business Chile The voice of the Chilean-American chamber of commerce N°271, APRIL 2011

The President's Speech Trade Testimonial Wine Business Special Report From Field to Concha y Toro Chile’s Drought Supermarket in California Dilemma

Contents 6 TRADE TESTIMONIAL bUSiness CHILE From Farm to Supermarket THE VOICE OF THE CHILEAN-AMERICAN CHAMBER OF COMMERCE N°271, APRIL 2011 Farmers in Chile’s Maule Region are receiving better prices for their produce thanks to a new partnership between Walmart and INDAP. 42 Life in the Slow Lane 8 Wine Business 37 ECONOMIC SNAPSHOT Dear Mr. President The President's Uncorking the U.S. Market Return to Fiscal President Obama missed Speech Concha y Toro’s acquisition Responsibility TRADE TESTIMONIAL WINE BUSINESS SPECIAL REPORT From Field to Concha y Toro Chile’s Drought of California winery Fetzer out on breakfast at the Supermarket in California Dilemma Economist Ricardo Matte

BUSINESS ABRIL 2011 .indd 1 15/4/11 18:50:42 Vineyards is aimed at explains why Chile’s recently Eneldo residence, but the 26 increasing sales in the fast- announced reduction in its 2011 invitation stands for the growing U.S. market. budget is a positive signal. President Obama in President’s next visit. Chile The 44th President of the United States, 12 Cover Story 38 Public Policy Barack Obama, visited A Better Agricultural Yield Maintaining Momentum Chile as part of his first Rising prices for food imports A new OECD study says state visit to Latin raise the question of how Chile Chile must improve its public America in March. can produce more from its policies in areas such as limited farmland. productivity, education and opportunities for women. 19 Special Report 40 Interview Chile’s Drought Dilemma Arturo Fermandois, Chile’s © 2011 AmCham Chile Ambassador to the United Reproduction in whole or in part is After a long, dry summer, Special Report strictly forbidden without permission reservoirs in central Chile are States, talks to bUSiness 19 from the publisher. Opinions expressed in at record lows forcing farmers CHILE about his first nine Chile’s Drought bUSiness CHILE are those of the authors months in Washington DC. and do not necessarily reflect those of and companies to use water Dilemma AmCham or bUSiness CHILE. We accept no more efficiently. responsibility for the accuracy of the articles A severe drought in and any unforeseen errors. bUSiness CHILE central and northern is published monthly, 10 months a year and mailed free of charge to AmCham 26 SPOTLIGHT Chile has reduced water members. Letters are welcome. They should be accompanied by the author's name The President’s Speech supplies for farming and daytime telephone and sent to From Santiago, President Obama and power generation, [email protected] For reasons of outlined his vision for a new spirit space limitation, AmCham reserves the but will water-saving right to edit letters published. of partnership between the United Advertising inquiries should be addressed States and Latin America. measures work? to AmCham's Sales Department: Paulina Dellafiori: E-mail: cristina.ordenes@ amchamchile.cl; Phone: 290 9700 Fax: 212 2620 Av. Presidente Kennedy 5735, Torre Poniente, Of.201, Las Condes, Santiago de Chile; E-mail: [email protected]; EDITORIAL BOARD 2011 www.amchamchile.cl; www.businesschile.cl CHAIR, Kathleen Barclay, Asesorías KCB; VICE CHAIR, Karen Poniachik, Compañía Chilena de Tabacos; VICE CHAIR, Manuel José Vial, Grupo Vial Abogados; PAST CHAIR, Michael Combes, Marco Chilena; GENERAL EDITOR, Julian Dowling, AmCham Chile; ASSISTANT EDITOR, Daniela Valda, AmCham Chile. Production K & D Comunicaciones Ltda. Olga Kliwadenko, MEMBERS General Manager, 11 de Septiembre 1945 - Of. 213, Providencia. Phone: 481-6940 / Jaime Bazán, AmCham Chile; Ruth Bradley, The Economist; John Byrne, Boyden Consultores Chile; Richard Diego, 481-6941, Cell: (09) 874-0619; Royal Bank of Canada; John P. Dill, Project Management; Francisco Garcés, Banco de Chile; Claudio Hohmann, D&S; e-mail: [email protected]; Javier irarrázaval, The Walt Disney Company Chile; Charles Kimber, Celulosa Arauco y Constitución; Olga Kliwadenko, [email protected];www.kyd.cl K&D Comunicaciones; Gideon Long, BBC; Vincent McCord, Asesorías e Inversiones CarCon; James Newbold, Tanager Enterprises; Patricia O'Shea, AmCham Chile; Roberto Ossandón, Ossandón Abogados; Rodrigo Silva, Silva & Asociados; Printed in Morgan, Mitch Larsen, U.S. Embassy; Paulina Dellafiori, AmCham Chile. business Chile April 2011 3 AmCham Global Sponsors 2011

