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January 29, 2001
TO: INTERNATIONAL COMMITTEE No. 5-01
RE: INSTITUTE PROVIDES INDUSTRY PRIORITIES FOR US-CHILE FREE TRADE
AGREEMENT
On January 29, 2001, the Institute submitted a letter in response to a request by the
Office of the United States Trade Representative (USTR) for public comment regarding the US
negotiations with the Republic of Chile on a free trade agreement (FTA).1 To assist USTR in
formulating negotiating objectives for a US-Chile FTA, the Institute provided information about
market access and other issues in Chile for US asset management firms. A copy of the
Institute’s letter is attached.
The Institute’s letter noted that Chile expressly made no market access commitments for
asset management in the 1997 World Trade Organization Financial Services Agreement
although the Chilean government generally has permitted US firms to manage mutual funds
and pension assets. The Institute urged US trade negotiators to seek binding commitments
from Chile to allow foreign firms to provide asset management services to mutual funds and
pension clients on both a commercial presence and cross-border basis.
The letter also described a regulatory impediment that prevents US firms from obtaining
meaningful and effective market access to Chile. Specifically, Chilean law restricts the amount
of foreign investment that the country’s pension funds -- Administradoras de Fondos de
Pensiones (AFPs) -- are permitted to make. The Institute argued that laws that prohibit or
restrict mutual or pension funds from making foreign investments are not necessary for the
protection of investors and prevent US firms from investing for clients in markets in which they
may have expertise.
With respect to portfolio investment in Chile by US mutual funds, the Institute’s letter
described the cumbersome and costly restrictions imposed on foreign investors. The Institute
1 On December 14, 2000, USTR published a notice of intent to conduct negotiations with the Republic of Chile
on a bilateral free trade agreement. See Memorandum to International Committee No. 45-00 (December 19,
2000).
2requested that the Chilean government work to ease the burden on foreign institutional
investors by streamlining the process for making portfolio investments in Chile.
Jennifer S. Choi
Assistant Counsel
Attachment
Attachment (in .pdf format)