India–Chile CEPA ToR Signed: A New Era in Bilateral Trade

On May 8, 2025, India and Chile took a significant step toward deepening their economic ties by signing the Terms of Reference (ToR) for a Comprehensive Economic Partnership Agreement (CEPA). This milestone, as reported by NDTV Profit, marks a pivotal advancement in bilateral trade relations, building upon an existing Preferential Trade Agreement (PTA) and setting the stage for enhanced economic integration. The agreement, signed by Juan Angulo, Ambassador of Chile in India, and Vimal Anand, Joint Secretary in India’s Ministry of Commerce and Industry, signals a mutual commitment to expanding trade and cooperation across diverse sectors. With the first round of negotiations scheduled for May 26–30, 2025, in New Delhi, this development positions India and Chile to unlock new opportunities for growth, investment, and collaboration. This article explores the context, objectives, and potential impacts of the India-Chile CEPA, situating it within the broader framework of India’s trade strategy and global economic dynamics.

Historical Context of India-Chile Trade Relations

India and Chile have enjoyed cordial diplomatic and economic relations for decades, with trade serving as a cornerstone of their partnership. The foundation for this relationship was laid in January 2005 with the signing of a Framework Agreement on Economic Cooperation, followed by a Preferential Trade Agreement (PTA) in March 2006. The PTA, which became effective in August 2007, initially covered a modest 178 tariff lines, focusing primarily on goods such as agricultural products and engineering items. In September 2016, an expanded PTA was signed, increasing the coverage to 1,000 tariff lines, and it took effect on May 16, 2017. This expansion reflected a growing recognition of the potential for deeper economic engagement between the two nations.

Bilateral trade between India and Chile has grown steadily over the years. According to government data, trade volume doubled from $1.8 billion in 2016–17 to $3.6 billion in 2024–25 (up to February 2025). However, India maintains a trade deficit with Chile, estimated at $2.5 billion in 2024–25, primarily due to Chile’s exports of copper ore, lithium, and other critical minerals. India’s exports to Chile are more diversified, encompassing motor vehicles, pharmaceuticals, textiles, chemicals, and auto components. The CEPA aims to address this trade imbalance while expanding cooperation into new areas such as digital services, micro, small, and medium enterprises (MSMEs), and critical minerals, which are vital for India’s sustainable energy transition.

The Significance of the Terms of Reference

The signing of the ToR on May 8, 2025, is a critical procedural step in the journey toward a CEPA. The ToR serves as a blueprint, outlining the purpose, structure, and scope of the negotiations. It establishes a shared framework for discussions, ensuring that both parties are aligned on objectives and priorities. According to the Ministry of Commerce and Industry, the CEPA aims to build upon the existing PTA by encompassing a broader range of sectors and fostering deeper economic integration. The agreement is expected to cover not only trade in goods but also services, investment promotion, intellectual property rights, and cooperation in emerging areas such as digital public infrastructure and space.

The ToR was finalized following a Joint Study Group report signed on April 30, 2024, which underscored the potential for a comprehensive trade agreement to boost employment, facilitate investment, and enhance exports. The report highlighted Chile’s strategic importance as a gateway to Latin America and Antarctica, particularly for critical minerals like lithium, which are essential for India’s ambitions in electric vehicle (EV) manufacturing and renewable energy. The signing of the ToR was further reinforced during Chilean President Gabriel Boric Font’s state visit to India from April 1–5, 2025, where both nations’ leaders reaffirmed their commitment to a balanced, ambitious, and mutually beneficial agreement.

India’s Strategic Trade Agenda

The India-Chile CEPA is part of India’s broader strategy to diversify its trade partnerships and reduce reliance on traditional markets. In recent years, India has pursued an aggressive free trade agreement (FTA) agenda, signing pacts with countries such as the United Arab Emirates (UAE), Australia, and the United Kingdom (UK). The CEPA with Chile marks India’s first comprehensive trade agreement with a Latin American nation, signaling a shift toward deeper engagement with the Latin America and Caribbean (LAC) region. Union Commerce Minister Piyush Goyal, speaking at the 10th CII India-Latin America Caribbean Conclave in March 2025, emphasized the need for expedited decision-making in trade negotiations to capitalize on untapped potential in the LAC region, which currently accounts for $45 billion in bilateral trade with India.

