When Chilean president Michelle Bachelet visited New Zealand last week with an entourage of business people and officials from Chilean economic development agency CORFO, she bore glad tidings. The Trans-Pacific Strategic Economic Partnership, or “P4 agreement”, which New Zealand and Chile signed in May 2005 along with Singapore and Brunei, has finally passed into law in Chile.

Officials from both countries prefer to describe the P4 as a “collaboration” or “alliance”. It's not just about trade, they say, but is an effort by small countries to pool their strengths in the competitive world of international commerce.

In addition to the usual features of trade agreements, the P4 has a strategic partnership chapter, which includes provisions for exchanges in science, technology, culture, and education, and sets a goal of “creat[ing] new opportunities for business and investment”.

Why has New Zealand chosen to form such a partnership with Chile? Despite different colonial histories, the two narrow, mountainous Pacific Rim countries have a lot in common. Chile's copper resources aside, their economic bases are very similar: farming, horticulture, viticulture, forestry and tourism.

This has tended to see them cast as competitors. But both governments share a vision of the New Zealand and Chile as natural partners with complementary economic strengths.

Beyond the warm rhetoric, however, there's a clear quid pro quo. Chile, whose economy still relies heavily on copper exports, is hoping for technology transfer, and to learn from New Zealand's experience at adding value to its primary products. For New Zealand, Chile is a potential gateway, to bigger markets in Latin America and elsewhere.

This is a role that Chilean ambassador Luis Lillo says his country is happy to play. “We're a modern country – with good infrastructure, communications, efficiency, transparency”, he says. “We’d like to be seen as a bridge into Latin America”.

Chile certainly has good connections. It has free trade agreements with the USA, the European Union and South Korea; is an associate member of South American trade blocs Mercosur and the Comunidad Andina; and is further advanced than New Zealand in negotiations with China.

Now, the Chileans are eagerly embracing the concept of exchanges with New Zealand. The agritech and tourism representatives here this week looking for Kiwi contacts were the ones lucky enough to have made the trip; CORFO had far more demand for places than it could accommodate.

According to New Zealand Trade and Enterprise Chilean manager Winifred Oehninger, New Zealanders are also gradually moving away from the “competitive paradigm” and realizing the opportunities to market their expertise to the growing and diversifying Chilean economy.

But with just 16 million people, Chile itself remains a relatively small market. For its potential as a “platform” to be realized, New Zealand businesses will need to partner up more closely with their Chilean counterparts. To complement Kiwi know how in production and marketing, and our existing global supply chains, Chile offers what we lack - readily available land and labour, and much better preferential market access.

Winifred Oehninger says that “the opportunity is for New Zealanders to take their technology and intellectual property [to Chile] to extend their productive capacity and gain access to further markets, working with Chileans and sharing the profits”.

A case study is Zespri's licensing arrangement with Chilean growers to produce the Kiwi Gold variety of kiwifruit. This allows Zespri to supply European markets for a longer period, while the Chilean growers benefit from the recognised premium quality (and price) of the Kiwi Gold trademark.

Another example is Flowerzone, which is working with Chilean company Agromen to commercialize Chilean native flowers for the ornamental market, and has formed Novazel, the first NZ-Chilean company.

Many more such joint ventures are possible, say those promoting the P4 agreement.

It's an attractive vision: NZ Inc goes global, spreading Kiwi ingenuity to bigger pastures. But will it work out?

In fact, there's already a history of New Zealand involvement in Chile. Fonterra has long been a majority shareholder in Chilean dairy company Soprole, for example. And strong Chilean economic growth in the 1990s attracted investment from several New Zealand companies, particularly in the construction and forestry sectors.

But not all found it easy going. According to some sources with business experience there, New Zealanders found working in Chile or with Chileans to be more difficult than expected, due in part to the language barrier and cultural differences.

Oehninger acknowledges that there may have been some bad experiences. “But this comes from not using the in-country [NZTE] resource”, she says. “If you go it alone, the learning curve is a lot steeper”.

Standard advice to any company looking to invest in Chile is to establish a good relationship with a local partner, and ideally to consult first with NZTE. The trade agency organised an exploratory mission to Chile in June 2006, taking 13 New Zealand companies. Of these, at least two have returned already to investigate further.

An area with particular potential is the meat industry, according to Lincoln University professor Roy Bickerstaffe, who has recently returned from a fact-finding mission.

Whether the agreement can realize its full potential for New Zealand will depend on whether more businesses can follow on from the work done by government and trade officials, and successfully extend their horizons towards Latin America. But Winifred Oehninger warns that, as the Chilean economy steams ahead, the opportunities are time-limited. “Don't think this will all happen in three, or five years”, she says. “Now is the window of opportunity”.