NEON COSMETICS TO CHILE

NEON COSMETICS TO CHILEMPM735SUBMITTED BY: MR CHOUDHARY VIKAS ID 213441882 GROUP NO. 44

EXECUTIVE SUMMARYEconomic 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 TradeTop 3 Trade Partners:China, United States, and JapanTop 3 Exported Goods:Copper, Ores, and Fruit & Nuts

Top IndustriesCopper; 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 IndicatorsInflation, consumer prices (annual %)1.792% (2013)

External debt stocks, total (DOD, current US$)$96,245 million (2011)

Total tax rate (% of commercial profits)27.7% (2013)

Real Interest Rate (5 year average %)7.406% (2013)

Manufacturing, value added (% of GDP)11.475% (2013)

Current Account Balance (BoP, current US$)$-9,496,520,872 (2012)

Labor and EmploymentLabor Force, Total8,458,204 (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 Rate6.4% (2012)

TradeImports 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)59.375% (2012)

FDI, net inflows (BoP, current US$)$20,258 million (2013)

Commercial Service Exports (current US$)$12,626,086,103 (2012)

Total TradeTotal 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.

COSMETICSIf 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 cosmeticNeon 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 RiskChile 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 TransparencyAccording to the Perceived Corruption Index, Chile is 21st in the world and 1st in Latin America.7. Great Business Environment and Economic Freedom10th worldwide and 1st in Latin America according to the Economic Freedom Index 20108. Outstanding Quality of LifeChile is 71st out of 195 countries in quality of life.9. Highly Skilled and Competitive Human ResourcesChile 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 CHILEEconomic 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 LAWThe 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 SIZEChiles 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 EFFICIENCYIncorporating a business takes less than 10 procedures, with no paid-in minimum capital required, but completing licensing requirements remains time-consuming 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 MARKETSChile 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 institutionsEspecially by Latin American standards, Chile has strong institutions. The quality of governance is high and corruption is low.+Good fiscal positionAccording 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) exportsCopper exports accounted for 53% of total exports in 2012 and other commodities for another 26%.-Relatively high level of inequalityAlthough 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 goodEconomic 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

Source: 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 systemPolitical 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 systemChilean 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 environmentThe 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 climateRecognizing 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 investmentLabour 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 policyThe 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 restrictionsAll 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 ownershipThere 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 controlExchange 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 ChileCompanies 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 supplyThe 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 labourWorkers are adequately skilled and special sectors, such as mining,Agriculture and fishing employ highly skilled workers.

Visa and employment of aliensCitizens 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 issuesAny 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 issuesIn 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 marketFinancial 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% near-term.Bank systemChile 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 marketsThere 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-ii-projects/chile.aspx www.heritage.org/index/country/chile http://www.historyofcosmetics.net/ http://www.ibtimes.com/chile-will-continue-its-low-unemployment-low-inflation-growth-2014-1532732 http://www.mapsofworld.com/chile/government/ http://neoncosmetics.com.au/ http://www.thisischile.cl/economy/financial-system/?lang=en