NEON COSMETICS TO CHILE

EXECUTIVE SUMMARY
Economic and political conditions in Chile stabilized after the end of the
tumultuous period of Pinochets military rule. Chile has since gained a
reputation as a role model for successful economic and political reforms within
South America. The countrys sound economic policies, extensive trade
agreements and reputation for strong financial institutions have made Chile one
of the most attractive locations in South America for foreign investment.
Having a comprehensive understanding of Chilean traditions and underlying
influences on business culture is essential for successful business endeavors in
Chile.
According to this analysis neon cosmetic can easily enter to this country and
can capture the market of chile because the 3 factors are under the control and
there is huge investment of FDI in this country.
METHODOLOGY
Data that is collected for this report is the secondary data Secondary data
consists of data and information that already exists somewhere that has
been collected to fulfil some other purpose. I have collected from
websites, magazines etc.
LIMITATIONS
Every work has its own limitation. Limitations are extent to which the process
should not exceed. Limitations of this project are: The project was constrained by time limit of few days.
Information that is provided in this report is on the bases of pervious data
that is available from internet and various sites .
Some data is hypothetical created
Proper research is not conducted due to time limitation.

CHILE: INTRODUCTION
Chile is an outstanding country in Latin America considering its political and
economical stability, its efficient level of connectivity, its legal framework
which is designed to guarantee the protection of investments, the ability to
operate in accordance with normal business practice, and the large number of
International Agreements that have been subscribed.
Chile is an interesting country not only to develop business in the territory, but
also to administrate business in other country of Latin America. Indeed,
considering Chile as a business platform, it is possible to establish in Chile a
firm to administrate investments in other countries.

STATISTICS OF CHILE
Trade

Top 3 Trade Partners: China, United States, and Japan

Top 3 Exported Goods: Copper, Ores, and Fruit & Nuts

Top
Industries

Copper; Lithium; Other Minerals; Foodstuffs

Gross Domestic Product (GDP)

GDP, PPP (current international
$)

$386 billion (2013)

GDP Growth Rate (annual %)

4.075% (2013)

GDP Per Capita, PPP (current

international $)

$21,911 (2013)

Economic Indicators
Inflation, consumer prices
(annual %)
External debt stocks, total
(DOD, current US$)
Total tax rate (% of commercial
profits)
Real Interest Rate (5 year
average %)

1.792% (2013)
$96,245 million (2011)
27.7% (2013)
7.406% (2013)

Manufacturing, value added (%

of GDP)

11.475% (2013)

Current Account Balance (BoP,

current US$)

$-9,496,520,872 (2012)

Labor and Employment

Labor Force, Total

8,458,204 (2012)

Employment in Agriculture (% of
total employment)

10.3% (2011)

Employment in Industry (% of total

employment)

23.4% (2011)

Employment in Services (% of total

employment)

66.4% (2011)

Unemployment Rate

6.4% (2012)

Trade
Imports of goods and services (current US$)

$91,203 million (2013)

Exports of goods and services (current US$)

$90,248 million (2013)

Total Merchandise Trade (% of GDP)

FDI, net inflows (BoP, current US$)
Commercial Service Exports (current US$)

59.375% (2012)
$20,258 million (2013)
$12,626,086,103 (2012)

Total Trade
Total Exports ($)

$78,276,982,611

Total Imports ($)

$79,461,529,007

Trade Balance ($)

-$1,184,546,396

Exports of goods and services (% of GDP)

32.56%

Imports of goods and services (% of GDP)

32.9%

CULTURE

Chile is a country of surprises with its tremendous beauty and diverse

landscape, climate and culture. Its vibrant culture is a fusion of European
influences and indigenous heritage.
After years of tumultuous political conditions, Chile has established a solid
democracy and sound financial system that makes it an attractive place for
foreign investment. Doing business in Chile requires an understanding of how
its culture differs from other cultures including those of its South American
neighbors.
Personal Relationships In Chilean business culture, relationships and the
right contacts are used to get information and to conduct business.
Time Chileans attitude to time is complex. While punctuality is appreciated
and expected in Chilean business culture, people can show a more relaxed
approach to time than Europeans when it comes to social occasions such as
dinners.
Religion The majority of Chileans are Roman Catholic. Although the role of
the Catholic Church has decreased, it still has direct influence on the mentality
of Chileans as well as Chilean society such as its economy and politics.
Humor Humor is frequently used in Chilean conversations. Chilean humor
is different from its neighboring countries and can be perceived as offensive if
not completely understood. Foreigners doing business in Chile may require
some time to get used to Chilean humor.

