Voluntary Report - public distribution

**Date:** 1/26/2005

**GAIN Report Number:** CI5002

CI5002

**Chile**

**Product Brief**

**Cheese and Dairy Products Brief**

**2005**

**Approved by:**

![](media/image1.wmf)Christine M. Sloop, Agricultural Attaché

U.S.Embassy Santiago

**Prepared by:**

Office of Agricultural Affairs

**Report Highlights:**

Chile's processed dairy product market is strongly influenced by
European technology. Few imported dairy products are competitive and the
main barriers are market acceptance, shelf life and price. Cheese faces
the fewest obstacles among potential dairy product exports to Chile.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Santiago \[CI1\]

\[CI\]

Table of Contents

[**Section I. Market Overview 3**](#section-i.-market-overview)

[Section II. Market Sector Opportunities and Threats
3](#section-ii.-market-sector-opportunities-and-threats)

[Entry Strategy 3](#entry-strategy)

[Market Size, Structure and Trends 6](#market-size-structure-and-trends)

[Market Size 6](#market-size)

[Imports 6](#imports)

[Local Production 8](#local-production)

[Exports 9](#exports)

[Market Structure -- Distribution Channels
9](#market-structure-distribution-channels)

[Market Trends, Consumer Demand and Preferences
11](#market-trends-consumer-demand-and-preferences)

[Opportunities 12](#opportunities)

[Competitive Threats and Obstacles
14](#competitive-threats-and-obstacles)

[Company Profiles 15](#company-profiles)

[Relevant Private and Public Institutions
17](#relevant-private-and-public-institutions)

[Section III. Costs and Prices 18](#section-iii.-costs-and-prices)

[Tariff Rates, Quotas, Import Duties
18](#tariff-rates-quotas-import-duties)

[Inspection Fees, and Customs Broker's Fees
19](#inspection-fees-and-customs-brokers-fees)

[Cargo Unloading, Transport and Storage Fees
19](#cargo-unloading-transport-and-storage-fees)

[Value-added Tax 19](#value-added-tax)

[Average Markups 19](#average-markups)

[Prices 20](#prices)

[Section IV. Market Access 21](#section-iv.-market-access)

[Chilean Food Regulations 21](#chilean-food-regulations)

[Section V. Key Contacts and Further
21](#section-v.-key-contacts-and-further)

[Annex 1. Chilean Imports of Cheese, Powdered Milk, Butter and Milk
Whey, Year 2003
29](#annex-1.-chilean-imports-of-cheese-powdered-milk-butter-and-milk-whey-year-2003)

[Annex 2. Imports of Cheese, Powdered Milk, Butter and Whey, 1999-2003,
Thousands of US\$ CIF
32](#annex-2.-imports-of-cheese-powdered-milk-butter-and-whey-1999-2003-thousands-of-us-cif)

# Section I. Market Overview

The processed dairy product market in Chile is strongly influenced by
European technology, investors and product types. There is a wider
variety of dairy products in Chile than in the U.S., approaching that in
Europe, especially among yogurts, dairy desserts and the very popular
"Bio" or "Health and Wellness" products targeted at higher-income,
health-conscious ABC1-level consumers. Fine cheeses are 2-3 percent of
the total cheese market, which favors soft fermented farm-type cheeses.

Few imported dairy products aside from powdered milk, cheese and some
other products such as whey are competitive in Chile. The main barriers
are market acceptance, price, product shelf life and minimum order
quantities in relation to local retailer quantity and shelf life
requirements. For these reasons, cheese faces the fewest obstacles among
potential dairy product exports to Chile, as it can last as long as one
year. However, establishing a European-like market image of high quality
and sophistication for U.S. processed dairy products, especially cheese,
requires a very strong promotional effort and competitive pricing. This
is necessary to overcome the image of and preference for European
cheeses on the one hand and the more competitive price of Brazilian and
Argentina processed dairy products on the other. This is exemplified by
Kraft, which successfully introduced Philadelphia cream cheese into
Chile several years ago through strong advertising, although it has not
succeeded with other dairy product categories.

The main dairy items produced in 2003 were powdered milk (62,000 metric
tons), cheese (53,000 tons) and fluid milk (311 million liters). The
production of these three products required the equivalent to 1,396
million of liters of milk, that is, 89% of the milk received by plants.

Cheese consumption drops in summer as milk production goes up. This has
triggered a strong push to process and export surplus milk as cheese and
the development of several new varieties of locally made cheeses that
substitute for imported cheeses such as Gruyere, Camembert, Roquefort
and Parmesan.

Total Cheese imports grew 25.4% in 2003, reaching 4,128 tons and 9.64
million dollars. Argentina accounts for 52% of total cheese imports by
volume, followed by Brazil (16%) and the U.S. (11%). Gouda cheese is the
main type 47% of total imports by volume and 41% by value. Argentina
supplies 78% of imported Gouda cheese by volume and 79% by value. The
overall trend is one of growth but with significant year-to-year
variation, which is linked to the variations in local production.

Other important dairy product imports in 2003 were Low-Fat Powdered Milk
(15 million dollars), High-Fat Powdered Milk (28.3 million dollars),
Butter (4.5 million dollars) and Milk Whey (5.6 million dollars).

**Advantages and Challenges for US Exporters of Cheese and other dairy
products**

  ----------------------------------- -----------------------------------
  **Advantages**                      **Challenges**

  U.S. dairy processors are capable   The processed dairy products market
  of strong product differentiation.  in Chile is patterned after the
  Premium products in Chile are       European one and offers a much
  differentiated by brand or origin.  wider variety of products than that
                                      seen in U.S. supermarkets.

  Overall, U.S. dairy product quality Fluid product (milk, yogurt, and
  is recognized to be on a par with   desserts) quality is good, but
  large local producers (Nestle,      cheese quality (flavor, etc.) needs
  etc.) and better than the small     improvement. US cheeses do not have
  ones.                               as strong a brand or market
                                      recognition as European products.

  Chilean consumers trust U.S.        Consumers have negative perception
  labeling more than local one. U.S.  of U.S. products with long additive
  dairy products have image of high   lists as more "artificial" or less
  quality and adherence to best       "natural".
  manufacturing practices and         
  principles. Sugar free really is    
  sugar free when it is a U.S.        
  product.                            

  Because of their experience and     Cheese and in general food products
  good technology, US dairy or cheese from United States are considered
  products that could find potential  to be more artificial in
  in Chile are those with value added ingredients, thus in taste, than
  or substitute.                      local products. Strong cheeses are
                                      only slowly finding approval in
                                      Chile.

  In general US food products are     Key market entry obstacles are
  presented in very attractive and    Price with retailers and consumers
  original packaging, which can allow and Shelf Life with retailers.
  them to compensate for their lack   Shelf life for U.S. products is
  of market recognition.              less than for European products, in
                                      part due to allegedly more advanced
                                      European technology.

  New free trade agreement between    It is difficult for U.S. cheese and
  Chile and United States will reduce other dairy products to compete
  costs of U.S. products, making them with costs of products manufactured
  more competitive in the market.     locally and from Argentina or other
                                      South American countries because
                                      the labor, consumables and shipping
                                      are cheaper.

  U.S. companies have the experience  Finding a good, reliable exclusive
  and resources for a strong market   distributor is not easy.
  penetration strategy. Choose a      Manufacturers normally fail when
  distributor carefully and ensure    they try to enter the market
  that the distributor complies with  without a brand development
  your quality, customer service and  strategy and without investing in
  delivery standards.                 advertising or supporting their
                                      distributor against the established
                                      market leaders.

                                      Lack of nearby plant makes U.S.
                                      products less competitive due to
                                      shipping problems (time, expense,
                                      cold chain, etc.), diminished shelf
                                      life and inability to reprocess
                                      products returned by retailers.
  ----------------------------------- -----------------------------------

# Section II. Market Sector Opportunities and Threats

## Entry Strategy

## 

-   The Chilean market is not large, but it is very competitive and
    price-conscious. Chilean dairy product consumers have rapidly
    accepted innovations in convenience and health foods such as
    desserts and yogurts, but they are not adventurous when it comes to
    cheeses and are only slowly acquiring a taste for stronger-flavored
    cheeses than the traditional soft farm-type cheeses. There is a
    widespread lack of knowledge and sophistication related to
    non-traditional cheeses, especially spreadable cheeses, and the
    variety of imported cheeses only leads consumers to confusion.
    Therefore any market penetration effort should include resources for
    a strong marketing campaign including advertising (especially on
    television), a strong product launch, and point-of-sale marketing.

```{=html}
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```
-   The main component of a point of sale promotion program for cheese
    and food products is to have promoters in key supermarkets offering
    product samples for shoppers to taste, as well as marketing
    literature to educate them about new processed dairy food products,
    their nature and unique characteristics and how to use them. A
    special section in the Cheese section for fine cheeses can help the
    introduction. D & S, Chile's largest supermarket chain (Lider
    stores) has a "Flavors of the World" (Sabores del Mundo") section in
    their higher-income level location stores, which at this time does
    not have any U.S. cheeses on display because the U.S. cheeses do not
    have a world-class image in Chile. Kraft Philadelphia Cream Cheese
    is an exception. It was introduced with significant initial
    investments, caught on as people learned how to use it, and now
    grows without much aid based on brand recognition and formed
    consumer habits.

```{=html}
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```
-   To start having success in Chile, U.S. cheeses need a strong
    strategic brand image building campaign. Tasting and consumer
    education are an important part of this. Along with this, U.S. dairy
    products need to be available in a wider variety of flavors and
    presentations comparable to the European market, in packaging that
    is in proportion to local sizes, with fewer calories per serving,
    and to have a longer shelf life than they do now, more in tune with
    European products, to compete with Chilean products.

```{=html}
<!-- -->
```
-   Emphasize non-refrigerated products with long shelf life initially,
    especially cheeses, but price will be an issue. Even long-life
    yogurts (e.g. no-cold-storage, 6-month shelf life Iparlat yogurt
    from Spain) have not really entered yet.

```{=html}
<!-- -->
```
-   Sales in Chile are made based on a relationship of personal trust,
    and personally visiting the country and demonstrating products to
    potential distributors and end-users is fundamental for generating
    solid, durable business relationships. It is essential to find a
    good importer/distributor, with experience, good reputation and good
    contacts and knowledge of food import regulations and procedures.
    The distributor should be accustomed to dealing with demanding
    supermarket chains and their specific requirements.

```{=html}
<!-- -->
```
-   Cheese and dairy products are sold mostly by price; therefore US
    suppliers should find the way to be competitive. Profit margins in
    Chile are very commonly significantly slimmer than in the U.S. for
    the same product. Because some local cheese producers also import
    cheese, this avenue of forming joint ventures should be explored.
    Products could be developed locally to avoid the obstacles faced by
    imports (shelf life, cold chain, price, non-recyclability, etc.).
    Kraft is successful in Chile because it has a local office, but even
    so it has not generally been successful with dairy products because
    of a lack of a local plant.

```{=html}
<!-- -->
```
-   Take advantage of gourmet or food trade shows to exhibit products
    and contact potential importers and end users. Two annual shows to
    consider in Chile are "ExpoGourmand" and "ExpoAlimenta"
    (www.expotrade.cl). Chilean food retailers also visit shows such as
    Expo Abras in Rio de Janeiro, Brazil and Fispal in Sao Paulo,
    Brazil. Publishing ads and articles in wine-related and gourmet
    magazines, including weekend newspaper magazines, is also an option.

```{=html}
<!-- -->
```
-   As a recommendation, it is essential to be aware of the fairly
    limited size of the Chilean market and to seriously commit to
    pursuing it, to provide strong support to the distributor and
    clients, and to be patient.

