. /.RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/CHL/8
22 January 1999
(99-0238)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Questions from the UNITED STATES
Regarding the New and Full Notification of CHILE1
The following communication, dated 18 January 1999, has been received from the Permanent
Mission of the United States.
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1. In several of your programmes, you state that the period covered for the aid was June 1998.
Does this imply that the credit was only granted in June 1998, or is the programme an on-going one?
What is the duration of the programme?
2. Regarding "Tax Credit for Investment in the Provinces of Arica and Parinacota (Region I)":
(a) The notification states that during th e period 1995-1996, investors applied for tax credit
for investments amounting to Ch$11,500 milli on.  Could you please indicate what
amount of tax credit was applied for in 1996-1997 and 1997-1998?
(b) The notification also states that the period of  eligibility for this incentive is retroactive
as of 1 January 1995 and may be extended to 31 December 1999 if so ordered by the
President of the Republic.  Has the President ordered that this benefit continue to
31 December 1999?
3. Regarding "Exemption from First-Category Tax Under the Income Tax Law on Earnings in
the Financial Years of Management Companies and Users in the Free Zones in the Cities of Iquique
(Region I) and Punta Arenas (Region XII)", please clarify more fully what exemptions are allowed
(e.g. machinery, technological improvements, etc.).
4. Regarding "Support Programme for the Management of Export Firms (PREMEX)":
(a) Please explain more fully your definition of small and medium firms.  In addition,
could you clarify to whom the aid would flow?
(b) Please indicate a budget amount for this subsidy for 1998, as well as any amount
already distributed?
5. Regarding "Motor Vehicle Statute", please provide the amount of the tax credit and
compensatory trade in 1998.
                                                     
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6. Finally, please explain why the following subsidy programmes were not included in your
subsidy notification:
ProChile Export Promotion Assistance
Prochile, the Export Promotion Bureau of the Chilean Ministry of Foreign Affairs, aims to
promote and diversify Chile's exports by providing grants to private companies or industries for
export promotional activities.  Each ProChile project is designed and developed through a joint
participation of ProChile and the private sector.  The projects are aimed at the "Internationalization"
of the private sector participant.
Law 18,634
Law Number 18,634 of 5 August 1987, established a programme whereby customs duties
may be deferred and subsequently waived on imported capital goods used in the production of
exports.  Under this programme, both exporters and non-exporters are allowed to defer paying duties
on certain capital goods.  During the deferral period, the amount of duties owed is treated as a loan onwhich the producer is required to pay interest.  If the capital goods are ultimately used for the
production of exported goods, the outstanding balance and interest on the loans are waived.  The
Law 18,634 deferral programme is available to exporters as well as non-exporters.
Promotion and Development Fund (Decree 15)
The Promotion and Development Fund for Extreme Regions was established pursuant to
Decree Law No. 3,529, published on 6 December 1980.  Article 38 of this law established the fund to
aid in the development of remote regions of Chile.  These regions are Tarapaca, Aysen del Presidente
Carlos Ibanez del Campo, Magallanes and Antartica Chilena and the provinces of Chiloe and Pelena.The Fund was established to assist small and medium-sized investors who make investments or
reinvestments in these regions.  The programme provides grants in the amount of 15 per cent of the
cost of new investments or reinvestments made  between 1 January and 31 December 1981, and 20 per
cent of the cost of investments and reinvestments made between 1 January 1982 and
31 December 1999.
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