COSMETICS
If you look at the entire worldwide cosmetic industry, sales reach about $170
Billion dollars a year. Its distributed pretty uniformly around the world with
~$40 billion in the Americas, ~$60 billion in Europe, ~$60 billion in Australia
& Asia, and another $10 billion in Africa.
Early 20th century will remain remembered as one of the most exciting times in
the history of the cosmetics. During those years, countless innovators
introduced many new products to the market, enabling radical change in our
fashion styles and society.
After roaring 20s, worldwide fashion stabilized into safe style that was
embraced by both older and younger female population. However, 70s brought
big shifts that forever changed modern fashion with hippie movement, punk and
glam.

Timeline of cosmetics is filled with interesting events. Sometimes those events

have small effects, and sometimes they caused great shifts in our culture and
fashion.
Neon cosmetic
Neon Cosmetics is Australias leading cosmetic manufacturer providing a
comprehensive array of services such as product formulation, manufacturing,
packaging procurement and logistic management across all categories of colour
cosmetics.
Neons experience as cosmetic specialists in manufacturing and formulating is
unsurpassed. Neon offers manufacturing expertise and cosmetic formulating
knowledge, with advanced technical experience, operating systems and in house
laboratory.
Neon are the leading contract manufacturer of colour cosmetics in Australia,
providing innovation and quality products to Australias leading brands and
retailers.
Neon has a specialised team of beauty industry professionals to deliver high
quality product & service, creative product solutions and innovation and a
tailored supply solution to suit individual customer needs.
At Neon we view our customers as partners. We are committed to helping build
our customers brands and work collaboratively to create and provide targeted
product solutions to suit their specific requirements. Neon take a proactive
approach with our customers by identifying product opportunities, presenting
the latest research & trends, and investing in innovation and new product
development.
Our goal is to operate a leading national business to international standards that
produces quality products and innovative solutions for our customers, the
market place and the end consumer.
Reasons to invest in Chile
Chile has created many incentives for people to invest within the country. The
government has laid out why it believes Chile is a great place to invest:
1. Chile has a "Dynamic Economy"

The economy has grown, on average, 5.5% every year from 1985-2009, not
only the highest growth rate in Latin America, but also one of the highest
growth rates worldwide.
2. Chile is "Highly Competitive"
According to the World Economic Forum, Chile is the most competitive
economy in Latin America.
It has the highest ranked institutions, infrastructure, macroeconomic
environment, market efficiency, and correct technology array in Latin
America.
3. Chile is "Globally Integrated"
"Chile has more than 20 Trade Agreements with 57 countries in the
world, which represent 90% of the world's GDP."
Chile is the first Latin American country to become a member of the
Organization for Economic Co-operation and Development.
4. Institutional and Financial Strength and Low Country Risk
Chile is the lowest country risk in Latin America due to its "economic stability,
monetary discipline and a strong political and fiscal environment."
5. Tax-Friendly Economy
Chile has one of the lowest corporate tax rates in the world at 17%.
Chile has agreements with 22 countries that avoid double taxation.
6. High Transparency
According to the Perceived Corruption Index, Chile is 21st in the world and 1st
in Latin America.
7. Great Business Environment and Economic Freedom

10th worldwide and 1st in Latin America according to the Economic Freedom
Index 2010
8. Outstanding Quality of Life
Chile is 71st out of 195 countries in quality of life.
9. Highly Skilled and Competitive Human Resources
Chile has the best talent in Latin America and labor costs in Chile are very
competitive compared to the United States and European countries.
10. Transport Infrastructure and Modern Connectivity Integrated to the
World
Chile has cutting edge telecommunications network
18 international airlines
37 airports

ECONOMY OF CHILE
Economic Risk: Low
Chiles market-oriented economy is buoyed by exports, accounting for about
one-third of Chiles total GDP. These exports are mostly comprised of
commodities, most notably copper. Increased domestic demand and a steady
improvement in global macro economy should help support growth near-term.
GDP grew by 5.5% in 2012 and by 4.2% in 2013. Moving forward, Chiles
economic prospects are positive with growth to range from 4-6% largely driven
by a business friendly operating environment and strong legal framework.
Chile is ranked #34 out of 189 countries in the world in the World Banks Ease
of Doing Business index, the highest in Latin America.
Chiles economic freedom score is 78.7, making its economy the 7th freest in
the 2014 Index. Its overall score is slightly lower than last year, with an