## Market Size, Structure and Trends

### Market Size

Cheese consumption in Chile is 10 lbs. per capita, higher than the world
average of 5.5 but low compared to Argentina's 18, the US's 30 and
Europe's 36 (average) lbs. per capita. Although statistics indicate that
the estimated cheese consumption in 2003 dropped to 9.5 lbs. per capita,
compared to 10 lbs. per capita in 2002, the general trend is up. The
drop in 2003 was the result of an increase in exports to 5,541 tons,
which was 126.5% higher than in 2002. It also reflects the increase in
cheese retail prices. ODEPA, the government agricultural planning
service, states that 53 thousand tons of cheese were produced by the
large producers in 2003 and a year-on-year growth rate of 12.6% for the
January-June 2004 period. The Chilean Dairy Association estimates that
Chile produced a total of 60-70 thousand metric tons of cheese in 2003
and exported 8-10 thousand tons.

![](media/image2.wmf)Even though cheese exports are growing in 2004, it
is estimated that the cheese consumption will also increase thanks to
the increase in local production (by large cheese industries and also
small producers), to the increase in imports and to the continuing
growth of personal income among the population.

### 

A wide variety of cheeses are sold in the market, among which Gouda is
the main one, followed by Chanco (country type similar to Gouda in
texture but milder). Locally produced Gouda and Chanco and imports (only
Gouda) account for around 80% to 90% of the total market. Chanco cheese
is the traditional type consumed in Chile and it is produced by the
large dairy industries as well as by an estimated 100 small cheese
producers located mostly in southern Chile. These small cheese makers
sell their products mostly for local consumption and prices depend on
quality and prestige.

Other cheese types produced in smaller proportions are Parmesan,
Mozzarella (sold mostly to fast food restaurants selling pizza),
Cheddar, Edam, processed cheese, cream cheese (mostly Kraft Philadelphia
Cream Cheese), and others. Laminated (sliced) cheese to be used hot and
melted, with fast growing sales, has become an important cheese
consumption driver. Besides cheese made of cow milk, cheeses made with
goat and sheep milk are becoming more popular in the market, which shows
a long overdue, gradual increase in consumer sophistication. Imported
cheese has further increased the diversity and supermarkets now offer
cheese from Argentina, Uruguay, Brazil, Germany, New Zealand, France,
Italy, Spain, Holland, Switzerland, etc. The most popular are Gruyere,
Camembert, Roquefort, Sheep type and Cheddar.

Competition is strong. For instance, the Lider supermarket chain, which
is part of D&S and one of the main participants in the retail market,
works with around 25 different cheese suppliers (local producers and
importers) and has around 100 different cheese products. On locally made
country cheese it is easy to find at least 15 different types in any
large supermarket.

### 

### Imports

Table 1. Chilean Imports of Cheese and Main Imported Dairy Products

+------+------+----------+----------+----------+----------+----------+
| Year |      | Cheese   | Powdered | Powder   | Butter   | Milk     |
|      |      |          | Milk,    | Milk,    |          | Whey     |
|      |      | (Heading | fat      | fat      | (HS      | (Heading |
|      |      | 0406)    | content  | content  | 04       | 0404)    |
|      |      |          | not      | e        | 05.1000) |          |
|      |      |          | e        | xceeding |          |          |
|      |      |          | xceeding | 26% (HS  |          |          |
|      |      |          | 1.5%     | 04       |          |          |
|      |      |          |          | 02.2118) |          |          |
|      |      |          | (HS      |          |          |          |
|      |      |          | 04       |          |          |          |
|      |      |          | 02.1000) |          |          |          |
+------+------+----------+----------+----------+----------+----------+
| 2004 | Tons | 2,708    | 1,176    | 3,585    | 2,059    | 2,850    |
|      |      |          |          |          |          |          |
| Jan- |      |          |          |          |          |          |
| June |      |          |          |          |          |          |
+------+------+----------+----------+----------+----------+----------+
|      | US\$ | 6        | 2        | 6        | 3        | 2        |
|      | CIF  | ,731,924 | ,126,239 | ,973,093 | ,510,725 | ,918,277 |
+------+------+----------+----------+----------+----------+----------+
| 2003 | Tons | 4,128    | 8,692    | 15,539   | 2,925    | 5,307    |
|      |      |          |          |          |          |          |
| Jan  |      |          |          |          |          |          |
| -Dec |      |          |          |          |          |          |
+------+------+----------+----------+----------+----------+----------+
|      | US\$ | 9        | 14       | 28       | 4        | 5        |
|      | CIF  | ,642,533 | ,999,849 | ,284,055 | ,528,502 | ,599,763 |
+------+------+----------+----------+----------+----------+----------+
| 2002 | Tons | 3,293    | 5,486    | 2,358    | 465      | 1,862    |
|      |      |          |          |          |          |          |
| Jan  |      |          |          |          |          |          |
| -Dec |      |          |          |          |          |          |
+------+------+----------+----------+----------+----------+----------+
|      | US\$ | 7        | 7        | 3        | 622,69   | 1        |
|      | CIF  | ,145,610 | ,807,351 | ,093,179 |          | ,826,544 |
+------+------+----------+----------+----------+----------+----------+
| 2001 | Tons | 3,045    | 5,851    | 4,428    | 835      | 2,298    |
|      |      |          |          |          |          |          |
| Jan  |      |          |          |          |          |          |
| -Dec |      |          |          |          |          |          |
+------+------+----------+----------+----------+----------+----------+
|      | US\$ | 7        | 12       | 9        | 1        | 3        |
|      | CIF  | ,750,559 | ,428,902 | ,064,173 | ,463,527 | ,324,841 |
+------+------+----------+----------+----------+----------+----------+
| 2000 | Tons | 6,631    | 9,135    | 6,936    | 1,830    | 2,443    |
|      |      |          |          |          |          |          |
| Jan  |      |          |          |          |          |          |
| -Dec |      |          |          |          |          |          |
+------+------+----------+----------+----------+----------+----------+
|      | US\$ | 14       | 16       | 13       | 2        | 2        |
|      | CIF  | ,900,083 | ,705,329 | ,401,331 | ,887,416 | ,765,105 |
+------+------+----------+----------+----------+----------+----------+
| 1999 | Tons | 3,602    | 9,428    | 2,743    | 446      | 1,300    |
|      |      |          |          |          |          |          |
| Jan  |      |          |          |          |          |          |
| -Dec |      |          |          |          |          |          |
+------+------+----------+----------+----------+----------+----------+
|      | US\$ | 8        | 13       | 4        | 1        | 1        |
|      | CIF  | ,783,442 | ,427,371 | ,387,018 | ,075,635 | ,308,241 |
+------+------+----------+----------+----------+----------+----------+

Cheese imports grew 25.4% in 2003, reaching 4,128 tons. Argentina was
the main supplier with 2,165 tons, or 52% of the total imported. Brazil
followed with 661 tons and then the United States with 437 tons, which
is 11% of total. Other origins were Germany, Uruguay and New Zealand.
Cheese imports from New Zealand accounted for around 70% of imports
(4,655 tons), in the year 2000, mostly Gouda cheese, but this
surprisingly dropped to 72 tons in 2002. This is probably due to
increased imports from Mercosur countries which entered the country with
very low import tariffs as well as record low prices as their economies
and currency exchange rates suffered, which makes for very strong
competition for U.S. products. Another reason is that Soprole, which is
the main importer of products from New Zealand, is producing more
locally. In any case in 2003 there is a small recovery of imports from
New Zealand reaching the 195 tons. Products from New Zealand are
relatively low in price; thus they can compete well with products from
Mercosur.

![](media/image3.wmf)

The main type of cheese imported from the U.S. was cream cheese,
reaching almost 361 metric tons. In fact, most U.S. cream cheese was
imported by the Chilean subsidiary of Kraft Foods. Kraft has been in
Chile since 1994 and sells snack products such as chocolates, cookies,
powdered desserts, etc. In dairy products they only sell cream cheese in
Chile, which is sold only to Soprole (one of the largest dairy product
producers in Chile). Philadelphia Cream Cheese is sold only in
supermarkets visited by upper income level shoppers and represents a
small part of Kraft's business in Chile. Their imports come from US as
well as other locations where they own plants such as Colombia, Brazil,
Europe, etc.

Cheeses imported from United States were Gouda, Roquefort, Parmesan,
Powdered Cheese and Processed Cheese.

### Local Production

Cheese production in 2003 was 53,000 metric tons, which is very similar
to the quantity registered in 2002. To this production we have to add
the smaller cheese producers, which are estimated to account for more
than 13,500 tons.

In the first quarter of 2004, large dairy industries boosted cheese
production by 13%, credited mostly to Soprole, which has a yearly
contract to sell 7,000 tons to Mexico. Cheese production by other large
dairy processors and also by smaller cheese producers is expected to
increase in 2004. Even though the exact production by smaller cheese
producers is not available, it is known that these companies are
advancing in production volumes and also technologically, which is
making them very competitive in the market.

The main dairy items produced in 2003 were powdered milk (62,000 metric
tons), cheese (53,000 tons) and fluid milk (311 million liters). The
production of these three products required the equivalent to 1,396
million of liters of milk, that is 89% of the milk received by plants
(see table below).

Table 2. Milk Reception at Plants and Dairy Product Production.