4 April 2011 business Chile Editorial The Eagle Lands in Latin America

In late March, President Obama made his first state successes and spoke of the ability shown by Chile, visit to Latin America stopping in Brazil, Chile and as well as other countries in the region, in effectively El Salvador. The trip was symbolically significant as managing their own challenges – seeking help when an attempt to forge a new partnership with the region required but managing the overall process. In the – a partnership of equals based on strong, stable case of the miners, for example, Chile sought specific democracies and economic growth. assistance from the U.S. and Japan, among other In Brazil, President Obama sought a renewed countries, but managed the process and made the relationship with a country that is playing an tough decisions on its own. increasingly important role on the world stage – a This self-determination and regional leadership is the leader among emerging economies and one which basis of President Obama’s hope for the United States’ has an important voice in key global issues from trade evolving relationship with Latin America. This also reflects in the Doha round of negotiations to climate change. the economic reality of the United States since overseas The U.S. President met with Brazil’s first woman assistance will need to be more sharply focused in the president and sought closer ties for the United States future and the beneficiaries will be those countries, such on the economic front, especially in the energy area. as Chile, which demonstrate an ability to manage their In El Salvador, President Obama sought to highlight own challenges. the country’s success in terms of economic and But there was another important message in political progress, as well as to honor improvements President Obama’s speech - a challenge for countries in human rights. in the region to assume leadership in issues which go Chile was also on the U.S. President’s agenda. His visit beyond national boundaries. here was of particular importance as he chose to address This is the next step for countries such as Brazil with the region from Santiago. global political clout that can be helpful in building a Why Chile? regional view. Successful countries like Chile can provide The choice reflects the sustained political and leadership and support to other nations in Latin America economic success of Chile, as well as the country’s and the Caribbean. ability to ensure broad participation of its people in the Overall, President Obama’s visit was an important benefits of a growing and dynamic economy. success. AmCham applauds his reaffirmation of the President Obama spoke eloquently about the reasons why Chile is a good place to invest and to trade. way Chile was able to peacefully transition back to It also supports the call for countries including Chile to democracy two decades ago and, at the same time, take a more active role in regional affairs. become fully integrated into the global economy. He Finally, AmCham is pleased that just weeks after spoke of the strength of Chile’s institutions and its model President Obama’s trip, this new spirit of partnership leadership as reflected most recently by the country’s has already been demonstrated in the recent steps management after the February 2010 earthquake, as taken by the U.S. and Colombian governments well as the rescue of 33 trapped miners which held the towards an agreement that should pave the way to globe captive last October. final approval of a Free TradeA greement – a milestone The U.S. President congratulated Chile on these for the U.S. and for Latin America.