improvement in investment freedom offset by combined declines in labor

freedom, business freedom, and fiscal freedom.
During 2012, the largest sectors by GDP were mining (mainly copper), business
services, personal services, manufacturing and wholesale and retail trade.
Mining also represented 59.5% of exports in the period, while the
manufacturing sector accounted for 34% of exports, concentrated mainly in
food products, chemicals and pulp, paper and others.
RULE OF LAW
The constitution provides for an independent judiciary, and the courts are
generally free from political interference. In the past decade, the Chilean
Congress passed significant anti-corruption,transparency, and campaign-finance
laws that contributed to Chiles reputation for good governance. Property rights
are strongly respected, and expropriation is rare. Crime rates have declined
significantly in the period from 2009 to 2013.

GOVERNMENT SIZE
Chiles top individual income tax rate has been lowered to 40%, and the
corporate tax rate has risen to 20% to cover new education spending. Other
taxes include a value added tax (VAT) and a property tax. Overall tax revenue
amounts to 18.7 % of GDP. Falling commodity prices could tighten revenue, but
government expenditure has been stable at 23.2 % of GDP. Public debt is about
11 % of the domestic economy.
REGULATORY EFFICIENCY
Incorporating a business takes less than 10 procedures, with no paid-in
minimum capital required, but completing licensing requirements remains timeconsuming and somewhat costly. Minimum wage increases have exceeded
overall productivity growth in recent years. Government price supports for
agriculture are less than 5 % of total farm receipts, one of the lowest rates
among OECD countries.
OPEN MARKETS
Chile has a 4 % average tariff rate. It recently joined the Pacific Alliance, which,
if counted as a single country, would be the worlds ninth-largest economy.

Foreign investment is welcomed. The dynamic financial system facilitates high

levels of bank usage and provides relatively efficient access to financing.
Reforms to improve capital market liquidity and enhance access to financial
services for small companies have progressed gradually.
Creating a million jobs between 2010 and 2014.
Undeniably, employment is one of the most powerful tools for extending and
expanding opportunities. Thanks to the strong growth rates of the economy and
the persistent promotion of entrepreneurship, it has been possible to create more
than 817,000 new jobs between 2010 and March 2013, in line with the
achievement of the ambitious goal that President Piera established for his
mandate:
creating
a
million
new
jobs.

Inflation has remained under control.

Keeping stable macroeconomic equilibriums and a responsible management of
public spending has helped control inflation. From 2010 to 2012, public
expenditure grew an annual average of 4.8 %, substantially less than the average
growth of GDP, which reached 5.7 %. This contributed to reaching levels of
inflation of 3 % in 2010, 4.4 % in 2011, and only 1.5 % in 2012.

Major levels of investment. Another critical factor to assure sustainable growth

is investment, both public and private. The higher the % of GDP intended for
infrastructure and machinery, the stronger the basis for future economic growth.
In this way, investment rates went from an average of 24.1 % between 2010 and
2011. This has been possible due to a strong growth of investmentmeasured
as gross fixed capital formationwhich in this administration has increased by
16 % annual average, more than three times our economys growth.

Strengths (+) and weaknesses (-)

+ Strong institutions
Especially by Latin American standards, Chile has strong institutions. The
quality of governance is high and corruption is low.
+ Good fiscal position
According to estimates, public debt was 14% of GDP and the budget deficit 1%
of GDP in 2013. The government has committed itself to a structural fiscal
surplus rule since 2001. The government is thereby a net creditor.
- Dependence on commodity (copper) exports
Copper exports accounted for 53% of total exports in 2012 and other
commodities for another 26%.

- Relatively high level of inequality

Although inequality has fallen in the past two decades, it remains relatively
high. In recent years, there have been rising social demands, particularly in the
field of education.

Growth slowed down in late 2013, but outlook remains relatively good
Economic growth in Chile seems to have slowed down in late 2013. According
to the Central Banks index of economic activity, economic growth in October
and November fell to 2.8% year-on-year (yoy). In the first nine months of 2013,
yoy growth was 4.5%. The deceleration in late 2013 seems to be caused by
weak performance of the manufacturing and wholesale sectors, while mining
activity remained strong. The slowdown in the manufacturing sector appears to
be the result of a weaker investment growth, due to some uncertainty about the
economic policies of the new government.
Meanwhile, consumption remained strong, partially as unemployment stayed
very low. It was 5.7% in the September-November period and thus reached the
lowest level (for that period of the year) in three decades. Despite the low
unemployment rate, inflation has remained rather low. It increased to 3% in
December 2013 and was thus exactly in the middle of the 2-4% inflation target
range. This allowed the central bank to reduce its main policy rate by 25 basis
points in both October and November. As a result, this rate now stands at 4.5%.

