Both countries have had a trade agreement in force since 2019 that has incorporated goods, services and, in the future, investments. In both cases, each nation represents for the other both a commercial partner and a gateway: for Chile it is the entry into ASEAN and for Indonesia, the arrival to countries such as Peru and the Mercosur bloc.
At the end of September, five Indonesian companies presented their products to potential Chilean buyers at a stand at the Espacio Food & Service food suppliers fair in Santiago. From canned pineapple to gluten-free snacks , the offering is part of Indonesia's growing presence in the Latin American market, with Chile as a strategic entry point.
Companies such as Great Giant Pineapple and Gulapa Indonesia held a series of meetings with importers and distributors in a constant effort to penetrate the Chilean market. With more than 30,000 attendees this year, all of them potential buyers, it is the tenth time that Indonesia has exhibited its products at this event.
In October, meanwhile, Chilean businessmen attended the Trade Expo Indonesia held between October 9 and 12 in Jakarta, to learn about the exportable products and services offered by the fastest-growing economy in Southeast Asia.
At the center of this quiet expansion is the Indonesian Trade Promotion Center (ITPC) in Santiago, a nonprofit representing Indonesia's Ministry of Trade.
Under the direction of Indah Fajarwati, ITPC operates as a free facilitator for Chilean entrepreneurs interested in doing business with that nation, whose trade has been growing quietly and steadily since the implementation of the Comprehensive Economic Partnership Agreement (CEPA) signed in 2019.
For Indonesia, this progressive free trade agreement has meant sustained growth in its exports to Chile. “Trade exchange has increased at an annual average of 11.2%, reaching US$507 million in 2023,” Fajarwati tells AméricaEconomía .
The most promising sectors for current and future cooperation include the automotive industry, where Indonesia already exports Toyota and Mitsubishi vehicles and parts, and the sportswear sector, with the presence of Nike and Adidas factories. “The mountain bike market has also shown significant growth, with the Polygon brand gaining ground in the Chilean market,” says Indah Fajarwati.
However, the real potential could lie in services, where ITPC sees opportunities in the financial sector, animation, video game development and Indonesian tourism. “The country’s experience in exporting hotel professionals to Japan could be replicated in Chile, although this will depend on the ratification of the pending services protocol,” Fajarwati adds.
The director of ITPC does not hide her satisfaction with the results of CEPA so far, although she admits that the potential is not fully developed, since the investment aspect has yet to be specified.
Indonesia's strategy is twofold: to use Chile as a gateway to South America. It is already Chile's third largest trading partner among the ten ASEAN countries (comprised of Vietnam, Thailand, the Philippines, Malaysia, Singapore, Laos, Cambodia, Brunei, Myanmar and Indonesia itself), representing 12% of total trade with the bloc.
CHILE IN ASEAN
Chile and Indonesia have had the CEPA in force since August 10, 2019. With a pre-CEPA trade of US$ 298 million in 2018, by the end of 2023 the trade of the treaty brought with it an average annual growth of 11.2%, totaling US$ 507 million.
According to data from the Undersecretariat of International Economic Relations (Subrei), the main exports of Chilean products to Indonesia are copper cathodes and cathode sections, worth US$ 69 million; sawn pine wood, worth US$ 11 million and Pacific salmon, worth US$ 8.3 million. Conversely, Chile's main imports from Indonesia are passenger cars, worth about US$ 82 million; urea, worth US$ 25 million and sports shoes, with shipments worth US$ 23 million.
In order to continue advancing in the deepening of the economic-commercial relationship, the CEPA Protocol on Trade in Services was signed in Jakarta on November 21, 2022, which was approved by the Chilean Congress on June 4, 2024.
This protocol incorporates provisions on trade in services, contemplating direct benefits for Chile to access different types of professional services, provides certainty and predictability to service exports and supports both exports of goods and logistics services.
Although the process of ratification of the services protocol is still pending on Indonesia's part, in the middle of that same month, in the capital Jakarta, the Undersecretary of International Economic Relations, Claudia Sanhueza, met with the Vice Minister of Commerce of Indonesia, Jerry Sambuaga, to officially begin negotiations to deepen the Comprehensive Economic Partnership Agreement, with the aim of including an investment chapter.
“For Chile, Indonesia is projected as a key market in its diversification strategy, both in terms of its export basket and its destinations, opening up new opportunities that will improve the quality of life in both countries,” said Sanhueza.
Because, just as Indonesia sees Chile as the gateway to South America, Chile links its relations with Indonesia to an arrival by proximity to ASEAN, since It is Chile's third largest trading partner within ASEAN and represents 12% of total trade with the bloc.
INDONESIA AND APEC
However, Peru is the country in the spotlight this month, especially because of the APEC leaders' summit and the upcoming signing of a Free Trade Agreement between Indonesia and the Boluarte government, which will allow the market to expand and boost Peruvian exports. Negotiations for an agreement similar to the Chilean CEPA are underway, with the expectation of concluding them in November of this year.
"We see that we can have a new FTA with that country," said the Minister of Foreign Trade and Tourism, Desilú León, this week, specifying that both countries are in the fourth round of negotiations. "For Indonesia, the services that Peru exports are relevant, in addition to agricultural products, such as blueberries, mangoes, asparagus, among others, as well as textiles, leather and footwear," said the minister in Peruvian media.
The speed with which these negotiations are taking place suggests a sense of urgency on the part of Indonesia to consolidate its presence in the region before and during the APEC summit.
“President Prabowo’s participation in the upcoming APEC meeting in Peru in 2024 and the G20 summit in Brazil in 2024 will be crucial to promoting Indonesia’s interests in the region,” said Simon Hutagalung, a former Indonesian diplomat in an opinion piece on the Euronews website .
Both summits, especially APEC, offer Indonesia an important platform to advocate on regional and global issues relevant to its economic development, security and environmental sustainability, the expert said.
In addition to Peru, the ITPC recognizes interest in the nations of the Mercosur bloc, although it knows that it faces greater difficulties.
“Mercosur is also one of the objectives that Indonesia is negotiating, although we have a different approach in the negotiation. If the counterparty wants to have a regional agreement, we can go with that. But if not, we can go separately. We will see what happens in the future. [But this decision] is not on Indonesia’s side now, it is on Mercosur’s side,” Indah Fajarwati admits.
For now, the Asian giant is quietly advancing its regional expansion, while Chile is trying to find its place in this trade equation with the countries of the Asia Pacific.
