Olive Oil Investment in Chile

Increasing Demand for Olive Oil

Most countries, and particularly those with a swelling middle class such as China and India, are becoming increasingly interested in the taste and health benefits of olive oil. Currently, Spain is the world’s number one producer of olive oil, and has experienced a surge in recent years in exports to China.[i] Globally, consumption of olive oil increases yearly as countries such as the USA, Japan, India, and others import thousands of tons of it. While Spain and Italy produce the most olive oil, it should be noted that there are grades of olive oil and that Chile is establishing a reputation as being capable of consistently producing the highest grade, even exporting some extra-virgin olive oil to Italy.[ii] The rising global demand for olive oil can be attributed to increased recognition of its health and culinary benefits, as well as increased purchasing power in populous developing countries.[iii]

Opportunities and Potential for Growth of the Olive Oil Industry in Chile

In response to increased demand, both domestically and globally, Chile has experienced a significant increase in production over the last several years. From 2005 to 2010, the number of hectares in Chile under olive cultivation has increased by 45%, with especially large increases in the last two years. There are currently around 24,000 hectares under production, and is projected to have 29,000 hectares under production by 2015.[iv] Chile enjoys many unique geographical and economic advantages that make it an ideal place to develop olive cultivation.

  • Climate: Chile is one of the few places in the world with a mild Mediterranean-style climate which is necessary for the best cultivation of olives and grapes. The regions from Arica in the North to Bio Bio in the South are ideal for the cultivation of a wide selection of fruits and vegetables, and virtually every variety of olive.[v]
  • Geography: Chile benefits from being geographically isolated from the rest of the continent by the Andes Mountains on the East and the Pacific Ocean on the West. This is fortunate in terms of fruit production because it results in a naturally phytosanitary area. Crops in Chile do not suffer the same danger from pestilence and disease as other countries due to this privileged geographical situation. This protected status enables Chile to cultivate crops with a minimum chemical intervention. An added bonus of being a long, narrow agricultural country that has the Pacific Ocean along its entire Western border is that transportation of products is simple and swift since a major sea port is never far from the production site.
  • Soil: Chile also has terrific soil for cultivation, and produces around 12 tons of olive oil per hectare compared to around 7 tons per hectare in Europe.[vi] This high production capacity allows for investment in olive land and development to deliver strong returns on every investment dollar.
  • Proximity to a Strong Fruit Industry: The technology and personnel required to cultivate fruit is transferable to olive production, and Chile has an ever growing fruit and vegetable industry. Due to Chile´s location in the Southern hemisphere, it enjoys a counter season to most countries that grow olives. Additionally, the olive harvest occurs as the fruit harvest ends, ensuring that there is a skilled harvest and production force at hand to efficiently collect and distribute the olive oil product.[vii] This is especially important in olive oil production because it is a product that deteriorates in quality and taste as time passes both in the production stage and on the shelf, and so the established infrastructure (storage, trucks, personnel, etc) enables Chile to consistently produce high quality olive oil. It is thanks to this established infrastructure that Chile has established a reputation for producing fresh and high quality olive oil year after year, and winning prizes in many international quality competitions.[viii]

In addition to the naturally occurring advantages that Chile enjoys, it is also a country that is very trade oriented and open to investments of all kinds. Although Chile is a small producer in the world, producing only 0.4% of the world supply last year, olive oil production is a rapidly growing industry in Chile.[ix] Olive oil of the quality which Chile produces in abundance is increasingly considered a gourmet product and contains an important value-added component. Olive oil in Chile currently has a ready market to countries such as the USA, Italy, Spain, Canada, Colombia, Mexico, Brazil, and domestically, but has the potential to export to many more countries in increasing quantities. China especially is a country where demand for olive oil is on the rise (increasing imports by over 40% in the last year alone)[x], and the free trade agreement made with Chile in 2005 ensures that exports of olive oil to China will enjoy free trade benefits.

There is also an opportunity both in South America and on a global scale to invest in the branding and marketing of olive oil. Much of China and the world in general is not aware of Chile in any sense, let alone its products. There are many efforts currently being undertaken by the Chilean government and businesses both inside and outside of Chile to enlighten the world about Chilean products and its favorable business climate. Much of the groundwork around the world has been established with regards to the nutritional and taste properties of olive oil, and now is an opportune time to capitalize on global recognition of olive oil to establish Chile as a significant contributor of the highest quality of olive oil.

Investment platform to all of South America

Chile not only celebrates a free trade agreement with China, but also maintains 22 trade agreements with 56 different countries,[xi] many of these free trade agreements. This allows a company that invests in Chile to not only enjoy the benefits of doing business in Chile, but also provides a platform to access a plethora of markets encompassing the majority of the world’s inhabitants. Chile also has a high rating as a place where it is safe to conduct business, and also for transparency on a national level. Chile has an educated and skilled populace, and enjoys a high level of technology. Its political stability has made it one of the leading economies in South America and it is currently recognized as a place for secure investment.

Additional Information

The government of Chile has considered investing in a standardization process to ensure that the quality of olive oil produced in Chile is consistently high to boost the international perception of Chilean olive oil.[xii] Both the government and private groups like ChileOliva are dedicated to positioning Chile as a significant world producer of high quality olive oil.[xiii] Chile has also created a favorable investment situation for the Chinese, where there are virtually no restrictions for investment in land or entering into joint ventures with locals for production.

[ii] http://www.frayjorge.com/oliveoil/index.php?id=29

[iv] Chile Opportunities in Agribusiness- Foreign Investment Committtee. P. 32.

[v] Oficina de Estudios y Políticas Agrarias – (Odepa) Report about olive oil. P. 11.

[vi] Oficina de Estudios y Políticas Agrarias – (Odepa) Report about olive oil. P. 11.

[vii] Chile Opportunities in Agribusiness- Foreign Investment Committtee. P. 60.

[viii] Oficina de Estudios y Políticas Agrarias – (Odepa) Report about olive oil. P. 11.

[ix] Oficina de Estudios y Políticas Agrarias – (Odepa) Report about olive oil. P. 11.

[xi] http://www.foreigninvestment.cl/index.php?option=com_content&task=view&id=171

[xii] Oficina de Estudios y Políticas Agrarias – (Odepa) Report about olive oil. P. 21

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