Growth performance fig 1

Fiscal indicators fig2

S
ource: EIU
With a per capita income of USD 16,010 (or USD 19,140 at PPP) in 2013, Chile
is one Latin Americas richest countries. In the late 1960s and 1970s, political
polarization culminated in the 1973 coup d'tat by the military that overthrew
the Allende government. A military dictatorship led by general Pinochet ruled
Chile until 1990. Between then and 2010, Chile was governed by a centre-left
government.
Chiles economy has continued to be dependent on copper exports. The
countrys institutions and macroeconomic policies are strong and Chile has a

friendly business environment. Chile has concluded free trade agreements with
many other countries. Furthermore, the Chilean companies have strongly
increased their investments in neighbouring countries in recent years.
Government and political system
Political Risk: Low
President Bachelet, elected in November 2013, has plans to implement a range
of fiscal, social and constitutional reforms. The democratic system is robust and
citizens continue to call for improvements in healthcare, education, and crime
rates.
Environmental concerns continue to fuel environmental activism. A
controversial hydroelectric project was recently rejected by the government and
the case is no w headed to the Supreme Court.
Recent reforms to the public health system have been successful, greatly
reducing wait time for guaranteed treatments by introducing a voucher system.
Chiles government has adhered to prudent public finance management
practices that have kept public debt and recent budget deficits under control.
Judicial system
Chilean Judicial system is based on a three level jurisdiction. One Supreme
Court with national jurisdiction, seventeen Courts of Appeal, and sixty three
Civil Courts as well as many specialized Tribunals with territorial jurisdiction.
Chile also counts specialized Courts such as Criminal, Labour, Tax and
Environmental Courts.
Chile's legal system is based on the civil law model followed by Europe and
Latin America.
The legal system lays emphasis on the importance of codified, statutory law.
Legal environment
The Chilean legal system follows the Spanish and French patterns. The Civil
Code was enacted in 1855 and has served as a model for other countries in
Central and South America.

General business and investment climate

Recognizing the importance of foreign investment for the future growth of the
economy, Chile withdrew from ANCOM (the Andean Common Market) in
order that it could, among other things, be free from ANCOMs restrictions
regarding foreign investment. Thus, government policy towards foreign
investment is liberal and open.
Trade policy Chile has a policy of free trade with no barriers. The country is a
member of LAIA (Latin American Integration Association) and an associate
member of MERCOSUR. At present, Chile is probably the freest market in
Latin America. Chile has been become a member of the Organization for
Economic Cooperation and Development (OECD), currently is in the process
working on the roadmap set by the OECD for that purpose.
Taxation policy
Entities with foreign investment, as a general rule, are subject to the same tax
system applicable to resident business entities. The basic aim of government tax
policy is for taxes to be neutral, that is, that in and of themselves they should not
attract or restrict foreign investment. Thus, the rates are in line with those
prevailing in the countries most interested in investing in Chile.
Labour attitude toward foreign investment
Labour has an open attitude and welcomes the foreign investor, realizing that
they develop new fields of work and provides employment opportunities to a
greater proportion of the workforce.
Regulatory environment
Investment policy
The government believes that the best incentive is the opportunity to take
advantage of the countrys rich natural resources within a stable legal
framework and a reasonable tax regime that do not discriminate between local
and foreign investors.
Investor restrictions
All activities related to the exploration or exploitation of hydrocarbons are
undertaken exclusively by the state and are closed to private enterprise,
notwithstanding the right to assign risk contracts to private investors,
including foreign investors, for the exploration and exploitation of designated
areas.
Restrictions on foreign ownership

