Due to anemic Canadian growth in the current economic environment and the foreseeable future, Sell Side Handbook is adopting Latin American coverage and will be discontinuing Canadian commentary

This was supposed to be an April Fools joke. It was not very funny.

Overview of Chilean Industry and Latin American Business Environment

After a strong recovery from military junta rule, Chile has become a liberal free market economy that is more developed than any other Latin American nation excluding Mexico and Brazil, but with far better growth prospects – although on a go forward basis Colombia and Macri-led Argentina may be more promising. There are more Chilean professors at many Canadian universities (especially Pacific Rim school UBC) than any other South American country. The education system is strong and infrastructure development is well planned.

While Brazil (which is in an economic trough as commodity prices are down and the corruption of the Workers Party regime unravels) and Venezuela (doing very poorly due to depressed oil prices and the kleptocratic Maduro government) are part of left-leaning trading bloc Mercosur, Chile is part of the pro-free trade Pacific Alliance that includes many prominent countries on the Pacific Rim and has a pre-existing free trade agreement (FTA) with China. The FTA has made Chile’s largest trading partner by far, given Chile’s abundance in copper and other industrial metals and agricultural history.

Chilean mining revenues are growing at a 9% year-over-year compound growth rate whereas food and drinks are growing at 20% per year. This is a big opportunity for Chile. Chilean exports are currently around 80 billion USD per annum. Within the approximately $15 billion in food exports from Chile, most of it is from produce (2/5ths). However, around 1/3 is seafood (fish, crabs, snails), and 3/4ths of the seafood are Chilean salmon. Also, seafood exports are growing substantially quicker than all other food export categories (including wine, grains and meat).

Mining Industry in Chile

Along with state-owned and private Chinese players, many Canadian giants have substantial operations in Chile, including Teck, Barrick Gold (Pascua-Lama gold mine) and Silver Wheaton (streaming operation with said mine). 60% of Chile’s exports are mining.

Chile, in terms of financial markets, is known as a copper producer. That said, with Chinese industrial growth slowing and a shift towards domestic consumption (cutback on government spending, tighter regulations on corruption and official expenses, interest rate liberalization and stronger financial prerequisites for loans), the demand for commodities falls and the demand for consumer goods grow.

Agriculture and Seafood in Chile

Many people do not know that around 20% of Chile’s exports (around $15 billion) are from food and drink (fish, Chilean wine), and with China’s demographic shift from manufacturing to domestic consumption this is sure to grow (Copper prices, $3,000 a metric ton during the financial crisis went to $11,000 during China’s boom post-crisis and has settled around half of that in the current slowdown and has stabilized).

Salmon is the largest fish export, and Chile is the #2 largest producer worldwide due to natural environment, relative labor advantage, and economies of scale. Salmon production is around 700,000 tons per annum, or a third of world production. Salmon is 2/3 of aquaculture in Chile while mussels make up the remaining third.

As with most industries, a few players dominate the market. AquaChile, Agrosuper, and Multiexport Foods. AquaChile is a pure play fish producer.