Chile's history makes it somewhat unique even in a Latin America famous for its bewildering diversity. The turning point was the deposition of the left-wing President Salvador Allende by the miltary dictator Augusto Pinochet in 1973. The handover by Pinochet to an elected coalition government (Concertación) in 1990, after a referendum which rejected his continuation, led to a remarkable transition to civilian rule from which the country never looked back.
Between 1975 and 2010, GDP grew by almost five per cent annually, against only three per cent for Latin America as a whole. Poverty fell from 45 per cent in 1987 to less than 15 per cent in 2013. In 2015, GDP per capita (purchasing power parity) exceeded $22,000, the highest in the region. Unlike most Latin American countries, Chile's natural resource endowment - except for copper - is sparse. This country of 17 million has achieved a global reputation for wines, fruit, salmon and entrepreneurship.
The continuity established by the Concertación coalition was interrupted by right-wing President Sebastian Piñera (2010-14). Public resentment, primarily expressed by left-wing students over the cost of higher education, led to riots and the return of Michelle Bachelet for a second term. The Gini Index (a measure of economic inequality) fell from 56.2 in 1987 to 50.5 in 2013, but was still the highest in the OECD. Ms Bachelet forged the New Majority coalition, incorporating the Communist Party and agitating students, and announced ambitious structural reforms, including free university education, higher corporate taxes and more bargaining power for labour unions.
Ms Bachelet's room for manoeuvre has recently been curtailed. Since 2011, the global slowdown has more than halved the price of copper, which still represents more than half its exports. A fall in Chinese demand and other factors slowed growth to two per cent since 2013. This forced her to postpone or dilute some promised reforms. The government amended some labour laws and raised corporate tax from 20 per cent to 27 per cent. Higher education reform is bedevilled by legal challenges and a skewed structure that still excludes vast numbers. To make matters worse, Ms Bachelet's son was credibly accused of misusing his mother's position for private deals. Her popularity plummeted to 15 per cent.
Two former presidents, Sebastian Piñera for the centre-right and Ricardo Lagos (2000-2006) for the centre-left, are the most likely presidential candidates for 2018. Neither appears for now to appeal to a population whose expectations have turned into demands.
These internal problems have not diminished Chile's intrepid international profile. It is a member of the prestigious OECD and APEC, was a prime mover of the Trans Pacific Partnership and plays an important role in most regional organisations.
Since the early 1990s Chile has negotiated and implemented preferential and free trade agreements (PTAs and FTAs) with over 60 countries. These have complemented its unilateral trade liberalisation, reflected in a gradual lowering of its almost uniform ad valorem tariff rate, from 11 per cent in 1998 to six per cent in 2003 and thereafter. Except for few remaining tariff and non-tariff barriers on selected agricultural goods, as a result of price bands, Chile's sector-specific barriers and non-tariff restrictions are virtually non-existent.
India's relations with Chile are extremely cordial. Indira Gandhi included Chile in her eight-nation Latin American odyssey in 1968. Since then there have been two presidential visits from each side.
In 2015-16 India's exports grew to $679 million, from $566 million a year before. These do not include exports to the free trade zone of Iquique in the north ($30-60 million annually), nor IT exports. Apart from pharmaceuticals, textiles, plastics, etc., a major export to Chile is motor vehicles - Tata, Maruti Suzuki and Hyundai. Imports fell from $3.08 billion (2014-15) to $1.96 billion (2015-16). This was mainly on account of copper, whose imports came down to $1.7 billion, from $2.61 billion in 2014-15, despite a reduction in volume of only 21 per cent.
An important cause of India's thriving relationship with Chile was the PTA concluded in 2005, the first in that region. Even more significant was the signing, after four years of negotiations, of the expanded PTA last month. It should be ratified by the Chilean parliament and enter into force within weeks.
The existing PTA offered 178 tariff lines from India with the margin of preference (MoP) ranging from 10-50 per cent at 8-digit level, and from Chile, 296 tariff lines with MoP ranging from 10-100 per cent at 8-digit level. Under the expanded PTA, Chile has offered concessions to India on 1,798 tariff lines, with MoP ranging from 30-100 per cent. India has offered concessions to Chile on 1,031 tariff lines at 8-digit level, with MoP ranging from 10-100 per cent. Under the new PTA, 86 per cent of India's exports to Chile can avail of concessions. Chile hopes to enhance its copper exports as well as value-added fruit and other commodities, but will wait for India to conclude agreements with the EU before it can avail of tariff reductions on its world-famous wine.
This relationship with an influential, progressive country in a region we know so little about is serendipitous. Ideologically agnostic Chile is an attractive destination for Indian investment. We need to increase our contacts and focus on our complementarities.
The writer served as India's Ambassador to seven Latin American countries between 2003 and 2012
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