There are no percentage restrictions on foreign holdings nor are there any
restrictions on foreign ownership of buildings and land, with the only exception
of land located in limiting territories, which may not be owned by nationals of
border countries, or by juridical persons .
Foreign exchange control
Exchange controls are very limited in Chile and the Foreign Investment
Committee is responsible for the authorization and control of foreign
investment. Foreign Exchange Regulations of the Chilean Central Bank do not
require further authorization and are only informed to the Central Bank. There
are basically two foreign exchange markets, the formal and the informal
market. Some transactions, such as liquidation of foreign currency and
remittance of profits under the Foreign Investment Law must be made in the
formal market. Other transaction can be freely made in the informal market.
Foreign exchange operations in the formal market must be effected through
authorized banks and financial institutions. Exchange rates for the formal
market are not fixed.
Income tax on businesses with residence or domicile in Chile
Companies resident or domiciled in Chile are subject to First Category Tax
(FCT) at a rate of 17%, which is determined on the basis of all their income
accrued or effectively received throughout the corresponding financial year,
which in Chile is the same as the calendar year. The yearly books of a company,
therefore, are closed at December 31, of each year. The companies with
domicile or residence in Chile pay income tax on worldwide income; that is on
income derived from sources located in Chile and outside the country.
Labour supply
The right to work in a non discriminatory environment is established in the
Article 19, No. 16 of the Constitution. In addition, the Constitution
acknowledges the right to form a union, to negotiate collectively and to strike.
The Labour Code regulates labour relations in the private sector. Workers in the
public and municipal sectors are subject to a especial statute.
Availability of labour
Workers are adequately skilled and special sectors, such as mining,
Agriculture and fishing employ highly skilled workers.
Visa and employment of aliens
Citizens from some countries must obtain a visa before entering the country. In
the case of certain South American countries such as Argentina or Brazil an
identity card is sufficient. This matter is based on reciprocity.

Import and export issues

Any person may import goods freely and in any quantity, except used cars.
Payments can be made as agreed by the parties. Chile is a member of WTO.
Goods are classified as per the Customs Cooperation Council Nomenclature
(formerly known as the Brussels Tariff Nomenclature). The rate of custom duty
is in general 6%. Note that Chile has an extended network of Free Trade
Agreements. Up today, there are such agreement in force with China, United
States,
Mexico, Japan, European Union, Canada, Panama, Central America and South
Korea. Therefore reduced or non existing customs duties rates are available.
Duties on goods are imposed on the CIF price, without deducting special
discounts. In general, Chile has a very open economy and there are no
significant barriers to foreign trade.

Environmental issues
In the last few decades Chile has experienced accelerated economic
development driven mainly by the mining, forestry, salmon, fishing, fruit and
wine industries, all of which rely on the countrys natural resources. Therefore,
to protect the economy and the countrys natural heritage for future generations
to enjoy-and profit form- a sustainable model of development is necessary.
Financing and financial market
Financial System Risk: Low
The Superintendence of Securities and Insurance is the insurance supervisory
authority.
Chiles financial sector is among the most developed and stable in the region.
The legal framework and enforcement is largely impartial and professional.
The Central Bank will continue to focus monetary policy on keeping inflation
targeted at 3%.
The policy interest rate will likely remain between 3.75% and 4.25% nearterm.
Bank system

Chile has an open economy banks have most of the technical advances used in
developed countries and are linked to international information and operation
systems. There are two main kind of institutions within the Chilean financial
market. Commercial banks, which offer the full range of banking services.
Financial institutions, which, as compared to banks, are restricted as they cannot
operate current accounts, carry out import and export operations, underwriting,
etc.
Securities markets
There are two stock exchanges in Chile, one in Santiago and one in Valparaso.
Most of the transactions are made in Santiago. Few public companies are
widely held. In Santiago there also is an electronic stock exchange. Foreign
investors are permitted to buy and sell. The law provides for the formation of
foreign funds to hold shares of Chilean open corporations with a preferential tax
treatment
Forcasting
Chile, has low levels of economic, political, and financial system risk.
The economy is forecasted to experience slower-than-normal growth at
3.6% in 2014 before returning to an annual growth rate above 4%.
Economic performance in the region has been affected by the sluggish
recovery in the United States and Europe through decreased tourism
revenues, slumping financial services sectors, and a reduction in overseas
remittances. Regional recovery will rely, in part, upon US and European
growth.

REFERENCES
http://www.everyculture.com/Bo-Co/Chile.html
http://www.fdiworldental.org/fdi-at-work/livelearnlaugh/lll-phase-iiprojects/chile.aspx
www.heritage.org/index/country/chile
http://www.historyofcosmetics.net/
http://www.ibtimes.com/chile-will-continue-its-low-unemploymentlow-inflation-growth-2014-1532732
http://www.mapsofworld.com/chile/government/
http://neoncosmetics.com.au/
http://www.thisischile.cl/economy/financial-system/?lang=en