  ------------- ----------- ---------------------- --------------- --------------- --------------- ---------------
                            **JANUARY-DECEMBER**                                                   

  **PRODUCT**   **UNITS**   **1999**               **2000**        **2001**        **2002**        **2003**

  MILK          LTS         1,469,716,292          1,447,213,009   1,636,461,297   1,605,391,798   1,563,169,284
  RECEPTION                                                                                        

  Fluid Milk    LTS         279,481,516            275,193,430     291,268,257     295,909,345     310,751,512
  Production                                                                                       

  Powdered Milk KGS         60,596,660             59,088,156      71,463,856      67,709,599      61,867,045
  Prod.                                                                                            

  Curd Cheese   KGS         7,034,377              7,166,620       7,150,433       7,479,974       7,555,476

  Cheese        KGS         44,777,139             44,717,992      50,416,509      53,074,751      53,037,176

  Yogurt        LTS         100,203,007            106,623,501     95,249,538      127,057,261     139,343,652

  Cream         KGS         13,142,437             16,125,411      17,544,062      17,631,470      16,760,286

  Butter        KGS         11,006,560             9,855,236       11,836,134      11,551,232      10,848,961

  Powdered Milk KGS         11,862,924             14,105,471      15,783,682      14,285,559      15,239,684
  Whey                                                                                             

  Condensed     KGS         15,742,230             24,400,340      25,418,149      24,190,214      30,558,318
  Milk                                                                                             

  Caramel       KGS         20,783,943             21,963,910      24,139,771      26,105,067      26,637,591

  Modified Milk KGS         1,250,350              3,518,100       3,293,470       1,484,270       1,938,278

  Evaporated    KGS         15,930                 313,640         1,003,430       93,180          0
  Milk                                                                                             
  ------------- ----------- ---------------------- --------------- --------------- --------------- ---------------

### Exports

The main dairy product exported in year 2003 was cheese, which increased
126,5% with 5,541 tons in 2003 and whose main destination was Mexico
representing 90% of exports and where Gouda cheese was the most exported
type. Other destinations were Cuba (5%) and the United States (2%).
Exports to the U.S. were mostly Roquefort and Parmesan cheeses.
Condensed milk exports increased 54% in 2003.

First quarter 2004 cheese exports were 192.3% higher than the same
period in 2003, due mostly Soprole's increased exports to Mexico.

### Market Structure -- Distribution Channels

Cheese is sold in supermarkets, public wholesale markets and the
traditional market (including street markets and grocery stores). Some
studies say supermarkets account for 20% of total cheese sales, other
say they represent 40%. In any case, it is known that much cheese is
still being sold in neighborhood grocery stores and public markets, but
the specialty cheeses are to be found in supermarkets and specialty
stores, even department store delicatessen.

The distribution channels for cheese in Chile vary depending on the
company. Large cheese producers sell directly to supermarkets, open
public markets as well as to the traditional markets. In the case of
Soprole, one of the largest producers, 50% of their cheese goes to
supermarkets and the other half goes to the open public markets and the
traditional segment. Many small cheese producers sell predominantly to
grocery stores and they do it directly. Procesadora de Alimentos S.A.
(Prodeasa), a strong importer that accounts for 18% of imported cheese,
sells to one wholesale company, which sells to the public markets and to
the traditional market. Prodeasa also sells cheese to the supermarkets
(directly) but this is a small portion of their overall sales. The main
cheese importer, Santa Rosa Chile Alimentos Ltda. (Los Fundos), sells
only to supermarkets and they do so directly, without intermediaries.
Supermarkets also import cheeses and many other food products but they
do it sporadically because they would rather buy from an importer and
free themselves of all the import procedures and other aspects involved,
such as managing stock and pulling products off the shelf as the
expiration date approaches.

Supermarkets admit that selling to them is complicated. In selling to
supermarkets, the distributor is crucial because he needs to understand
each chain's purchasing system and replenishing requirements. The
distributor is expected to keep sufficient stocks of products with
sufficient shelf life in his own warehouse, to replenish the shelves and
to take back those products that have less than a certain shelf life
left.

####### Table 3. Supermarket market shares, May 2004

  ---------------------------------- ------------------------------------
  *Supermarket Chain*                *% Market Share*

  D&S (Lider)                        32.0

  Cencosud (Jumbo)                   21.0

  San Francisco                      3.2

  Unimarc                            3.1

  Rendic                             3.1

  Montserrat                         2.7

  Montecarlo                         2.7

  Others                             32.2
  ---------------------------------- ------------------------------------

[Distribution channel diagram for cheese in Chile.]{.underline}

### Market Trends, Consumer Demand and Preferences

The Chilean market is split into two social segments as far as buying
premium food products goes. The ABC1 segment knows and appreciates good
dairy products (health products, fancy cheeses, etc.) and pays for them
even if they have to pay "import" prices. This is 15-20% of the total
market. This segment is also leading a strong growth of the "to go"
packaged products mainly for school children's snacks. The other, less
affluent segment goes strictly for price and is not interested in
experimenting with new product varieties.

Retailers have observed that "diet" products are perceived negatively by
Chilean consumers as being intended for people with health problems as a
medical option. The trend is to call low-calorie products "light"
products, as in Europe, which conveys the positive image of products for
persons who are actively engaged in furthering their wellness. This
product category has been growing strongly, but diet cheeses are
perceived to have "too much chemistry".

In terms of cheeses, Chileans prefer soft, mild types, not strong ones.
For decades Chileans placed mostly Gouda and Chanco cheese on the table
on a day-to-day basis and other specialty cheeses in reduced quantities
for special occasions. Now the market is increasingly acquiring a taste
for and demanding new cheese types and origins such as Parmesan,
Camembert, Gruyere, Edam and even the strong Roquefort. European cheese
varieties that have done well in Chile are Emmental (Swiss) and blue
cheeses, and Philadelphia cream cheese from the U.S. Camembert and Brie
cheeses are expensive and do not sell well, and Cheddar is one of many
whose application is not well understood. Cheddar is widely used for
hamburgers in Chile.

These products are imported but there are already local companies
forming alliances with European producers in order to manufacture
special types of cheese in Chile. Sales of these delicatessen -- as
these products are still being considered in Chile - are still limited
but are growing and providing better profit margins than the traditional
cheeses. Supermarkets are following this trend and thus they are trying
to educate consumers and get them to eat a wider variety of cheeses and
distinguish the different flavors. They are very careful on how to
display cheese on the shelves and they invest a lot in promoting them,
but the supermarket layout is still not conducive to differentiating
among cheese classes, for example among spreadable ones.

A characteristic of specialty cheese sales is that they are bought by
the mother, or by the father on weekends, who quickly leave the cold
refrigerated area without spending much time comparing the products.

Traditionally cheese had been sold by cutting portions from the whole
cheese at the counter following the customer's indications, and
customers still prefer this system, even for sliced cheese. But
pre-packaged cheese is becoming an important item in refrigerated
showcases, especially in supermarkets. Traditional markets (corner
groceries stores) get best results by offering smaller bars of cheese of
around 4 lbs. Most of the time distributors sell 8 to 9 lb. bars to the
smaller stores.

Goat cheese is a product that has been well received in the market and
small companies manufacture it with simple technology. One interviewee
believes that there is a need for suppliers with experience in this
product and that can offer better prices, so that it can be accessible
for more people.

### Opportunities

There are good market opportunities in Chile for U.S. dairy processors
that can expand the variety and technology of their product lines. The
highest market potential is among non-refrigerated products, since
refrigerated imports are too perishable and expensive to ship by air.

Supermarket contacts stress that the Chilean dairy product market is
very close to the European one in variety, style and technology for
processed products, whereas the U.S. supermarkets has very little
product type and brand variety, especially among yogurts and desserts.
The European technology helps in delivering high quality products with
good flavor and long shelf lives. The "Bio" or Health and Wellness type
products that are so popular in Europe are undergoing strong growth in
Chile. These are reportedly just recently becoming an important category
in the U.S. Items like Kraft's Diabetic Choices products are growing
strongly in Chile as diabetes is growing three times faster among
youngsters than among adults.

One as yet non-existent product type with high potential demand in Chile
is the type of dairy product that substitutes for Mozzarella cheese and
is used by pizza chains and other such franchise chain operations, sold
in coarsely ground fashion.

Flavored butters have been indicated as another example of value-added
products with market potential, representative of U.S. manufacturers'
diversification capability. Land O'Lakes entered Chile with such
products at one time but could not compete on price. The situation may
have changed now.

If we analyze import statistics (see table Nº 3) we see other imported
dairy products that have increased their penetration in Chile. Such is
the case of *whole and skimmed powdered milk*, imported mainly from
Argentina and Uruguay and mainly because the local production was not
enough to supply the market in 2003 (in 2003, the United States had no
share of imports of this product). Powdered milk is 35% of the Chilean
milk market, and this is basically because of the dominating Nestle
name. Establishing a good brand would be a way of gaining market share,
but the marketing investments and Nestle's reaction must be taken into
account.

*Butter* imports increased by 530% in 2003 mainly because there was a
deficit of milk fat since it was used in the production of other dairy
products leaving a smaller quantity to make butter out of (US import
participation was only of 0.07% in this item). The main country of
origin for butter was Uruguay followed by Australia.

*Powdered milk whey* imports increased by 130%, reaching 5,307 tons in
2003. Imports of powdered milk whey came mainly from Argentina and
France. The United States is in third place in imports with 1,307 tons
(25% of total imports). This could present a good opportunity for US
exporters depending on their product quality, even though the market is
small and there are still many producers that throw away this product
because they do not have the capacity to dry the powdered milk whey
(which is the reason why it is imported). Powdered milk whey is used to
produce ice cream, cakes, etc.

Another area of opportunity is specialty powdered milks developed as
baby formulas or enhanced prenatal and postnatal milk for mothers. Milk
for mothers-to-be is all imported from Argentina (Sancor brand). Nestle
is strong among baby formulas, which are presented for ages 0-6 months,
6-12 months, and 1-4 years.

Table 4. Key Dairy Products with Potential for US Producers, Principal
Competing Countries, Jan-Dec 2003.

+-------+--------------+--------+------+------+---------------------+
| **HS  | **Product**  | **     | **U  | *    | **Main Competing    |
| C     |              | Total, | S,** | *US, | Countries**         |
| ode** |              | US\$   |      | Mkt. |                     |
|       |              | CIF    | **   | Sha  |                     |
|       |              | x      | US\$ | re** |                     |
|       |              | 1000** | CIF  |      |                     |
|       |              |        | x10  |      |                     |
|       |              |        | 00** |      |                     |
+-------+--------------+--------+------+------+---------------------+
| 0402  | Powdered     | 15,000 | 0.0  | 0.0% | Uruguay-43%,        |
| .1000 | milk with    |        |      |      | Argentina 28%,      |
|       | 1.5% or less |        |      |      | Canada 19%, Germany |
|       | fat          |        |      |      | 3%                  |
+-------+--------------+--------+------+------+---------------------+
| 0402  | Powdered     | 28,284 | 0.0  | 0.0% | Argentina-59%,      |
| .2118 | milk with    |        |      |      | Uruguay 22%,        |
|       | 26% or more  |        |      |      | Ireland 8%, New     |
|       | fat          |        |      |      | Zealand 12%         |
+-------+--------------+--------+------+------+---------------------+
| 0404  | Whey         | 3,933  | 7    | 1    | Argentina 31%,      |
| .1000 |              |        | 06.3 | 8.0% | France 23%,         |
|       |              |        |      |      |                     |
|       |              |        |      |      | USA 18 %, New       |
|       |              |        |      |      | Zealand 12%         |
+-------+--------------+--------+------+------+---------------------+
| 0406  | Mozzarella   | 1,727  | 0.0  | 1.4% | Argentina-58%,      |
| .1030 | cheese       |        |      |      | Brazil 34%, Uruguay |
|       |              |        |      |      | 8%, Australia 0%    |
+-------+--------------+--------+------+------+---------------------+
| 0406  | Gouda cheese | 3,958  | 0.4  | 0.0% | Argentina-84%,      |
| .9010 |              |        |      |      | Germany 11%, New    |
|       |              |        |      |      | Zealand 9%, Uruguay |
|       |              |        |      |      | 1%                  |
+-------+--------------+--------+------+------+---------------------+
| 0406  | Cheese,      | 940    | 61.8 | 6.6% | France-18%,         |
| .9090 | other        |        |      |      | Holland-15%,        |
|       |              |        |      |      | Argentina-14%,      |
|       |              |        |      |      | Germany-14%         |
+-------+--------------+--------+------+------+---------------------+

Table 5. Comparative Table, Key Dairy Products with Potential for US
Producers, 2003 vs. 2002.