India’s focus on FTAs reflects a response to global economic challenges, including geopolitical tensions, supply chain disruptions, and the rise of protectionist policies. The global trade environment has become increasingly uncertain, with events such as U.S. tariffs under President Donald Trump in early 2025 adding complexity to international commerce. By forging bilateral and regional trade agreements, India aims to secure preferential market access, diversify its export basket, and strengthen supply chain resilience. The CEPA with Chile aligns with this strategy, offering India an opportunity to tap into Latin America’s resource-rich markets while promoting its own labor-intensive and technology

Key Sectors in the India-Chile CEPA

The India-Chile CEPA is designed to be comprehensive, covering a wide array of sectors that reflect the economic priorities of both nations. Key areas of focus include:

Critical Minerals: Chile is a global leader in the production of copper and lithium, both of which are critical for India’s energy transition and industrial growth. Lithium, in particular, is a vital component in EV batteries, energy storage systems, and electronics. India’s push to secure lithium supplies is evident in its non-disclosure agreement with Chile’s state-run company ENAMI, aimed at ensuring a stable supply chain for this strategic mineral. The CEPA is expected to facilitate investment and cooperation in critical minerals, supporting India’s goal of reducing its carbon footprint and achieving net-zero emissions by 2070.

Agriculture: Agricultural trade has been a cornerstone of India-Chile relations, with India exporting spices, fruits, vegetables, and maize, and importing walnuts, chemical wood pulp, and other products from Chile. The CEPA aims to expand market access for Indian agricultural goods, particularly maize, bananas, groundnuts, and oil cakes, while addressing non-tariff barriers that have historically limited trade. Chile’s proximity to Peru, Bolivia, and Argentina also positions it as a gateway for India to access the broader South American agricultural market.

Digital Services and Public Infrastructure: The inclusion of digital services in the CEPA reflects India’s growing emphasis on its digital economy, which is projected to contribute $1 trillion to GDP by 2025. Areas such as digital public infrastructure, cybersecurity, and artificial intelligence are likely to be prioritized, aligning with India’s expertise in IT and IT-enabled services (ITeS). Chile, with its advanced digital infrastructure, offers opportunities for collaboration in fintech, edtech, and e-governance, fostering innovation and cross-border investment.

MSMEs: Micro, small, and medium enterprises are a backbone of India’s economy, contributing significantly to exports and employment. The CEPA seeks to promote MSME cooperation by facilitating access to markets, technology, and financing. This is particularly relevant for labor-intensive sectors such as textiles, leather goods, and handicrafts, where Indian MSMEs can leverage Chile’s trade networks to expand their global footprint.

Investment Promotion and Cooperation: The CEPA will include provisions for investment promotion, encouraging bilateral investments in sectors such as railways, space, and renewable energy. India’s expertise in railway infrastructure and space technology, coupled with Chile’s strategic location and resources, creates opportunities for joint ventures and technology transfers. The agreement is also expected to address intellectual property rights, trade facilitation, and customs cooperation to create a conducive environment for investment.

Services Trade: While goods trade has dominated India-Chile relations, the CEPA aims to unlock opportunities in services, including professional services, education, and healthcare. India’s strength in IT/ITeS and professional services can complement Chile’s growing service sector, fostering mutual growth and innovation

Economic Implications for India

The CEPA with Chile holds significant economic implications for India, particularly in the context of its export-driven growth strategy. India’s merchandise exports in FY23 stood at $450.4 billion, with services exports contributing an additional $322.7 billion. By expanding market access to Chile, India can boost exports of labor-intensive goods such as textiles, leather products, and auto components, which are critical for job creation. The elimination or reduction of tariffs on these goods under the CEPA will enhance their competitiveness in the Chilean market, potentially reducing India’s trade deficit.

