The presidents of Chile and China today formally signed a free trade agreement worth over US$3bn.

Although the agreement is still subject to ratification, it is set to take affect by mid 2006.

It is Chile’s ninth such treaty in as many years and it cements an increasingly close commercial relationship between the two countries.

Chile’s economy has benefited from China’s booming demand for copper and other raw materials to fuel its rapid expansion. And the traffic is not only one way: Chinese investment looks set to increase in many key sectors of Chile’s economy – including wine.

Industry sources point to at least two wineries that are currently in discussions with Chinese investors. decanter.com understands the Chinese have shown specific interest in Chile’s far northern wine regions as well as Colchagua.

According to Chilean President Ricardo Lagos, around 92% of Chilean products will benefit from Chinese import tariff exemption under the agreement.

There had initially been concerns that wine would be omitted but last minute negotiations in Beijing secured a deal in which import tariffs on wine will be steadily reduced to zero over a ten-year period.

In recent years, Chile has been the largest supplier of bulk wine to China. It exported over 30m litres, valued at nearly US$20m, in 2004.

According to Chilean foreign minister Ignacio Walker, Chile’s trade with China is worth around US$3.4 bn annually.

Chile is now opening talks with Japan on a similar agreement.

Written by Peter Richards