+-------+---------+----------+---------+---------+---------+---------+
| **HS  | *       | **2003** | *       | *       | *       | *       |
| C     | *2002** |          | *2002** | *2003** | *2002** | *2003** |
| ode** |         | *        |         |         |         |         |
|       | **      | *Total** | **US**  | **US**  | **US**  | **US**  |
|       | Total** |          |         |         |         |         |
|       |         | **US\$   | **US\$  | **US\$  | *       | *       |
|       | **      | CIF      | CIF     | CIF     | *Market | *Market |
|       | US\$CIF | x1000**  | x1000** | x1000** | Share** | Share** |
|       | x1000** |          |         |         |         |         |
+-------+---------+----------+---------+---------+---------+---------+
| 0402  | 7,807   | 15,000   | 0.0     | 0.0     | 0.0%    | 0.0%    |
| .1000 |         |          |         |         |         |         |
+-------+---------+----------+---------+---------+---------+---------+
| 0402  | 3,093   | 28,284   | 0.0     | 0.0     | 0.0%    | 0.0%    |
| .2118 |         |          |         |         |         |         |
+-------+---------+----------+---------+---------+---------+---------+
| 0404  | 1,704   | 3,933    | 385.5   | 706.3   | 22.6%   | 18.0%   |
| .1000 |         |          |         |         |         |         |
+-------+---------+----------+---------+---------+---------+---------+
| 0406  | 1,118   | 1,727    | 16.2    | 0.0     | 1.4%    | 1.4%    |
| .1030 |         |          |         |         |         |         |
+-------+---------+----------+---------+---------+---------+---------+
| 0406  | 2,755   | 3,958    | 35.7    | 0.4     | 1.3%    | 0.0%    |
| .9010 |         |          |         |         |         |         |
+-------+---------+----------+---------+---------+---------+---------+
| 0406  | 1,323   | 940      | 576.1   | 61.8    | 43.5%   | 6.6%    |
| .9090 |         |          |         |         |         |         |
+-------+---------+----------+---------+---------+---------+---------+

### Competitive Threats and Obstacles

What might be considered threats for U.S. dairy products is the market
image, distribution strength and the wider product variety European
companies. A majority of these products are already in the Chilean
market and are distributed nation-wide by companies such as Nestle and
Soprole (controlled by Fonterra of New Zealand), the two largest firms
in the market.

Another threat is the fast market acceptance of "Bio" type products in
Chile, replicating the strong demand in Europe, a market sector in which
the U.S. dairy industry has not geared up for to the same extent. The
Chilean food market is a mature one in which more attention and money
are being spent on healthy food.

A third threat is that there are several small local dairy processors
that can quickly copy the nature and the packaging of the product. One
way around this is to patent brands and product names and package
styles.

The two biggest obstacles to importing processed dairy products from the
U.S. are shelf life, which is normally shorter than from other origins,
and food regulations that are in some cases more stringent than in the
U.S. or in Europe. A one-shot obstacle is the need to get the products
approved by the health authorities. This can take a significant amount
of time and at times be impossible because the product does not comply
with local regulations, but once approved it is then much simpler for
later regular shipments. Vitamin and mineral contents, for example, are
tightly regulated with regard to maximum contents in food products in
Chile (see Section IV, Market Access).

Shelf life requirements vary among supermarket chains. Yogurts and
desserts generally have a 30-day shelf life, are delivered to the
supermarket at most 5 days after manufacture and are pulled off the
shelf again 5 days before the "best before" expiration date, leaving 20
days in between for display on the shelf. In another case they must be
delivered within 7 days of manufacture and pulled off again when about
half of the shelf life is gone (i.e., 15 days before expiration).

Chilean cheeses have about 90 days of shelf life. About 10-15% of that
has already passed when they are placed on the shelves and they are
pulled off one chain's shelves when only 1/2 of their life remains. In
another case, assuming a cheese lasts 6-8 months, it is assumed that
one-third of the shelf life goes by during distribution, another third
on the supermarket shelf, and the last third in the client's possession.
European cheeses have better shelf lives than Chilean or U.S. products
due to more advanced technology, we were told, and are found in
supermarkets where few if any U.S. products are present. Imported
cheeses can last up to one year, arrive two months after date of
manufacture and are sold within 3-4 months, so that the ½ of shelf life
condition is again normally met.

Another set of obstacles is related to getting supermarket shelf space.
The product must be attractive enough to displace another one on
already-full dairy product shelves. This requires an investment in
strong point-of-sale marketing and distribution (stock management, shelf
replenishing, etc.). These costs work against the narrow profit margins
of commodity products, so that value-added products with market appeal
have a better chance of doing well.

It is very often easier to import food products from Europe than the
U.S. because U.S. exporters have not developed a culture of working with
small export markets as European ones have. European exporters are more
flexible in adapting packaging to local tastes and requirements (such as
smaller portions), incorporating new labels, and manage shorter delivery
times. U.S. food product exporters are much less willing to send less
than full-pallet loads (like ½ pallet) or in smaller wholesale SKU
containers (e.g. 12 instead of 24 retail boxes), etc. This creates
excess stock problems for slow turnover items and the need to repackage
wholesale containers to match the locally accepted quantity before
delivery to retailers.

Further obstacles for an importer are low initial sales and slow product
turnover rates and not having a nearby processing plant for its dairy
products. This is because Chilean law allows processors to recycle
products when they need to remove them from supermarket shelves and
before expiration. Importers with no local plant cannot do this, which
adds significantly to the cost of doing business, and they cannot even
give the products to charity after expiration.

Finally, it is even harder to overcome the still insufficient cheese
culture than changing consumer habits regarding specialty value-added
dairy products and health-oriented products when manufacturers and
retailers have made few efforts to educate the consumers. This is
especially true when D&S, Chile's largest supermarket chain, is imposing
Every-Day Low Prices (EDLP) policies on the market.

## Company Profiles

The dairy food processing sector, the nucleus of the dairy industry
production chain, is made up of around 15 companies that run 28 plants
which process 75% of the local milk production and where the leading
five companies buy 90% of the milk (year 2000). These five companies are
Nestlé, Soprole (New Zealand Dairy Board) and Parmalat, of foreign
capital, plus the local Loncoleche and Colun operations. The other
companies are mid-sized or small and most of them produce cheese. The
milk producers are the main suppliers, and supermarkets are the main
retailers. Dairy products, at 7.5%, are the second largest supermarket
perishable sales group after meats.

Table 6. The ice cream market is over \$100 million and is dominated by
Savory (Nestlé) and Bresler (Unilever).

+---------------+--------------+--------------+---------+-------------+
| **Company**   | **Sales      | **End-Use    | **Pro   | **          |
|               | (US\$)**     | Channels**   | duction | Procurement |
| **(Product    |              |              | Locati  | Channels**  |
| Types)**      |              |              | on(s)** |             |
+---------------+--------------+--------------+---------+-------------+
| Nestle        | 261 tons in  | Retail       | Chile   | Direct      |
| (dairy,       | 2002, 13.3%  |              | (8)     | (Local and  |
| c             | overall      |              |         | Foreign),   |
| onfectionery, | packaged     |              |         | D           |
| cereals and   | food market  |              |         | istributors |
| dehydrated    | value share  |              |         | (Local and  |
| soups)        | in 2001      |              |         | Foreign)    |
+---------------+--------------+--------------+---------+-------------+
| Parmalat      | N/A          | Retail and   | Chile   | Direct      |
| (dairy        |              | Exports      | (2)     | (Local and  |
| products)     |              |              |         | Foreign),   |
|               |              |              |         | D           |
|               |              |              |         | istributors |
|               |              |              |         | (Local and  |
|               |              |              |         | Foreign),   |
|               |              |              |         | Importers   |
+---------------+--------------+--------------+---------+-------------+
| Proc. De      | N/A          |              | Chile   | Direct      |
| Leche del Sur |              |              | (3)     | (Local)     |
| (Prolesur, in |              |              |         |             |
| Soprole       |              |              |         |             |
| holding -     |              |              |         |             |
| dairy         |              |              |         |             |
| products)     |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+
| Soprole       | N/A          | Retail       | Chile   | N/A         |
| (milk, diary  |              |              | (5)     |             |
| products)     |              |              |         |             |
+---------------+--------------+--------------+---------+-------------+

Table 7. Dairy product producers (year 2003)

