China-Chile FTA boon to European business

SANTIAGO - In geographical terms, Chile marks the farthest point from China, but the two countries have succeeded in forging a free trade agreement (FTA) that has brought them closer, and Europe in the bargain.

European firms eyeing China's market have opened plants in the South American country in hopes of taking advantage of Chile's trade deal with China.

Brueggen, a German cereal maker in business since 1868, recently invited Liu Rutao, economic and commercial counselor of the Chinese Embassy in Chile, to tour its Chilean plant.

According to Liu, the FTA between China and Chile is benefiting businesses not just in these two countries, but also in other parts of Latin America and even Europe.

Jose Manuel Ibanez, director of Brueggen America, told Xinhua: "China is very important to us. We developed this plant along with our partners in order to supply Chile, and also the rest of Latin America and the Asia-Pacific."

In 2015, Brueggen partnered with Latin American Foods in Chile, giving rise to Brueggen America, which aims to produce goods in Chile for China's market.

According to Ibanez, the idea is to replicate Chile's strong and long-running trade ties with China on homegrown products such as wine, copper and fruits.

Previously, Brueggen operated plants only in Germany, Poland and France, with the German facility producing cereals for the Chinese market.

The company, Ibanez said, has outlined a clear goal for its expansion in the Chinese market. "Our mission is to take granola to China."

Highly popular in Germany, Europe and the United States, traditional granola which is made from a blend of oats, walnuts and honey that is then baked to a crunchy consistency, can be eaten alone or mixed with yogurt or milk and fresh fruits.

"We believe we can generate value in the supply chain for this market," said Ibanez, referring to China.

"We very much respect and value the way of doing things in China, and we feel that with this product we can generate not only value, but also a relationship that we would like to see last," said Ibanez.

Chile offers companies with expansion plans certain clear advantages, he said, including its FTAs with countries around the globe, access to raw materials, and ports for shipping to "highly competitive markets like China's."

Chile is one of the world's most open markets, and has key international trade deals, such as its Partnership Agreement with the European Union and FTAs with the United States and China.

Former Chilean Ambassador to China Fernando Reyes Matta, who is currently director of the Center for Latin American Studies on China at Chile's Andres Bello University, said exports from Chile to China "have better competitive conditions than those arriving from Germany" thanks to existing Chile-China trade ties.

"This benefits those shipments, because even though they are coming from the southern tip of the world, the economic conditions for entry into China are totally different and much more favorable," said Reyes Matta.

Brueggen's plant in Chile has the capacity to process 650,000 kg of cereal, 220,000 tons of granola bars and a million granola-based products.

Reyes Matta noted the plant has "very advanced technology and, as a result, all the capacity to mass produce quality goods."

Chile plants some 576,000 hectares of cereals, 44 percent of which is wheat, 24 percent is corn and 22 percent is oats, according to the latest figures from the Ministry of Agriculture.

Today, distance is no longer an issue in trade, said the former diplomat, adding what matters is quality.

"There are no more borders in terms of the capacity of a product to go from one side of the globe to the other in optimum condition, due to refrigeration and transportation. The important thing is the quality that's on offer," said Reyes Matta.