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	US Trade with Brazil and Chile Although this year’s Carnival, which follows the lunar calendar and ended on February 6th, was the earliest in almost 100 years, there won’t be any hangover for your company’s sales to Brazil and Chile! American exports to Brazil via Virginia in 2006 were up 50% over 2005, while American exports to Chile via Virginia in 2006 were up almost 80% on an annual basis. Brazil Brazil is a land of abundant natural resources and is striving to become the world’s breadbasket through agriculture exports. Natural resources include the world’s largest iron ore deposits, a strong ethanol industry that takes advantage of the country’s vast supply of sugarcane, and at least 8.3 billion barrels of proven oil reserves. The recent discovery of a deep-sea oil reserve estimated to contain between 5-8 billion barrels of oil would double Brazil’s petroleum reserves and could put it among the world’s top oil producers and exporters within the next decade. Brazil’s economy grew an estimated 4.4% in 2007, and the International Monetary Fund’s projection is 4% in 2008. The Brazilian currency, the real, which was devalued in 1999, has been a boon for Brazilian exporters and has driven an economic recovery. In fact, due to the large volume of exports, 2006 was a record year for Brazil’s trade surplus, which finished the year at US$ 46.07 billion, according to the Trade and Development Ministry. Over the last few years, however, the demand for Brazil’s relatively cheap exports has put upward pressure on the country’s currency. The upside is that as the real appreciates against the US dollar, Brazilians now have more purchasing power to buy American imports. Further bolstering Brazil’s economic performance has been a tight fiscal policy exercised by President Lula’s administration. Fiscal discipline has allowed the government to run a budget surplus to service its debt, which in turn has bolstered investor confidence and pushed the main Brazilian stock exchange –the Bovespa- to record levels. President Lula’s policies should continue through the year 2010 since he was sworn in for a second four-year term on New Year’s Day, 2006. U.S. exports to Brazil in 2006 were valued at $19.23 billion, an increase of 25% over 2005. Exports via Virginia to Brazil in 2006 were up 50% at $411.80 million, with mineral fuel/oil (mainly bituminous coal), valued at $179 million, being the top export commodity for the fifth consecutive year. Brazil uses coal from Virginia for steel smelters, which supply a booming domestic automotive industry. Fertilizers were valued at $58 million, and were used to support Brazil’s strong agricultural sector. Industrial machinery was the third largest category in 2006, valued at $40 million, and included products such as compressors used in refrigeration, parts for metal-working, hydraulic presses, and machinery for forging, bending, and stamping. Pharmaceuticals were valued at $28.16 million and were dominated by antibiotics and vitamins. Brazil is the largest and most dynamic IT market in Latin America, and has also showed the strongest signs of improved IT spending in recent years. Demand for telecommunication software is expected to grow as data, voice, conventional, and mobile technologies converge. Most significant within this sector is increased data communication in cellular telecommunications, which is expected to continue growing for a number of years. Industry experts predict US$13.7 billion in software sales in Brazil during 2007. Of this, US$5.9 billion will be imported, almost 70% from the United States. This year, Brazilian companies will increase spending on data storage by 10% to US$475 million. Investments in hardware should amount to US$311 million, and in software to US$164 million, Chile Chile’s economy is arguably the most market-driven in Latin America. The country’s economic output increased an estimated 5.9% in 2007, and the International Monetary Fund’s forecast is 5% growth in 2008. High prices for copper -Chile’s top export- over the last several years have helped to maintain Chile’s overall trade surplus. Trade between Chile and the United States is certain to grow with the signing of a free trade agreement between the two nations. Effective January 1, 2004, more than 85% of two way trade in consumer and industrial goods became duty free. Duties on other products will gradually be phased out over a 12 year period. U.S. exports to Chile were up 30% in 2006, and were valued at $6.8 billion. Exports to Chile via Virginia in the same year were valued at $71 million, and were led by vehicles, valued at $29.14 million (mainly commercial and industrial trucks). The second largest export was industrial machinery, with roughly half of that sector comprised of machinery parts for mining, boring and sinking. The third largest export category was optical/medical instruments, valued at $3.63 million. Paper/paperboard was another strong export sector in 2006, valued at $3.43 million. Chile continues to attract foreign investment from the United States in IT and other sectors. Growth in sales of computers and peripherals in 2008 is projected to continue due in part to 0% import tariffs and a competitive Chilean peso. Computer hardware sales in Chile reached approximately $622 million in 2006, an annual increase of 16%. Market penetration of laptop computers in Chile in 2006 represented 24% of PC purchases, which exceeded laptop sales in other Latin American countries where laptops are, on average, 10% of PC sales. The first choice in the hardware market among Chilean companies is Lenovo, the Chinese manufacturer that bought IBM’s division of personal PCs at the end of 2004, followed by Hewlett Packard, and Dell. The principal suppliers of hardware in Chile are the United States with 33% of the market share, China with 32%, and Mexico with 7%. It is important to note that a significant amount of these types of manufactured products, previously coming from the United States, are now coming from US companies based in China. The purchase of computer software by Chilean companies is also rising along with the overall growth in the economy. Small businesses are important potential customers since they account for some 40 percent of software purchases in Chile. The U.S. – Chile Free Trade Agreement will give IT services in Chile a boost by guaranteeing non-discriminatory access for U.S. service providers. Join the Party Just because you missed Carnival doesn’t mean you have to miss the party! With the festival over, Brazil and Chile are once again open for business, and finding sales opportunities in South America’s top economies is easier than you think. The Virginia Economic Development Partnership-Division of International Trade is hosting a trade mission to Brazil and Chile June 9 – 13, 2008. The VEDP has an office in São Paulo, Brazil, and a history of successful trade missions to the region. The Brazil office is staffed by a local, international trade professional who is eager to assist with matchmaking for Virginia businesses. This will give Virginia companies interested in the South American market a competitive advantage and the opportunity to expand their business in that part of the world. Trade mission participants will enjoy one-on-one meetings with targeted, pre-screened companies that match their unique company and market objectives. Participants will travel with Virginia's South American Representative, André Neufeld, and will benefit from his local connections and expertise. The VEDP will provide pre-arranged meeting rooms, in-country transportation, translation assistance, market briefings and networking functions. If you are interested in participating in the VEDP’s trade mission to Brazil and Chile, please contact International Trade Manager, Michael Howley via email or by calling him at (703) 506-1030. You may also register for this event on-line by clicking here. The deadline to register is April 11, 2008, so pick up the phone and call or register today!