<table>
<colgroup>
<col style="width: 9%" />
<col style="width: 6%" />
<col style="width: 10%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td>Company Name</td>
<td>Number of Plants</td>
<td><p>Milk</p>
<p>Reception</p>
<p>(liters)</p></td>
<td><p>Fluid Milk Production</p>
<p>(liters)</p></td>
<td><p>Powdered Milk</p>
<p>(kilos)</p></td>
<td><p>Fresh Cheese</p>
<p>(kilos)</p></td>
<td><p>Cheese</p>
<p>(kilos)</p></td>
<td><p>Yogurt</p>
<p>(liters)</p></td>
<td><p>Cream</p>
<p>(kilos)</p></td>
<td><p>Butter</p>
<p>(kilos)</p></td>
<td><p>Powdered Whey</p>
<p>(kilos)</p></td>
<td><p>Condensed Milk</p>
<p>(kilos)</p></td>
</tr>
<tr class="even">
<td>Soprole</td>
<td>5</td>
<td>353,464,790</td>
<td>138,848,684</td>
<td>6,970,976</td>
<td>5,448,888</td>
<td>12,130,727</td>
<td>68,142,958</td>
<td>5,005,475</td>
<td>1,690,174</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Nestle Chile S.A.</td>
<td>4</td>
<td>301,384,867</td>
<td>0</td>
<td>26,187,167</td>
<td>0</td>
<td>0</td>
<td>34,296,865</td>
<td>2,146,113</td>
<td>1,760,795</td>
<td>0</td>
<td>28,624,904</td>
</tr>
<tr class="even">
<td>Quillayes - Peteroa</td>
<td>2</td>
<td>34,551,492</td>
<td>0</td>
<td>0</td>
<td>1,274,650</td>
<td>1,823,720</td>
<td>0</td>
<td>0</td>
<td>114,996</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Vitalac S.A.</td>
<td>1</td>
<td>11,813,740</td>
<td>1,835,943</td>
<td>0</td>
<td>374,746</td>
<td>883,726</td>
<td>69,964</td>
<td>104,004</td>
<td>6,158</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Parmalat Chile S.A.</td>
<td>2</td>
<td>101,663,924</td>
<td>7,469,356</td>
<td>7,419,845</td>
<td>0</td>
<td>1,339,765</td>
<td>14,821,768</td>
<td>859,455</td>
<td>542,690</td>
<td>861,375</td>
<td>1,933,414</td>
</tr>
<tr class="odd">
<td>Calan Ltda.</td>
<td>1</td>
<td>19,104,726</td>
<td>2,356,529</td>
<td>182,945</td>
<td>67,457</td>
<td>874,944</td>
<td>5,207,510</td>
<td>127,183</td>
<td>87,623</td>
<td>403,830</td>
<td>0</td>
</tr>
<tr class="even">
<td>Loncoleche</td>
<td>3</td>
<td>210,310,777</td>
<td>48,013,375</td>
<td>8,121,450</td>
<td>0</td>
<td>3,068,181</td>
<td>7,661,675</td>
<td>5,318,588</td>
<td>1,634,637</td>
<td>2,420,888</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Surlat S.A.</td>
<td>1</td>
<td>70,086,249</td>
<td>37,984,310</td>
<td>4,250,732</td>
<td>0</td>
<td>0</td>
<td>165,151</td>
<td>801,065</td>
<td>783,461</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Lb Ind.Alimentos S.A.</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Colun</td>
<td>1</td>
<td>280,886,745</td>
<td>50,719,225</td>
<td>5,657,575</td>
<td>281,347</td>
<td>17,913,487</td>
<td>5,292,556</td>
<td>2,197,952</td>
<td>2,812,228</td>
<td>7,796,175</td>
<td>0</td>
</tr>
<tr class="even">
<td>Cafra</td>
<td>1</td>
<td>32,643,287</td>
<td>5,575,460</td>
<td>1,120,421</td>
<td>0</td>
<td>1,918,051</td>
<td>25,216</td>
<td>47,078</td>
<td>334,885</td>
<td>309,706</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Chilolac</td>
<td>1</td>
<td>32,763,145</td>
<td>30,515</td>
<td>0</td>
<td>0</td>
<td>3,424,366</td>
<td>507,376</td>
<td>2,047</td>
<td>285,077</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Lacval S.A.</td>
<td>1</td>
<td>17,607,107</td>
<td>17,904,380</td>
<td>1,290,984</td>
<td>108,388</td>
<td>571,916</td>
<td>3,152,613</td>
<td>151,326</td>
<td>90,106</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Agrolacteos Cuinco Ltda.</td>
<td>1</td>
<td>21,610,646</td>
<td>13,735</td>
<td>0</td>
<td>0</td>
<td>2,004,176</td>
<td>0</td>
<td>0</td>
<td>85,186</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Campo Lindo</td>
<td>1</td>
<td>1,042,634</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>105,021</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Cumelen . Mulpulmo</td>
<td>1</td>
<td>74,235,155</td>
<td>0</td>
<td>664,950</td>
<td>0</td>
<td>6,979,096</td>
<td>0</td>
<td>0</td>
<td>620,945</td>
<td>3,447,710</td>
<td>0</td>
</tr>
<tr class="even">
<td>Total</td>
<td>1</td>
<td>1,563,169,284</td>
<td>310,751,512</td>
<td>61,867,045</td>
<td>7,555,476</td>
<td>53,037,176</td>
<td>139,343,652</td>
<td>16,760,286</td>
<td>10,848,961</td>
<td>15,239,684</td>
<td>30,558,318</td>
</tr>
<tr class="odd">
<td colspan="12">Note: Nestlé has four plants only for dairy products.
In total, Nestlé has eight plants (including all their products).</td>
</tr>
</tbody>
</table>

## Relevant Private and Public Institutions

[Fedeleche]{.underline}

Address: Tenderini 187 P. 1, Of. 1, Santiago Centro, Santiago, Chile

Tel: (56 2) 632-9473

Fax: (56 2) 633-0684

E-mail: <carancibia@fedeleche.cl>

Web Site: [www.fedeleche.cl](http://www.fedeleche.cl/)

Contact(s): Mr. Carlos Arancibia, Manager

[Ministerio de Agricultura]{.underline}

Address: Teatinos 40, piso 9, Santiago Centro, Santiago, Chile

Tel: (56 2) 593-5000

Fax: (56 2) 393-5135

E-mail: <mecastro@minagri.gob.cl>

Web Site: [www.minagri.gob.cl](http://www.minagri.gob.cl/)

Contact(s): Mr. Jaime Campos Quiroga, Agricultural Minister

Mr. Arturo Barrera, Undersecretary

[ODEPA - Centro de Información Silvoagropecuaria]{.underline}

Address: Valentín Letelier 1339 - Piso 1, Santiago Centro, Santiago,
Chile

Tel: (56 2) 397-3000

Fax: (56 2) 697-7805

Web Site: [www.odepa.gob.cl](http://www.odepa.gob.cl/)

Contact(s): Mrs. Aída Guerrero

Mrs. Dora Carreño

Mr. Victor Esnaola

[Servicio Nacional de Aduanas]{.underline}

Chilean Customs Service, Technical Department

Address: Plaza Sotomayor 60, Valparaiso, Valparaíso, Chile

Tel: (56 32) 200541

Web Site: [www.aduana.cl](http://www.aduana.cl/)

Contact(s): Mr. Fredy González, Subdireccion Técnica

[SESMA-Servicio de Salud Metropolitano del Ambiente]{.underline}

Address: Olivares 1229, Piso 3, Santiago Centro, Santiago, Chile

Tel: (56 2) 399-2400

Fax: (56 2) 699-3339

E-mail: <ahernandez@sesma.cl>

Web Site: [www.sesma.cl](http://www.sesma.cl/)

Contact(s): Mrs. Soledad Ubilla, Director

# Section III. Costs and Prices

## Tariff Rates, Quotas, Import Duties

## 

Chilean tariffs are all Ad Valorem taxes (percentage of merchandise
value) and not a certain amount per physical unit (box, bag, ton, etc.).
There are also no quotas for any product from any country and the normal
customs duty rate in Chile is 6% across the board for any product from
any country, except for imports from countries with which Chile has
established special customs agreements.

After January 1, 2004, when the U.S.-Chile Free Trade Agreement went
into effect, tariff rates for cheese products from the U.S. (HTS or
Schedule B Heading 0406) and most other processed dairy products will be
gradually eliminated in four years (see tables below). Therefore these
products will be free of duty imports starting on January first of year
four, 2007.

Tariffs for fluid milk (0401) and powdered milk other than HS 0402.1000
will gradually drop over eight years and will be duty on January first
of eighth year, 2011.

Table 8. U.S.-Chile FTA Detarification Schedule, Dairy Products

  ------------ ----------------------------------------------- --------------
  **HS Heading **Description**                                 **Category**
  or Code**                                                    

  0401         Milk and cream, not concentrated nor sweetened  C

  0402.1000    Milk and cream, concentrated, powdered          B

  0402, all    Milk and cream, various types                   C
  others                                                       

  0403         Buttermilk, curdled milk and cream, yogurt,     B
               etc.                                            

  0404         Whey, etc.                                      B

  0405         Butter and other fats and oils derived from     B
               milk, dairy spreads                             

  0406         Cheese and curd                                 B
  ------------ ----------------------------------------------- --------------

Table 9. U.S. -- Chile FTA Detarification Schedule, Chilean Table

  ---------------------- ------- --------- ----------- --------- ---------
  Year                   A       B         C           D         E

  0                      6       6         6           6         6

  \(2004\) 1             0       4,5       5,25        5,4       5,5

  \(2005\) 2             0       3         4,45        4,8       5

  \(2006\) 3             0       1,5       3,75        4,2       4,5

  \(2007\) 4             0       0         2,95        3,6       4

  \(2008\) 5             0       0         2,25        3         3,5

  \(2009\) 6             0       0         1,45        2,4       3

  \(2010\) 7             0       0         0,75        1,8       2,5

  \(2011\) 8             0       0         0           1,2       2

  \(2012\) 9             0       0         0           0,6       1,5

  \(2013\) 10            0       0         0           0         1

  \(2014\) 11            0       0         0           0         0,5

  \(2015\) 12            0       0         0           0         0

  Note: Tariff schedules                                         
  are set out in equal                                           
  stages along the given                                         
  number of years.                                               
  ---------------------- ------- --------- ----------- --------- ---------

## Inspection Fees, and Customs Broker's Fees

Products for human consumption are inspected by SESMA (Servicio de Salud
Metropolitano del Ambiente). SESMA has an irregular table with different
fee depending on the kilos imported. As an example they charge a fee of
US\$ 27.6 for 1 to 500 kilos, US\$ 29.4 for 501 to 1,000 kilos and US\$
31.2 for 1,001 to 2,000 kilos. Customs Service physical inspections cost
US\$ 30-45 per container. Customs brokers charge 0,5% of CIF value with
a minimum of US\$ 50-100 (can vary).

## Cargo Unloading, Transport and Storage Fees

Customs brokers charge a US\$ 30 dispatch fee, and unloading, transport
and storage fees for break bulk run from 20% to less than 2% as FOB
value increases. Containers must be guaranteed in Chile against damages
incurred between dock and warehouse for a US\$ 70-80 fee. Gate In for
empty container handling for a US\$ 35-55 fee. Air cargo is not subject
to container fees except for storage fees (by weight).

## Value-added Tax

Customs brokers charge a US\$ 30 dispatch fee, and unloading, transport
and storage fees for break bulk run from 20% to less than 2% as FOB
value increases. Containers must be guaranteed in Chile against damages
incurred between dock and warehouse for a US\$ 70-80 fee. Gate In for
empty container handling for a US\$ 35-55 fee. Air cargo is not subject
to container fees except for storage fees (by weight).

## Average Markups

Markups are different depending on the products. Importers of special
cheese such as Roquefort, camembert, etc. work with better margins, even
though there are some products that they only sell them to offer better
variety (thus service) to the supermarket and where they earn nothing.
Products such as Gouda (imported and produced locally) and the local
production of "Chanco" (country type) leave very small markups because
the competition is very strong and all suppliers want to be in
supermarkets. According to what we have just mentioned and to three
different opinions, markups along the distribution chain are around:

5-20% importers

8-12% wholesales distributor (selling to public market and grocery
stores)

10-30% for supermarkets

3% to 5% for large producers.