Moreover, the CEPA aligns with India’s ambition to diversify its export markets. While traditional markets like the United States, European Union, and China remain significant, the LAC region offers untapped potential. Chile, as the fifth-largest trading partner for India in the LAC region, serves as a strategic entry point to South America. The CEPA is expected to facilitate greater market access for Indian goods and services, while also attracting Chilean investments in sectors such as renewable energy and technology.

The focus on critical minerals is particularly strategic for India. As the country transitions to sustainable energy sources, securing a stable supply of lithium and copper is crucial. The CEPA, combined with India’s agreement with ENAMI, positions India to strengthen its supply chain for EV batteries and renewable energy infrastructure. This is especially relevant as India aims to increase its EV penetration to 30% by 2030, supported by government initiatives such as the Production Linked Incentive (PLI) scheme for battery manufacturing.

Economic Implications for Chile

For Chile, the CEPA offers an opportunity to deepen its economic engagement with India, one of the world’s fastest-growing economies. India’s large and growing consumer market provides a significant opportunity for Chilean exporters, particularly in agriculture and minerals. The CEPA is expected to enhance market access for Chilean products such as walnuts, copper ore, and chemical wood pulp, while also fostering cooperation in emerging sectors like digital services and space.

Chile’s strategic location as a gateway to Antarctica also holds geopolitical and economic significance. India, with its growing interest in polar research and resource exploration, can leverage Chile’s proximity to Antarctica for scientific and commercial collaboration. The CEPA is likely to include provisions for joint research and investment in polar and space technologies, aligning with India’s aspirations to expand its presence in global scientific communities.

Furthermore, the CEPA will strengthen Chile’s position as a trade hub in the LAC region. By deepening ties with India, Chile can diversify its trade partnerships beyond traditional markets like the United States, China, and the European Union. The agreement is also expected to attract Indian investments in Chile’s infrastructure, mining, and renewable energy sectors, creating new avenues for economic growth and job creation.

Challenges and Considerations

While the India-Chile CEPA holds immense potential, several challenges must be addressed to ensure its success. First, the trade deficit in favor of Chile requires careful negotiation to ensure balanced benefits. India will likely push for greater market access for its labor-intensive goods and services, while Chile may seek concessions in agriculture and minerals. Striking a balance between these priorities will be critical to achieving a mutually beneficial agreement.

Second, non-tariff barriers (NTBs) such as sanitary and phytosanitary measures, technical standards, and customs procedures could pose challenges. Both countries must work to harmonize regulations and streamline trade processes to ensure the free flow of goods and services. The inclusion of trade facilitation and customs cooperation in the CEPA is a step in this direction, but effective implementation will be key.

Third, geopolitical and economic uncertainties could impact the negotiations. The global trade environment remains volatile, with issues such as U.S. tariffs, supply chain disruptions, and regional conflicts affecting international commerce. India and Chile must navigate these challenges while ensuring that the CEPA aligns with their respective economic priorities and global commitments, such as those under the World Trade Organization (WTO).

Finally, stakeholder consultations will play a crucial role in shaping the CEPA. In India, industries such as textiles, pharmaceuticals, and IT/ITeS will advocate for greater market access, while domestic sectors like agriculture may raise concerns about competition from Chilean imports. Similarly, Chilean industries may seek protections for sensitive sectors. Engaging MSMEs, industry associations, and civil society in the negotiation process will be essential to building consensus and ensuring inclusive growth.