BOARD OF DIRECTORS EXECUTIVE COMMITTEE PRESIDENT GENERAL MANAGER Enrique Ostalé, D&S Alfredo Ergas, Enersis Javier Irarrázaval, The Walt Disney Company Jaime Bazán, AmCham Chile VICE CHAIR FINANCE AND ADR COMMITTEE Chile Karen Poniachik, Enterprises director DIRECTORS VICE CHAIR EDITORIAL COMMITEE Mauricio Ramos, VTR Global Com VICEPRESINDENT; CHAIR CORPORATE AFFAIRS AND VICE CHAIR CORPORATE AFFAIRS AND SUSTAINABILITY Fernando Concha, Citigroup Andean – COMMITEE SUSTAINABILITY COMMITEE Caribbean and Central America Region Luis H. Siles, IBM de Chile Charles Kimber, Celulosa Arauco y CHAIR FINANCE AND ADR COMMITTEE Constitución S. A. Carolina Valdivieso, Kimberly Clark Ramon Vergara, SCIP Group CHAIR LABOR AND HUMAN CAPITAL COMMITTEE TREASURER; Gonzalo Iglesias, Coca-Cola de Chile S.A. Kathleen Barclay, Asesorías KCB Felipe Cerón, AES Gener VICE CHAIR LABOR AND HUMAN CAPITAL COMMITTEE CHAIR EDITORIAL COMMITEE ADVISORY COUNCIL SECRETARY; CHAIR LEGAL COMMITEE Mitch Larsen, Embajada de los E.E.U.U. Michael Grasty, Grasty Quintana Majlis & Cía. EX OFFICIO Rubén Covarrubias, Rector, Universidad Mayor AmCham Mision Statement PAST PRESIDENT “Promote free trade and business between Chile and the Luis Marcelo Moncau, Microsoft Chile CHAIR TRADE & INTERNATIONAL BUSINESS Ricardo García, Special Advisor Americas/ COMMITTEE United States" Metlife business Chile April 2011 5 TRADE TESTIMONIAL From Field to Supermarket With the help of a grant from the Chilean government, a California- based biotech firm has developed a pilot seaweed farm onC hiloé Island to produce low-cost sugars that can be converted into ethanol. By Aaron Nelsen belardo Villacura has been in his footsteps. Despite its virtues, fertile Maule region of Chile’s Central sowing and tilling a seven- farming for a living is an unpredictable Valley, and based on its initial success hectare plot of land near endeavor, especially for small local has expanded to Iquique in the north Talca in central Chile for as producers like Villacura. and Punta Arenas in the South. A long as he can remember. “The market varies widely,” he says. The project may eventually be The 46-year-old Villacura was “You get there two hours before and introduced to farms around Santiago, raised in the fields, working alongside the prices are good, two hours later but the greater challenge lies in the his father while cultivating tomatoes, the prices drop.” country’s less populated regions. onions, lettuce and watermelons, Until recently, farmers like Villacura So far Lider couldn’t be happier among other fruits and vegetables. could only try to get to market first with the response, but the ultimate Villacura is proud of his heritage, but and hope for the best. However, now objective is to give farmers the his two children will not be following a group of small farming operations necessary tools so that the free around Talca have a new outlet for flow of produce from field to market their produce. evolves on its own. Walmart Chile, in partnership That means farmers must relearn with INDAP, Chile’s governmental nearly everything they know about agency for small framers, launched growing and harvesting fruits and in November last year an ambitious vegetables. plan to make local farmers direct Together, INDAP and Lider work with suppliers of produce to Walmart’s farmers on soil management, water Lider supermarkets. usage, proper usage of pesticides The program aims to provide market and warehousing. These aren’t details access and technical training while Lider takes lightly, said Larraín. providing a stable income for farmers, “Collectively, there are a series of explained Manuel Larraín, purchasing steps you need to take before you can manager for fruits and vegetables at begin to supply a market,” he said. “You Walmart Chile. have to lay the groundwork in training, “We’re trying to arrive directly to culture, and ways of working.” the producer so that he’s prepared Though only a few months into the to sell his product to any market,” project, the early success has been said Larraín. “The other side of the especially gratifying for Loreto Agurto, project is trying to pull these farmers head of INDAP’s Productive Partnerships out of poverty by opening economic (Alianzas Productivas) program. channels for them.” Back in the 1990s, the agency began Loreto Agurto, The project began with around 30 experimenting with strategic alliances INDAP farmers in Talca and Curicó in the to link businesses with famers, but