## Prices

Prices are the foremost purchase decision factor for cheese. As
explained by one importer, only if the product has a good price it will
be sold. According to one supermarket interviewee the special promotions
take around 20% of their sales.

In general cheese price increases or falls according to the local supply
of milk and prices. On year 2003 price of cheese and in general dairy
products increased. Wholesale cheese prices increased in 1.4% and
consumer prices increased in 3.2% the Gouda type, Chanco (country type)
increased only in 0.4% and the fresh cheese decreased in --1.7%. On
imports, cheeses under heading 0406 registered an increase on prices of
4.5% on year 2003 compared with year 2002.

Because of weather conditions, cheese price change during the year. In
the summertime (half of December, January, February and first half of
March) the price falls because of major offer of milk and then starts
recovering for the rest of the year.

Table 10. Prices at "Jumbo" supermarket

  ------------------------------------------------ ----------------------
  *Type of cheese*                                 *Range of prices
                                                   (US\$)*

  Chanco (country type)                            5.06 to 7.91

  Fresh cheese                                     3.16 to 4.55

  Gouda                                            5.06 to 7.36

  Mozzarella                                       7.21 to 9.48

  Edam                                             8.69 to 10.75

  Parmesan                                         9.78 to 14.99

  Gruyere                                          9.49 to 15.12

  Processed cheese                                 12.64

  Camembert                                        20.51 to 23.07

  Blue or Roquefort                                12.65 to 22.61

  Cheddar                                          9.78 to 11.39

  Goat cheese                                      9.04 to 14.23

  Sheep cheese                                     37.96 to 42.82

  Philadelphia cream cheese                        9.75 to 10.80
  ------------------------------------------------ ----------------------

Table 11. Prices at "Lider" supermarket

+------------------------------------------------+---------------------+
| *Type of cheese*                               | *Range of prices    |
|                                                | (US\$)*             |
+------------------------------------------------+---------------------+
| Chanco (country type)                          | 4.83 to 8.35        |
+------------------------------------------------+---------------------+
| Fresh cheese                                   | 3.12 to 4.34        |
+------------------------------------------------+---------------------+
| Gouda                                          | 5.06 to 5.50        |
+------------------------------------------------+---------------------+
| Mozzarella                                     | N.D.                |
+------------------------------------------------+---------------------+
| Edam                                           | > 7.81 to 9.89      |
+------------------------------------------------+---------------------+
| Parmesan                                       | > 8.39 to 13.79     |
+------------------------------------------------+---------------------+
| Gruyere                                        | > 8.47 to 12.39     |
+------------------------------------------------+---------------------+
| Processed cheese                               | > N.D.              |
+------------------------------------------------+---------------------+
| Camembert                                      | > 9.48 to 12.74     |
+------------------------------------------------+---------------------+
| Blue or Roquefort                              | > 10.11 to 14.18    |
+------------------------------------------------+---------------------+
| Cheddar                                        | > 10.44 to 12.01    |
+------------------------------------------------+---------------------+
| Goat cheese                                    | > 9.16 to 13.94     |
+------------------------------------------------+---------------------+
| Sheep cheese                                   | > 22.77             |
+------------------------------------------------+---------------------+
| Philadelphia cream cheese                      | > 10.73 to 11.23    |
+------------------------------------------------+---------------------+
| Prices include 19% V.A.T.                      |                     |
|                                                |                     |
| Exchange rate: US\$ 1/ Ch\$ 632 (Chilean       |                     |
| pesos)                                         |                     |
+------------------------------------------------+---------------------+

# 

# Section IV. Market Access

## Chilean Food Regulations

# 

Republic of Chile, Ministry of Agriculture, Agriculture and Livestock
Service

Resolution No. 1194, May 24, 2001

Specifies Public Health Requirements for the Import of Milk and Dairy
Products

All milk, dairy products and milk derivatives must arrive with an
official certificate granted at the moment of shipment by the competent
public health authority in the country of origin. This certificate must
prove the compliance with health requirements and must state the country
and premises of origin, the product identification, quantity and net
weight, the consignee, the means of transportation and the number of
packages in the shipment.

The health certification for milk should prove the following:

1\. ABOUT THE COUNTRY

1.  Milk and dairy products must originate in a country or area declared
    free of Bovine Pest by the World Organization for Animal Health
    (OIE) and recognized by Chile as such in accordance with the
    stipulations of Resolution 1150 issued in 2000.

2\. ABOUT THE PREMISES OF ORIGIN

2.1 In countries or areas infected with Hoof-and-Mouth disease, that the
milk originates from herds that have not been subject to restrictions as
a result of Hoof-and-Mouth disease at the time of milking.

3\. ABOUT THE PRODUCTION FACILITIES

3.1 The milk has been processed in a facility that has been authorized
by the competent public health authority and is in a condition to export
to Chile in accordance with Resolution 3138 issued in 1999.

4\. ABOUT THE PRODUCTS

1.  In countries free of Hoof-and-Mouth disease with or without
    vaccination, that the milk has been pasteurized.

2.  In countries or areas infected with Hoof-and-Mouth disease, that the
    milk has undergone a thermal treatment that guarantees the
    destruction of the Hoof-and-Mouth disease virus.

> Any of the following treatments, as recommended by the International
> Animal Health Code, are acceptable:

-   Double quick high-temperature pasteurization: 72 °C for at least 15
    seconds.

-   Quick high-temperature pasteurization combined with another physical
    treatment, such as pH reduction to 6 during at least one hour or
    thermal treatment of at least 72 °C and dehydration.

-   UHT treatment combines with another physical treatment as indicated
    in the previous paragraph.

    1.  That the necessary precautions have been taken after the
        treatment so as to avoid the contact of the milk with any
        potential source of Hoof-and-Mouth disease.

    2.  That if the dairy substitutes, cream, liquid or powdered milk
        whey, butter, butter oil, casein, caseinates, proteins and other
        dairy derivatives originate from countries free of
        Hoof-and-Mouth disease they have been produced with pasteurized
        milk.

    3.  That if they originate from countries with Hoof-and-Mouth
        disease, they have been produced with milk treated in accordance
        with paragraph 4.2.

    4.  That cheeses have been made with pasteurized milk or milk
        treated in accordance with paragraph 4.2, or that they were
        subjected to a fermenting process of at least 60 days, with the
        date of manufacture being stated in the public health
        certificate.

5\. That the milk, milk products and dairy derivatives are packaged in
sealed, labeled first-use packaging made of materials that do not modify
or contaminate the product.

6\. The package labels must clearly state the country and facility of
origin, the product description and the date of manufacture and its net
weight.

7\. The milk or dairy products must be transported from the facility of
origin to its destination in Chile in vehicles or containers that assure
the preservations of its public health and hygiene conditions.

8\. Upon arrival of the milk or dairy products, they must undergo the
controls and tests stipulated by the National Agricultural and Livestock
Service, which expense shall be paid by the consignee.

9\. Resolutions No. 3251 dated October 24, 1997 and No. 26 dated January
6, 2000 issued by the National Director's Office of the Agricultural and
Livestock Service are hereby rescinded.

**Government of Chile, Metropolitan Region Environmental Health Service,
date unknown**

**Instructions to Obtain the Customs Destination Certificate and the Use
and Disposal Authorization for Imported Foods**

[Legal Standards]{.underline}

Imported foods, which are to be authorized for use and disposition
within the country, must comply with the regulations established in Law
18,164. These foodstuffs must also comply with the quality and labeling
requirements determined by the Food Health/Sanitary Regulation (D.S.
977/96 and its amendments).

The Public Health Service within whose territorial jurisdiction the
customs office and depot is located in which the products are stored
shall be the one responsible of processing and clearing the Customs
Destination and Use and Disposition of Imported Products authorization,
after having been inspected and analyzed as the case may be.

[Procedure to Formalize the Clearance of Products]{.underline}

*Step 1*

Customs Destination Certificate (Certificado de Destinación Aduanera -
CDA): This is a Resolution issued by the Public Health Service of the
location where the Customs Office is located which processed the import
of the products, which authorized the transport of the merchandise from
customs into the warehouse where the products will b stored. This
certificate must indicate the warehouse's duly authorized address, and
the transport route and condition of the products.

*Step 2*

Use and Disposition Authorization (Autorización de Uso y Disposición):
This is a Resolution issued by the Public Health Service responsible for
the location where the warehouse is located in which the merchandise is
stored. This instrument authorizes the importer to use, sell, consume,
transfer or dispose of the imported products. Prior to such
authorization, the Public Health Service will inspect and/or subject
said products to laboratory testing to confirm that they comply with the
current health/sanitary standards.

[Procedure to Obtain the Certificate of Customs Destination (CDA) at
SESMA (Metropolitan Region Environmental Health Service) for Merchandise
Imported through the Comodoro Arturo Merino Benítez
Airport.]{.underline}

-   Present 1 original and 5 copies of the Customs Destination
    Certificate Application to SESMA's User Assistance Office at Paseo
    Bulnes 194, Santiago, during working days between 08:30 and 14:00
    hrs.

-   Attach a copy of the Purchase Invoice

-   Present a copy of the Health/Sanitary Resolution for the authorized
    warehouse.

[Procedure to Obtain Authorization for Use and Disposition of Imported
Products]{.underline}

-   Present two copies of the Authorization for Use and Disposition
    Application for the imported products at one of the User Assistance
    Offices at Paseo Bulnes 194, between 08:30 and 14:00 hrs. or at
    Vicuña Mackenna 7483-B, second floor, La Florida, Santiago, together
    with the following attached documents:

-   Copy of the Purchase Invoice

-   Copy of the Health/Sanitary Resolution for the authorized warehouse

-   Certificate of Free Sale for the products or Health/Sanitary
    Certificate for the shipment.

To facilitate this procedure in case of manufactured or processed food
products, attach a brief descriptive account and official Certificate of
Analysis regarding the microbiological and nutritional chemistry or
physiochemical quality of the product.

-   Without affecting the aforementioned, SESMA may request other
    complementary documents whenever this is required, such as technical
    sheets, proposed labeling, etc.

-   This Use and Disposition Authorization Application for imported
    products will have a fee that must be paid at the User Assistance
    Office.

-   The fee will not be returned if the application is rejected, in
    accordance with Resolution 1949/93 of the Metropolitan Region
    Environmental Health Service (SESMA).

[Filling Out the Application Form for the Use and Disposal Authorization
for Imported Products]{.underline}

In order not to encumber the reception of the application, [all
information requested in it]{.underline} must be set out in a clear and
reliable fashion.