Comparison with Other Indian FTAs

The India-Chile CEPA can be contextualized within India’s broader FTA landscape. India has signed 13 FTAs as of 2025, including agreements with the UAE, Australia, and the UK. The India-UK FTA, signed on May 6, 2025, is a notable example, offering zero-duty access for 99% of Indian exports and easing mobility for Indian professionals. Similarly, the India-UAE CEPA, completed in a record 88 days in 2022, has boosted bilateral trade to over $50 billion. These agreements highlight India’s shift toward comprehensive trade pacts that cover goods, services, and investment, a model that the India-Chile CEPA is likely to follow.

Unlike the India-UK FTA, which focuses heavily on services and industrial goods, the India-Chile CEPA emphasizes critical minerals and agriculture, reflecting the complementary strengths of the two economies. Additionally, the CEPA’s focus on digital services and MSMEs aligns with India’s digital economy ambitions, similar to provisions in the India-Australia Economic Cooperation and Trade Agreement (ECTA). By learning from these agreements, India and Chile can design a CEPA that maximizes mutual benefits while addressing sector-specific challenges.

Global and Regional Context

The India-Chile CEPA must be viewed in the context of global trade trends. The rise of bilateral and regional trade agreements reflects a shift away from multilateral frameworks like the WTO, which have faced challenges in achieving consensus. As noted by Indian Finance Minister Nirmala Sitharaman, bilateral agreements are gaining prominence due to geopolitical tensions and supply chain vulnerabilities exposed by the COVID-19 pandemic. The CEPA with Chile aligns with this trend, offering India a foothold in the LAC region while diversifying its trade partnerships.

Regionally, the CEPA strengthens India’s engagement with the LAC region, where it is also negotiating FTAs with Peru and other countries. Chile’s membership in the Pacific Alliance, a trade bloc that includes Mexico, Peru, and Colombia, further enhances its strategic importance. By deepening ties with Chile, India can position itself as a key player in Latin American trade networks, complementing its existing agreements with countries like the UAE and Australia.

Future Outlook and Negotiations

The first round of CEPA negotiations, scheduled for May 26–30, 2025, in New Delhi, will set the tone for the agreement’s scope and timeline. Both countries have expressed a shared vision for a balanced and ambitious agreement, but the complexity of covering goods, services, and investment may require multiple rounds of talks. The experience of India’s negotiations with the UK and EU, which spanned several years, suggests that patience and flexibility will be key.

Key priorities for the negotiations include tariff liberalization, non-tariff barrier reduction, and investment promotion. India will likely seek greater market access for its labor-intensive goods and services, while Chile may prioritize agriculture, minerals, and digital cooperation. The inclusion of emerging areas like space and polar research could also set a precedent for innovative trade agreements that go beyond traditional frameworks.

The CEPA’s success will depend on effective implementation and stakeholder engagement. Both countries must establish robust mechanisms for monitoring and resolving disputes, ensuring that the agreement delivers tangible benefits. Regular high-level dialogues, such as those between Prime Minister Narendra Modi and President Gabriel Boric Font, will be crucial for maintaining momentum and addressing challenges.

Conclusion

The signing of the Terms of Reference for the India-Chile Comprehensive Economic Partnership Agreement on May 8, 2025, marks a significant milestone in bilateral trade relations. By building upon the existing Preferential Trade Agreement and expanding cooperation into new areas like critical minerals, digital services, and MSMEs, the CEPA promises to unlock new opportunities for growth and innovation. For India, the agreement aligns with its broader strategy of diversifying trade partnerships, securing critical resources, and boosting exports. For Chile, it offers access to one of the world’s largest and fastest-growing markets, while strengthening its position as a trade hub in Latin America.

As negotiations progress, both countries must navigate challenges such as trade imbalances, non-tariff barriers, and global economic uncertainties. By leveraging their complementary strengths and shared vision, India and Chile can create a model for balanced and inclusive trade agreements. The CEPA not only strengthens bilateral ties but also positions both nations as key players in the evolving global trade landscape, fostering economic integration and mutual prosperity.

Abhisht Chaturvedi is a Research Analyst at Insights International. His research interests include tech policy, media, and communications.