6 April 2011 business Chile Abelardo Villacura, Farmer, Maule Region these programs have done little to own bottom-up approach. At the might not put money in a farmer’s pocket improve sales or reduce poverty. same time, Villacura and a group of for up to 90 days. For the farmer, the In 2008, however, INDAP created its Talca farmers were looking for ways security of cash in hand is the difference Productive Partnerships program designed to open dialogue with businesses. between living in and out of debt. to help farmers raise their productivity by The confluence of shared interests No matter how successful the pairing them with companies producing and opportune timing made Lider an partnership becomes, Lider will continue wine, fruits and vegetables. easy choice, explained Agurto. importing a significant portion of its The program expanded strongly “Our goal is to enable farmers to fly with produce. However, through the INDAP last year and currently there are 60 their own wings,” she said. “This program program the supermarket has already such partnerships between farmers gives them a chance to do that.” increased to 16 percent its stock of local and companies, but Lider is the Among the biggest advantages of produce with plans to raise that to 25 agency’s only partnership with a the partnership, as Villacura sees it, percent in the future. supermarket chain. is the elimination of the middleman. Villacura dismisses the idea that Under the agreement, INDAP It’s a benefit shared by local farmers farmers are the sole beneficiaries. promises its technical expertise and supermarkets alike. Without the Buying local produce isn’t altruistic to farmers and Lider guarantees a middleman, farmers avoid complicated benevolence by the supermarket, it’s market and reliable income for at business entanglements and the an investment - after all, customers least three years. supermarkets can pass the savings on prefer locally grown produce. “We can guarantee farmers a sure to their customers. “Take the example of the tomato,” sale at a price that is considerably Walmart also pays in cash within 30 he began. “Before you could only find higher than what they earn at the local days, and in seven days for some fruits northern varieties in the supermarket, market, and in return Lider is getting a and vegetables, which is practically like the Limache, which has a different better and local product,” said Agurto. unheard of in the business, said taste. Now you can buy the Talquino As it happens, just as Walmart Gustavo Vetterlein, ethical sourcing tomato, which is fresher and, let’s be was introducing its sustainability country manager for Walmart Chile. honest, it’s juicer.” bUSiness chile projects across the globe, including For some perspective, the typical in Chile, INDAP was developing its wholesaler-to-supermarket arrangement Aaron Nelsen is a freelance journalist based in Santiago.

business Chile April 2011 7 Wine Uncorking the U.S. Market Concha y Toro’s purchase of Fetzer Vineyards from alcoholic beverages giant Brown-Forman is the first major investment by a South American winery in the U.S., and gives the company a foothold in a large, thirsty market. By Julian Dowling mericans are drinking more mainly in California’s Napa valley, and “Part of that is due to a decline in bulk wine. In fact, more wine is now imports the rest. Considering exports exports after the earthquake, but there consumed in the U.S. than in of bottled and bulk wine, Chile is the was also a lot more price competition any other country including third largest exporter to the U.S. after and the exchange rate hurt as well,” A France – about 330 million Italy and Australia, accounting for 12.6 explained Tieszen. 9-liter cases in 2010 worth some percent of total imports. Concha y Toro, which accounts US$30 billion. But there is still plenty “The United States is a key market for nearly half of Chile’s bottled wine of room for that volume to grow - per for Chile and our exports have grown exports to the U.S. or some 3 million capita wine consumption in the U.S. is steadily in the last five years,” said Lori cases a year, is the third largest import only about 10 liters annually versus 50 Tieszen, executive director at Wines of brand led by its flagship premium label, liters in France and 16 liters in Chile. Chile USA, which represents around Casillero del Diablo. This gap is starting to close with the 90 Chilean wineries in the U.S. But, like other exporters, it has been Millenial generation, between 20 and Unlike Argentina which is known hit by the exchange rate. With the 30 years old, putting away more wine primarily for its Malbec wine, Chile’s dollar’s strong depreciation against at a younger age than any previous strength is in its diversity of wines the peso last year, Concha y Toro’s generation. But the challenge for including grapes like Sauvignon Blanc exports to the U.S. fell 1.7 percent Chilean wineries like Concha y Toro, and Carmenere, said Tieszen. and its share of the company’s global Chile’s biggest wine exporter, is to After strong growth in 2008 and exports dropped to 16.2 percent from capture a share of this growth in the 2009, however, Chilean exports to the 18 percent. face of strong competition. U.S. grew only 1 percent last year, “We increased prices because of The United States produces around while overall wine consumption was up higher costs and the appreciation of 75 percent of the wine it consumes, 2 percent. the peso, which affected our sales in this very competitive market,” said Blanca Bustamante, head of corporate communications at Concha y Toro. “The deal is right B u t t h e d i p i n s a l e s h a s n o t d r a i n e d t h e on many levels company’s interest in the U.S. market. and, strategically, it “Wines from Chile and Argentina are increasingly popular, especially with continues Concha younger consumers who are becoming y Toro’s focus on more knowledgeable about wine,” said organic wine.” Bustamante. With consolidated sales of US$735 million in 2010, Concha y Toro is also Lori Tieszen, one of the few Chilean brands with the Wines of Chile USA marketing clout and financial muscle to expand internationally.