The following information must be stated for each one of the products
for which the use and disposition authorization is requested, [when
applicable]{.underline}:

-   Commercial Name: Name under which the product will be marketed.

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-   Nature: Use or function of the product. E.g.: Preservative, canned
    goods.

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```
-   Name of the Product: Name of the finished product. E.g.: powdered
    milk.

-   Brand: Registered identification or seal of the supplier or
    manufacturer.

-   Presentation: Details of the packaging, container, volume and/or
    weight of each product. E.g.: 10 boxes with 12 one-liter bottles
    each. or 2 Pallets with 40 boxes of 20 1-kg. bags each.

-   Quantity (KN): State the quantity of the product in net kilograms.

The Name and Tax Number of the legal representative must correspond to
the data of the importer's legal representative, and NOT the data of the
customs agent employed by that company.

*Please Remember*:

The Use and Disposition Authorization for Imported Products is
contingent upon the prior obtainment of the Customs Destination
Certificate issued by the respective Public Health Service.

The expenses incurred in taking samples and carrying out the respective
analyses must be paid at SESMA's User Assistance Offices 72 hours after
the respective samples were taken. In order to facilitate the processing
of the application we suggest referencing the application number when
making payment. The documents provided by the SESMA inspector during the
inspection are also required.

**Republic of Chile, Ministry of Health**

**Resolution No. 393, Feb 20, 2002**

**Specifies Nutritional Directives on the Use of Vitamins and Minerals
in Food Products**

1.  The following maximum limits of vitamin and mineral fortifiers for
    food products per usual consumed portion will be:

  ----------------- ------------ ------------------- ---------------------
  **Nutrients**     **Unit**     **% of DDR          **Absolute value per
                                 reference value per usual consumed
                                 usual consumed      portion**
                                 portion**           

  **Vitamins**                                       

  Vitamin A         mcg ER 1     25                  200.0

  Vitamin D         mcg2         40                  2.0

  Vitamin E         mg ET 3      100                 20.0

  Vitamin K         mcg          100                 80.0

  Vitamin C         mg           100                 60.0

  Thiamin (B1)      mg           50                  0.7

  Riboflavin (B2)   mg           50                  0.8

  Niacin            mg EN 4      25                  4.5

  Vitamin B6        mg           50                  1.0

  Folate            mcg          50                  100.0

  Vitamin B12       mcg          100                 1.0

  Pantothenic Acid  mg           50                  5.0

  Biotin            mcg          10                  30.0

  Cholin            mg           50                  275.0

                                                     

  **Minerals**                                       

  Calcium           mg           50                  400.0

  Chromium + 3      mcg          50                  17.5

  Copper            mg           25                  0.5

  Iron              mg           25                  3.5

  Magnesium         mg           25                  75.0

  Phosphorus        mg           50                  400.0

  Zinc              mg           25                  3.8

  Selenium          mcg          25                  17.5
  ----------------- ------------ ------------------- ---------------------

1 ER: Retinol equivalent

2 Expressed as mcg of Tocoferol

3 ET = alpha Tocoferol equivalent

4 EN = niacin equivalent

2.  In order to prevent the loss through degradation that might affect
    vitamins and minerals during the period from the date of manufacture
    of the fortified food product until the end of its shelf life, and
    to ensure that at the end of its shelf life the product still
    retains vitamin and mineral contents at least as high as those
    declared in its label, the following excess dosage will be accepted:

-   for vitamins, the limits declared on the label can be exceeded by as
    much as 40%.

-   for minerals, the limits declared on the label can be exceeded by as
    much as 25%.

3.  The maximum limits established in this resolution will not be
    applicable to Special Diets as discussed in Chapter XXVIII of the
    Sanitary Food Regulation.

4.  This stipulations in this resolution will also not be applicable to
    those food products that the Sanitary Food Regulation requires be
    fortified with different dosages of some nutrient designed to
    resolve a specific public health problem, as well as those food
    products that are part of public health programs, which are subject
    to special fortification standards defined in each case and
    specified in the corresponding program.

5.  The following food products shall not be fortified or enriched with
    vitamins or minerals:

-   Milk formulas, dairy desserts, dairy drinks and dairy substitutes in
    which milk proteins make up less than 35% of total proteins in the
    dry extract.

-   Confectionery and similar products, such as chocolates, candy,
    chewing gum, cookies and ice cream.

-   Sugar, honey, syrup.

-   Carbonated non-alcoholics beverages.

-   Tea, coffee, "mate" herb and herbal teas based on aromatic herbs.

-   Spices, condiments and sauces.

-   Pickles.

-   Starchy cocktail snacks.

-   Processed fruit.

-   Meats, meat products, fish and seafood.

6.  Fortification or enrichment of fruit and vegetable "nectars" (thick,
    pulp juices) is authorized under the following condition:

-   That the fruit and vegetable nectars will specify the approximate
    percentage content of soluble fruit or vegetable solid constituents
    on the label.

7.  Fortification or enrichment of non-carbonated non-alcoholic
    beverages and powdered beverage preparations is authorized under the
    following condition:

-   The product must be fortified with at least three of the following
    nutrients:

> Iron
>
> Vitamin C
>
> Zinc
>
> Vitamin E
>
> Calcium
>
> Vitamin B12

8.  The fortification of juices is authorized. The juices to be
    fortified shall not be labeled "pure juice" in accordance with the
    stipulations of article 482 of the Sanitary Food Regulation, supreme
    decree No. 977/96 issued by the Ministry of Health.

9.  The fortification of food products with vitamins and minerals will
    be controlled through an inspection plan that requires one composite
    sample made up of five aliquots of the product selected at random
    and analyzed in triplicate. The analysis will be carried out with
    the analysis methods of the Chilean Public Health Institute, the
    reference national laboratory for these purposes.

10. The reference base for the fortification or enrichment of food
    products in Chile will be the following table:

  ----------------------------------------- ------------------- ----------
  **Energy**                                **Kcal**            **2300**

                                                                

  **Proteins**                              **g**               **50**

                                                                

  Vitamin A                                 mcg ER1             800

  Vitamin D                                 mcg 2               5

  Vitamin E                                 mg ET 3             20

  Vitamin K                                 mcg \*              80

  Vitamin C                                 mg                  60

  Thiamin (B1)                              mg                  1.4

  Riboflavin (B2)                           mg                  1.6

  Niacin                                    mg EN 4             18

  Vitamin B6                                mg                  2

  Folate                                    mcg                 200

  Vitamin B12                               mcg                 1

  Pantothenic Acid                          mg \*               10

  Biotin                                    mcg \*              300

  Cholin                                    mg \*\*             550

                                                                

  **Minerals**                                                  

                                                                

  Calcium                                   mg                  800

  Phosphorus                                mg                  800

  Magnesium                                 mg                  300

  Iron                                      mg                  14

  Zinc                                      mg                  15

  Copper                                    mg \*               2

  Selenium                                  mcg \*              70

  Chrome + 3                                mcg \*\*            35
  ----------------------------------------- ------------------- ----------

1 ER: Retinol equivalent

2 Expressed as mcg of Tocoferol

3 ET = alpha Tocoferol equivalent

4 EN = niacin equivalent

Ref. nutritional labeling directives Codex Rev. 1 (1993), except for
those nutrients with asterisks (\*, \*\*)

\* RDI Values, obtained from FDA

\*\* Adequate Ingestion values, IA

11. Resolution No. 1844/98 and its modifications and No. 09/96, issued
    by the Ministry of Health, are hereby repealed.

12. The ministerial resolutions which may have given individual
    authorization for the enrichment of specific food products with
    elements not included above or whose percentages exceed the margins
    approved by this regulation will remain in effect for six months
    after this resolution has gone into force, after which those
    products shall modify their contents to meet the requirements set
    out above.

13. This resolution will go into force 30 days after its publication in
    the Official Gazette.

# Section V. Key Contacts and Further

Mailing Address:

Office of Agricultural Affairs

U.S. Embassy Santiago

Unit 4118

APO AA 34033-4118

Street Address:

Office of Agricultural Affairs

Embajada de los EE.UU.

Andres Bello 2800

Las Condes

Santiago, Chile

Phone: 56-2-330-3704

Fax: 56-2-330-3203

Email: <agsantiago@fas.usda.gov>, <fas_stgo@rdc.cl>

Web Sites:

[http://www.usembassy.cl;]() U.S. Embassy Santiago homepage. First click
on "English Version" at top right and look under "Food & Agriculture",
then click on "Documents" or "Attaché Reports" for research reports, and
other pages for trade leads, contacts in Chile and more,

[http://www.fas.usda.gov;]() Foreign Agricultural Service homepage.

