Main Sectors: Organic Products
Chile 's Natural Products in the Most Competitive Markets
Organic Agriculture started in Chile in the early 1980s together with the implementation of organic production systems by small subsistence farmers. However, it was not until the mid-1990s that the export boom took hold in this industry. Chile enjoys exceptional agro ecological conditions that favor the production of a broad range of organic products. Together with its good export structure and counter seasonality, this allows Chile to reach the major consumer centers in the Northern Hemisphere markets.
Although small farmers initially developed organic production, larger companies from the fruit and wine industry, for example, which have dedicated larger areas to cultivation for exports, are now becoming involved in this line of business.
Advantages for Organic Production in Chile
Compared to other countries in the region, Chile has very reduced rate of pests and diseases. Its climate, geography and ecological conditions make their entry difficult. In addition, an abundance of beneficial arthropods help decrease the population of pests even further. Chile 's climate favors the production of a vast range of products. Fresh and healthy products are thus available to supply Northern Hemisphere markets in seasons when their own production is reduced. Moreover, the scarce use of agrochemicals and vast unpolluted areas make the development of organic agriculture possible. Successful exports to foreign markets are possible thanks to the availability of skilled labor and technical assistance for organic production, in addition to the presence of certifying companies of worldwide repute. Furthermore, the Chilean Association of Organic Agriculture, an organization that groups the different stakeholders involved in organic agriculture, has helped to promote the joint view with which Chile wishes to address the new challenges that this industry faces in its development.
Development and Evolution of Exports
Chilean exports of organic products have increased 3.3 times in 6 gears (see Table 1). Since there is a surface area currently in transition to organic farming, exports are expected to continue growing at annual rates ranging from 15 to 20 percent, thereby increasing the volume and also the variety of products available.
TABLE 1 : Development of Organic Product Exports
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Source: Prochile and AAOCH, based on data provided by the leading export companies.
Table 2 shows the different categories certified as organic by 2003. It also shows that the largest areas in organic farming are dedicated to fruit growing and vineyards. In the latter case, the surface area has increased more than four-fold compared to 1999. This translates into a constantly rising supply of organic wine. Exports in 2002 are estimated at 200,000 liters.
TABLE 2: Evolution and Distribution of Surface Area by Organic Crop Category
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Source: Prepared by ODEPA hoed on data provided by ProChile and certifying companies.
As the above Table shows, the surface area dedicated to organic production in the 200Z/2003 season increased more than six times compared to the 1997/1998 season. Wine producing grapes show the largest increase, rising from 44 hectares in the period 1997/1998 to over 1,914 hectares in the period 2002/2003.
Initially, the country's supply involved mostly asparagus, rose hips and kiwi fruit, but at present the supply has grown to include other species such as medicinal herbs, fresh and processed fruit and vegetables, fresh and frozen berries, wine, olive oil, honey and beekeeping products, essential oils, seeds, and certain cereals such as guinea and rice.
Main Products and Destination Markets
Chile currently exports more than 30 organic products, ranging from fresh products to processed goods. Generally, the main destination markets are the United States and Europe ( United Kingdom , Germany and The Netherlands). The main exports include fresh fruit (apples, kiwi fruit and berries), followed by products with some degree of processing such as medicinal herbs, honey, wine, frozen products and fresh vegetables, mainly asparagus and radicchios.
Benefits of the Free Trade Agreements on Organic Product Exports
The Association Agreement with the European Union and the Free Trade Agreement with the United States make no special mention of organic products, but they benefit from tariff cuts in the same manner as conventional products. Nevertheless, Chilean exports of organic products sent to both economic blocs will benefit from the enhanced competitiveness of the Chilean organic industry compared to its current competitors.
In the Agreement signed by Chile and the European Union (EU), 85 percent of fresh fruit is now tariff-free, a fact that places Chile in a favorable position with regard to competitors.
Fruit and vegetables with large potential, such as apples, pears, plums, avocados, raspberries, onions, asparagus and bell peppers already have duty-free access to the EU. Table grapes will enjoy duty-free status within four years, when the agreement becomes effective. However, the Agreement includes a benefit consisting of duty free quotas during two very important export periods: from January 1 to July 14 and from November 1 to December 31 of each year. Garlic was granted a 500-ton quota, with an annual increase of 25 tons. An exportable supply is available in all these species, so they will benefit from these advantages when they are exported to Europe .
The Free Trade Agreement between the United States and Chile complies with the main demands of the fruit and vegetable exporting industry as follows: strengthening of the Generalized System of Preferences (GSP), a reduction in the high duties applied to avocados and asparagus, equally favorable access as that granted to other trade partners and the establishment of a dispute settlement system.
Strengthening the GSP allows the following fruit and vegetable products to retain the preference (i.e. zero duty) granted by the United States : melons, loquats, prickly pears, garlic, onions, radicchios, asparagus (zero tariff from September 15 to November 15, air shipped and tomatoes (from November 15 up to the last day in February). A supply of organic radicchios, asparagus, onions and garlic is available for export and thus, they currently enjoy this export benefit.
An annual duty-free quota of 49,000 tons was negotiated for avocados, covering two specific periods, with full duty exemption in a 12-year period. A significant export supply of organic avocados is available and therefore it will be possible to make use of this benefit, particularly during the period September through December.
Organic Certification in Chile
International organic product companies of worldwide repute are established in Chile and this has made it possible to reach even the most demanding markets. Nevertheless, this alternative can be used in the European Union only up to December 31, 2005. Therefore, the Chilean Ministry of Agriculture through the Agriculture and Livestock Service (SAG) and the Office for Agricultural Policies (ODEPA) prepared a Bill for Organic Agriculture to be sent to Congress. The intended law, which is expected to be enacted by 2005, will endorse the establishment of a National Certification System for Chilean Organic Production, useful both for the domestic and for foreign markets.
The content of this document (Experience the Flavors of Chile - 2004) was kindly provided by the Export Promotion Bureau - ProChile
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E-mail: info@prochile.cl
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Web: www.chileinfo.com
