Mission Statement

Telecommunications Trade Mission to Chile and Argentina

June 18-23, 2000

Mission Description

Ellis R. Mottur, Deputy Assistant Secretary for Technology and Aerospace Industries, will lead a telecommunications trade mission to Chile and Argentina June 18-23, 2000. The mission will include a Commerce Department staff member from ITA's Office of Telecommunications to help coordinate logistics and administration. The mission is designed for representatives from a variety of U.S. telecom services and equipment firms interested in gaining a foothold in the fast-growing Chilean and Argentine telecommunications markets.

Commercial Setting

Chile

In the mid-1970s, Chile was the first country in Latin America to begin the privatization and liberalization process. Today, Chile is the best equipped country for telecommunications in Latin America, with a fully digital network. Huge investments built an infrastructure with high capacity and capable of traffic increases. The entire sector is completely privatized and the telecom equipment and services markets are open to competition and foreign participation.

Telecommunications is Chile's fastest growing industrial sector, growing at an annual average rate of 14 percent since privatization. Domestic production of telecommunications equipment is minimal and is limited to some central office equipment, wire and cable. Nearly 95 percent of telecommunications products are imported. U.S. companies exported $189 million worth of telecommunications equipment to Chile in 1998, up over 58 percent from $119 million in 1997. Preliminary U.S. government statistics indicate that U.S. companies exported over $215 million worth of telecom equipment to Chile in 1999.

Under the World Trade Organization (WTO) Agreement on Basic Telecommunications Services, concluded in February 1997, the Government of Chile committed to market access and national treatment for long distance and international wireline and wireless telecommunications services, including satellite services, by January 1, 1998. There are no restrictions on foreign investment in the telecom sector. Foreign companies such as Telefónica de España (Spain) and Stet (Italy) are present in the Chilean market, as well as BellSouth, Motorola, Qualcomm and others from the U.S., either as service providers or equipment suppliers, directly or indirectly.

The cornerstone of Chile's impressive telecommunications development is the multi-carrier system that includes seventeen authorized carriers (seven local operators and ten long distance companies). The constant need for new services, residential and business, assures the continued development of basic telephone service. Just eight years ago, Chile had only five telephone lines per 100 inhabitants. By 1998, the penetration rate had increased to slightly over 20 lines per 100 inhabitants, which compares to 50 lines per 100 inhabitants in the United States. The emergence of Personal Communications Service (PCS) and the implementation of "calling party pays" will stimulate further growth in the dynamic wireless market. There are now approximately 505,000 cellular subscribers in Chile.

Argentina

The Argentine market for telecommunications equipment and services is experiencing rapid growth in the wake of privatization and liberalization efforts launched over the past decade. Argentina's highly developed telecommunications infrastructure, sophisticated customer base and relatively high prices should offer a wealth of opportunities to U.S. firms. In addition to telephone carriers, U.S. equipment and related service providers will be able to participate in the projected boom of investment associated with additional competition.

Liberalization in the market will facilitate growth for imported telecommunications equipment and services of 15-20 percent annually through the year 2000. Imports have traditionally supplied about one-third of the market; however, privatization and increased competition have increased the ratio of imports to close to one-half of the total market. In 1998, U.S. companies exported $386 million worth of telecommunications equipment to Argentina, a 16 percent drop from the year before (primarily due to economic recession). Preliminary 1999 U.S. Government export statistics indicate that U.S. companies exported about $404 million in telecom equipment to Argentina in 1999, a solid increase from the year before.

The Government of Argentina, in June 1999, issued an Executive Decree opening all areas of telecommunications to an unlimited number of licensees in November 2000. Argentina made a commitment to such liberalization under the terms of the WTO Agreement on Basic Telecommunications Services. Until 1999, the only two basic telephony operators were Telefónica de Argentina, whose territory was the southern half of the country, and Telecom Argentina, in the northern half. The two began operating in direct competition throughout the country in early 1999, and two additional competitors were added when CTI and Movicom were each granted licenses to provide basic telephony services beginning in late 1999. Telecom and Telefónica together planned to spend over $2 billion in 1999 to expand their operations and improve their infrastructure.

Mission Goals

This is a commercial mission, intended to increase export sales of U.S. goods and services in the short- and medium-term. The focus is on the telecommunications sector. Chile and Argentina are two rapidly growing telecom markets in the Latin America region. The liberalization of regulations for these markets provides new opportunities for American companies. The mission's goal is to provide first-hand market information and access to key government officials and potential business partners for interested U.S. telecom firms. Mission participants will receive both written analyses and verbal briefings concerning emerging opportunities. The mission will open doors to U.S. companies for both formal and informal contacts with senior decision-makers in the Chilean and Argentine government and industry.

Mission Scenario

Deputy Assistant Secretary Mottur and other mission members will meet with senior officials from the Chilean and Argentine Ministries of Communications to obtain detailed information on steps their governments are taking to expand competition in their telecom markets. In addition, the mission will meet with executives of telecom companies in Chile and Argentina to obtain information on the business climate, key players, upcoming opportunities and their implications for U.S. telecom firms. Finally, participating U.S. firms will be introduced to potential Chilean and Argentine business partners through mission events and a series of pre-screened one-on-one meetings. The mission will include a minimum of seven, maximum of fifteen participating companies in mission.

Timetable

The mission is scheduled to visit Santiago and Buenos Aires during the week of June 18, 2000. The itinerary is for mission members to arrive in Santiago, Chile on Sunday, June 18 and meet with key government and business officials on June 19 and 20. The mission will depart for Buenos Aires on Wednesday, June 21 and will remain in Buenos Aires, Argentina for meetings and events on June 22 and 23. The precise schedule will depend in part on the availability of Argentine and Chilean government and company officials and the specific goals and interests of mission participants. Recruitment for the mission will begin immediately, and should be concluded no later than May 31, 2000. Applications received after that date will be considered only if space and scheduling constraints permit.

Criteria for Participant Selection

• Relevance of a company's business line to mission goals;
• Timeliness of signed application and participation agreement by company (including participation fee of approximately $3500);
• Potential for business in Chile and Argentina for company;
• Provision of adequate information on company's products and services, and company's primary market objectives, in order to facilitate approximate matching with potential business partners.

Any partisan political activities (including political contributions) of an applicant are entirely irrelevant to the selection process. Mission recruitment will be conducted in an open and public manner, including publication in the Federal Register, posting on the Internet, press releases to the general and trade media, direct mail and broadcast fax, e-mail, notices by industry trade associations and other multiplier groups, and at industry meetings, symposia, conferences, trade shows, etc.

A company's products or services must be either produced in the United States or, if not, marketed under the name of a U.S. firm and have at least 51 percent U.S. content of the finished product/service. In cases where U.S. content is not at least 51 percent, the following factors may be considered in determining whether a company's participation is in the U.S. national interest:

• U.S. materials and equipment content;
• U.S. labor content;
• Contribution to the U.S. technology base, including conduct of research and development in the U.S.;
• Repatriation of profits to the U.S. economy;
• Potential for follow-on business that would benefit the U.S. economy.

Contact

Richard Paddock Telephone: (202)-482-5235

Office of Telecommunications

International Trade Administration Fax: (202)-482-5834

Room 4324

U.S. Department of Commerce E-mail: Richard_Paddock@ITA.DOC.GOV

Washington, D.C. 20230