Ricardo Lessmann: Opportunities abound in Korean market

South Korea only began to appear on many Chileans’ map after the Free Trade Agreement (NAFTA) was finalized in 2004, when brands like Samsung, LG, Daewoo and Hyundai suddenly came to mind even though they had been in our stores and homes for years.

But several Chilean businesspeople had already realized Korea’s potential. This is the case of Ricardo Lessmann, CEO of Automotores Gildemeister, who brought Hyundai to Chile and is the current president of the Chilean-Korean Chamber of Commerce. We spoke to him about his admiration for Korea and the fact that Chileans have yet to fully capitalize upon Korean commercial opportunities.

What is the full significance of Chile’s FTA with Korea?

South Korean trade with Chile grew by 343% from year 1997 to 2007. Our exports have also risen by 276%, although about 70% - 80% of this is concentrated in minerals, especially copper. This is due to the Free Trade Agreement (FTA) signed in 2004.

At that time Chile had already signed FTAs with the United States, Canada, Mexico and other trade agreements with MERCOSUR. This made Korean products temporarily uncompetitive with aforementioned tariff-exempt countries.

For example, at that time 80% of cars entering the country did include not tariffs. But our Korean cars did. The FTA allowed us to compete on a level playing field.

Has this meant an increase in sales?

I would say yes, but more than anything it has enabled us to become more competitive by not paying tariffs.

But there was something more significant for Chile and for our products. In Korea the trade agreement received a lot of "hype" (so to speak). It was the first FTA they signed and so the government did it with a small and distant country. Precisely because of our small size not being any danger to them.

I remember that many Korean journalists came to our country. There was a lot of coverage in their press. And according to Eastern custom, that led them to see Chile as a friendly country. So, now, when Korean consumers are faced with a Chilean product, they are interested. That is exactly what has happened in fruit exports, and especially our wines.

Some say this treaty’s has not been fully capitalized upon by Chile. Do you agree with this assessment?

I remember the week after we signed this treaty, I saw many Koreans in Santiago, television journalists, who wanted to tell Koreans about Chile.  Along with them came an enormous amount of medium and small-scale entrepreneurs. It was no longer the same old Samsungs or Hyundais or LGs. Big conglomerates, with vested interests for being here. Rather, it was smaller firms, who wanted to buy meat, fish or squid.

At no time, however, did I see Chilean trips to Korea with the same enthusiasm for them to see what we could do in Korea. I would say that the initial interest phase was not well exploited by us.

And now we have more than 6 thousand tariff chapters in the FTA, within which there are thousands and thousands of products that Chile may export; where small and medium enterprises should find their niches. We have failed to do a job at his level, even though Pro-Chile has done a great job of supplying information and support to Chilean businesspeople who want to conduct business in Korea.  Hernán Gutiérrez, who heads the Pro-Chile office in Seoul, almost does a complete market study whenever you request any information.  But I think something else is lacking. 

There are not many alternatives for trade missions to South Korea.

I would not say that.   In fact there is a Korea-Chile program at the Federation of Chilean Industry (SOFOFA), which travels to Korea every two years. And the Koreans come here every two years, too. Some major exchange occurs during these contracts. But SOFOFA serves much larger-scale entrepreneurs. I do not know if small to medium-scale operators have access to such invitations, or with Pro-Chile for that matter.  Personally, I have traveled several times to Korea on government trade missions.

We should do a better job on getting the word out regarding these trips and extend them, too.  If you are already in China or Japan, it does not cost very much to get to Seoul and Vietnam.

This is a myth that we must get rid of.  Korean farmers produce in the northern hemisphere opposite to our own. Thus, we are not directly competing with them. They bought the Australian kiwi from us without any problems. The root of the Korean agricultural issue is different.

After the war in the 1950's, when the country divided, the primary agricultural area was the south. The north was the industrial zone.  And they tried to help these farmers, educating their children to be what they are today. The agricultural sector also plays a significant role in Korean elections. The weight of the farm vote is decisive.  And they exerted pressure against the opening with Chile in this area, with demonstrations and tractors in the streets.

But you have to understand that Chile was never in direct competition, and is not a danger. The farmers’ fears were based on the Korean government opening up its markets to the whole world. Because their real competition is China.  If Korea were opened to China or other similar nations, the Korean markets would be flooded. That was the real issue (and not Chilean imports).  Therefore, I would say there are many opportunities in Korea which are yet to be tapped.

What was the negotiation process like with the Korean executives, given their excellent schooling?

I understand that nearly 90% of Koreans are university-educated. So there is a high level of education and preparation. When entering into to negotiations or discussions we must be aware that they have studied everything up to the last detail. Not just skimming, as we are accustomed.  These gents are orderly, scholarly and methodical. Their education and cultivation are commensurate to their society’s high standards.