## Annex 1. Chilean Imports of Cheese, Powdered Milk, Butter and Milk Whey, Year 2003

+---------+---------------+--------------+---------+--------+--------+
| HS Code | Product       | Value,       | Country | Value, | Qua    |
|         |               |              | of      |        | ntity, |
|         |               | Total HS     | Origin  | per    |        |
|         |               | Code,        |         | Co     | per    |
|         |               |              |         | untry, | Co     |
|         |               | US\$ CIF/    |         |        | untry, |
|         |               |              |         | U      |        |
|         |               | Metric Tons  |         | S\$CIF | Tons   |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ar      | 3,1    | 1      |
|         |               |              | gentina | 18,781 | ,527.3 |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Germany | 4      | 200.7  |
|         |               |              |         | 27,581 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | New     | 3      | 195.0  |
|         |               |              | Zealand | 59,233 |        |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Gouda and     | 3,957,736    | Uruguay | 49,302 | 22.4   |
| 4069010 | Gouda type    |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 1,946 tons   | Holland | 1,755  | 0.5    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Brazil  | 668    | 0.1    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | *       | 416    | 0.0    |
|         |               |              | *United |        |        |
|         |               |              | S       |        |        |
|         |               |              | tates** |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ar      | 1,0    | 503.9  |
|         |               |              | gentina | 01,822 |        |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Mozzarella    | 1,727,461    | Brazil  | 5      | 250.6  |
| 4061030 |               |              |         | 86,220 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 826 tons     | Uruguay | 1      | 71.2   |
|         |               |              |         | 39,312 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Au      | 108    | 0.0    |
|         |               |              | stralia |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | *       | 9      | 360.7  |
|         |               |              | *United | 63,865 |        |
|         |               |              | S       |        |        |
|         |               |              | tates** |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Au      | 64,854 | 24.3   |
|         |               |              | stralia |        |        |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Cream Cheese  | 1,061,875    | Brazil  | 33,144 | 21.1   |
| 4061020 |               |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 406 tons     | Ar      | 7      | 0.0    |
|         |               |              | gentina |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Italy   | 5      | 0.0    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | France  | 1      | 26.6   |
|         |               |              |         | 68,621 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Holland | 1      | 38.5   |
|         |               |              |         | 39,225 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ar      | 1      | 49.1   |
|         |               |              | gentina | 33,768 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Germany | 1      | 32.7   |
|         |               |              |         | 27,030 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Uruguay | 84,896 | 26.3   |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Roquefort,    | 939,544      | *       | 61,839 | 26.2   |
| 4069090 | Camembert,    |              | *United |        |        |
|         |               |              | S       |        |        |
|         |               |              | tates** |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         | Gorgonzola,   | 255 tons     | Au      | 58,506 | 17.9   |
|         | etc.          |              | stralia |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Italy   | 47,960 | 5.5    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Spain   | 43,912 | 5.9    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Brazil  | 39,619 | 16.2   |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | P       | 34,137 | 10.0   |
|         |               |              | araguay |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Turkey  | 31     | 0.0    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Brazil  | 4      | 213.5  |
|         |               |              |         | 64,934 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ar      | 75,425 | 34.8   |
|         |               |              | gentina |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | France  | 73,692 | 10.4   |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Processed     | 701,218      | Germany | 43,498 | 6.6    |
| 4063000 | cheese,       |              |         |        |        |
|         | except        |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         | grated or     | 280 tons     | Swit    | 24,587 | 3.6    |
|         | powdered      |              | zerland |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | *       | 14,693 | 10.9   |
|         |               |              | *United |        |        |
|         |               |              | S       |        |        |
|         |               |              | tates** |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Spain   | 2,659  | 0.1    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Holland | 1,696  | 0.2    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Italy   | 33     | 0.0    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Uruguay | 2      | 66.0   |
|         |               |              |         | 55,128 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | *       | 1      | 39.2   |
|         |               |              | *United | 14,322 |        |
|         |               |              | S       |        |        |
|         |               |              | tates** |        |        |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Parmesan and  | 392,127      | Italy   | 17,099 | 1.8    |
| 4069040 | Parmesan      |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         | type cheese   | 108 tons     | Ar      | 4,255  | 0.6    |
|         |               |              | gentina |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Germany | 1,322  | 0.2    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Brazil  | 2      | 145.2  |
|         |               |              |         | 71,071 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ar      | 11,528 | 2.7    |
|         |               |              | gentina |        |        |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Fresh Cheese  | 283,404      | *       | 349    | 0.0    |
| 4061010 |               |              | *United |        |        |
|         |               |              | S       |        |        |
|         |               |              | tates** |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 148 tons     | N.D.    | 228    | 0.0    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Taiwan  | 228    | 0.1    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ar      | 1      | 39.0   |
|         |               |              | gentina | 05,008 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Germany | 67,590 | 15.1   |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Roquefort     | 228,416      | France  | 28,364 | 3.3    |
| 4064000 | (blue veined) |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 64 tons      | Denmark | 19,064 | 3.0    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Brazil  | 8,390  | 3.1    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Au      | 1      | 39.0   |
|         |               |              | stralia | 38,124 |        |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Cheddar and   | 147,697      | Brazil  | 9,513  | 4.8    |
| 4069020 | Cheddar type  |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 44 tons      | C       | 60     | 0.0    |
|         |               |              | olombia |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Holland | 75,535 | 18.7   |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Edam and Edam | 93,218       | Germany | 9,301  | 2.0    |
| 4069030 | type          |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 26 tons      | Ar      | 8,356  | 5.0    |
|         |               |              | gentina |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Uruguay | 27     | 0.0    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Uruguay | 79,709 | 16.4   |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Powdered      | 81,036       | *       | 1,231  | 0.2    |
| 4062000 | cheese        |              | *United |        |        |
|         |               |              | S       |        |        |
|         |               |              | tates** |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 17 tons      | Ar      | 94     | 0.0    |
|         |               |              | gentina |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Italy   | 2      | 0.0    |
+---------+---------------+--------------+---------+--------+--------+
| 0       | The other     | 28,796       | France  | 12,700 | 1.2    |
| 4061090 | fresh cheeses |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         | (not          | 10 tons      | Brazil  | 9,415  | 6.2    |
|         | fermented)    |              |         |        |        |
|         | including     |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         | whey cheese   |              | Ar      | 6,681  | 2.4    |
|         | and curd.     |              | gentina |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Uruguay | 6,4    | 3      |
|         |               |              |         | 68,291 | ,761.3 |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ar      | 4,1    | 2      |
|         |               |              | gentina | 44,514 | ,343.1 |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Canada  | 2,8    | 1      |
|         |               |              |         | 76,262 | ,703.6 |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Powdered      | 14,999,849   | Germany | 4      | 288.0  |
| 4021000 | Milk, fat     |              |         | 98,608 |        |
|         | content       |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         | not exceeding | 8,692 tons   | England | 3      | 208.0  |
|         | 1.5%          |              |         | 54,184 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Denmark | 3      | 204.0  |
|         |               |              |         | 46,763 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ireland | 2      | 112.0  |
|         |               |              |         | 03,993 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | New     | 1      | 71.6   |
|         |               |              | Zealand | 07,234 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ar      | 16,6   | 8      |
|         |               |              | gentina | 14,664 | ,934.7 |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Uruguay | 6,2    | 3      |
|         |               |              |         | 89,291 | ,450.7 |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ireland | 2,1    | 1      |
|         |               |              |         | 83,428 | ,244.0 |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Belgium | 1,6    | 948.6  |
|         |               |              |         | 42,872 |        |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Powder Milk,  | 28,284,058   | Denmark | 9      | 616.2  |
| 4022118 | fat content   |              |         | 52,933 |        |
+---------+---------------+--------------+---------+--------+--------+
|         | exceeding 26% | 15,539 tons  | Holland | 3      | 200.0  |
|         |               |              |         | 40,098 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Canada  | 88,804 | 48.0   |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | France  | 83,846 | 46.0   |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Brazil  | 48,333 | 25.0   |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | New     | 39,789 | 25.2   |
|         |               |              | Zealand |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Uruguay | 2,4    | 1      |
|         |               |              |         | 27,325 | ,567.5 |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Au      | 1,3    | 944.0  |
|         |               |              | stralia | 85,591 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | New     | 4      | 267.0  |
|         |               |              | Zealand | 76,549 |        |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Butter        | 4,528,503    | Ar      | 1      | 125.0  |
| 4051000 |               |              | gentina | 98,304 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 2,925 tons   | Ireland | 36,860 | 19.0   |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | *       | 2,644  | 1.9    |
|         |               |              | *United |        |        |
|         |               |              | S       |        |        |
|         |               |              | tates** |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Holland | 1,127  | 0.5    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Belgium | 103    | 0.0    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Ar      | 2,7    | 1      |
|         |               |              | gentina | 91,042 | ,682.3 |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | France  | 9      | 1      |
|         |               |              |         | 06,692 | ,317.2 |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | *       | 7      | 1      |
|         |               |              | *United | 06,346 | ,306.7 |
|         |               |              | S       |        |        |
|         |               |              | tates** |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | New     | 5      | 210.1  |
|         |               |              | Zealand | 10,874 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Holland | 3      | 365.2  |
|         |               |              |         | 32,290 |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Finland | 1      | 238.0  |
|         |               |              |         | 92,069 |        |
+---------+---------------+--------------+---------+--------+--------+
| 0       | Milk Whey     | 5,599,763    | Uruguay | 96,169 | 140.0  |
| 4040000 |               |              |         |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               | 5,307 tons   | Germany | 48,859 | 26.0   |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Canada  | 6,153  | 20.0   |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | South   | 5,797  | 1.0    |
|         |               |              | Africa  |        |        |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Brazil  | 3,218  | 0.4    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Belgium | 165    | 0.0    |
+---------+---------------+--------------+---------+--------+--------+
|         |               |              | Israel  | 89     | 0.0    |
+---------+---------------+--------------+---------+--------+--------+

## Annex 2. Imports of Cheese, Powdered Milk, Butter and Whey, 1999-2003, Thousands of US\$ CIF

  ------------ -------------------- ---------- ---------- ---------- --------- ---------- ---------
                                    1999       2000       2001       2002      2003       2003

  HS Code      Product              US\$ x                                                M. Tons
                                    1,000                                                 

  04060000     Total Cheeses        8,783.4    14,900.1   7,750.6    7,145.6   9,642.5    4,128.0

  04061000     Cheese, fresh        841.4      873.2      1,744.0    \-        \-         \-
               (including whey                                                            
               cheese), not                                                               
               fermented, and curd                                                        

  04061010     Fresh Cheese         \-         \-         \-         115.2     283.4      148.0

  04061020     Cream Cheese         \-         \-         \-         469.6     1,061.9    406.1

  04061030     Mozzarella           \-         \-         \-         1,117.8   1,727.5    825.7

  04061090     The other fresh      \-         \-         \-         15.9      28.8       9.8
               cheese (not                                                                
               fermented) including                                                       
               whey cheese and                                                            
               curd.                                                                      

  04062000     Powdered cheese      219.5      114.9      202.9      99.9      81.0       16.6

  04063000     Processed cheese,    464.1      619.5      861.9      731.4     701.2      280.2
               except grated or                                                           
               powdered                                                                   

  04064000     Roquefort            230.1      276.8      213.7      191.9     228.4      63.5
               (blue-veined)                                                              

  04069000     The other cheeses    7,028.4    13,015.8   4,728.1    \-        \-         \-

  04069010     Gouda and Gouda type \-         \-         \-         2,755.1   3,957.7    1,946.1

  04069020     Cheddar and cheddar  \-         \-         \-         139.8     147.7      43.8
               type                                                                       

  04069030     Edam and Edam type   \-         \-         \-         63.1      93.2       25.6

  04069040     Parmesan and         \-         \-         \-         122.5     392.1      107.8
               Parmesan type cheese                                                       

  04069090     Roquefort,           \-         \-         \-         1,323.5   939.5      254.8
               Camembert,                                                                 
               Gorgonzola                                                                 

  04021000     Powdered Milk, fat   13,427.3   16,705.3   12,428.9   7,807.3   14,999.8   8,692
               content not                                                                
               exceeding 1.5%                                                             

  04022118     Powder Milk, fat     4,387.0    13,401.3   9,064.1    3,093.1   28,284.0   15,539
               content exceeding                                                          
               26%                                                                        

  04051000     Butter               1,075.6    2,887.4    1,463.5    622.6     4,528.5    2,925

  04040000     Milk Whey            1,308.2    2,765.1    3,324.8    1,826.5   5,599.7    5,307

  Note: Some                                                                              
  HS codes                                                                                
  were                                                                                    
  subdivided                                                                              
  in 2002.                                                                                
  Dashes mean                                                                             
  no data for                                                                             
  those codes                                                                             
  after 2001                                                                              
  and no data                                                                             
  for                                                                                     
  subdivided                                                                              
  codes before                                                                            
  2002.                                                                                   
  ------------ -------------------- ---------- ---------- ---------- --------- ---------- ---------