gas production and distribution. Cardinal Resources Inc., of White Plains, New York, partnered with ENAP on several seismic research programs in 1998. Chile also awarded Evergreen Resources Inc. and Cordex Petroleums Inc, (both of Denver, Colorado) contracts for oil exploration in 1997. Two U.S. firms, Seacor and Smit Inc., have teamed with Chile's Offshore L.L.C. to operate oil and gas rigs.

Chile is a particularly promising market for high technology and infrastructure-type products. These products include electricity generation and related products, pollution control equipment, telecommunications equipment, computers and peripherals, mining and construction industry equipment, building materials, medical equipment, port equipment, food processing equipment, air conditioning and refrigeration equipment, and security equipment.

The market for generating equipment and supplies looks promising since new power plant construction started in 1996 and will continue through at least 2005.

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