8 April 2011 business Chile Last year Concha y Toro signed market, which will allow us to roughly years amid increasing competition and a sponsorship deal with the English double the volume of wine sold in the cost-cutting measures. Premiere League football club U.S.,” said Bustamante. Part of the problem is that Brown- Manchester United, aiming to capture The deal, which Concha y Toro will Forman’s heart was never in the wine a share of the club’s huge fan base in finance through a mix of capital and business. With its current focus on Asia and other markets. But advertising debt, will also allow the company expanding its tequila brands in Mexico, in the United States, which is a much to diversify its costs in dollars, said Brown-Forman has little time to tend more competitive market, will only help Bustamante. “It’s a natural hedge its vines. sales so much. against the exchange rate.” “The profit margins in the wine So when Concha y Toro was Fetzer, like Concha y Toro, began as a business are not as high as the approached by the investment bank family-run vineyard that has grown into spirits business and, because of our Rothschild last December about a large-scale producer of easy to drink geographic diversification, we have a winery for sale in California, the wines. It was bought by Brown-Forman more growth opportunities with our company’s CEO, Eduardo Guilisasti, in 1992 and is now one of the top ten spirits brands,” said Phil Lynch, vice- saw a golden opportunity. brands by volume in the U.S. market. president and director of corporate But its sales in the popular premium communications at Brown-Forman. California wine rush price segment, between US$7 and The global economic recovery helped US$10 a bottle, have fallen in recent attract interest in Fetzer, but Concha In March, after three months of negotiations, U.S. alcoholic beverages producer Brown-Forman announced an agreement with Concha y Toro to sell “Our aim is to Fetzer Vineyards for US$238 million. The deal rocked the wine world and grow in the United Concha y Toro’s shares immediately States and now we jumped 6.9 percent on the Santiago have one foot in stock exchange. California.” When the deal closes in April, it will add 429 hectares of vines in California’s Mendocino County to Concha y Toro’s Blanca Bustamante, portfolio and production capacity of Concha y Toro 3.1 million cases a year. “Fetzer gives us local production and the chance to enter the domestic

business Chile April 2011 9 wine with around 9,500 hectares of vines, including 1,000 hectares in Argentina, and it knows a thing or two about producing and marketing wine. Its experience in the U.S. market and expertise in the wine business should benefit Fetzer, said Jon Fredrikson, president of the California-based wine consultancy Gomberg, Fredrikson & Associates. “The prospects for continued growth in the U.S. wine market are very sound and Concha y Toro has the experience to grow the business and generate good returns,” said Fredrikson. Concha y Toro is not the firstN ew World “Profit margins are “Concha y Toro has the wine company to come to California expertise and experience higher in the spirits – Australia’s Fosters bought Beringer business than in the Wine Estates in 2000 and acclaimed necessary to do battle wine business.” Chilean winemaker Agustin Huneeus here.” owns several vineyards in Napa valley Jon Fredrikson, Phil Lynch, including Quintessa Estates. Gomberg, Fredrikson & Associates Brown-Forman “Huneeus is an example of how good Chilean know-how can make a winery y Toro’s reputation and its promise to very successful in the United States,” retain all of Fetzer’s 240 employees said Fredrikson. wine could be very successful,” said were key factors in Brown-Forman’s The key to Concha y Toro’s success Bustamante. decision to sell, said Lynch. in the highly competitive U.S. market, Concha y Toro also hopes to learn “Concha y Toro is an outstanding according to Fredrikson, is innovation. from Fetzer’s experience in organic wine company with a great reputation “This is a turnkey operation that wine making techniques as well as in and a strong sustainability focus, which allows Concha y Toro to come in and recycling and energy efficiency. was important to us,” said Lynch. be creative… with clever marketing “California is very advanced in this To aid in the transition, Brown- and production innovations they could sense and there is a window for us to Forman will continue to distribute and do a lot,” he said. learn a lot,” said Bustamante. market Fetzer wines for up to nine But the U.S. wine industry also has months until Concha y Toro determines Organic wine much to learn from Concha y Toro, its own marketing strategy. which pairs with Fetzer like a good bottle Concha y Toro has an exclusive One area of operations that Concha y of Carmenere and a prime rib steak. distribution arrangement with the U.S. Toro plans to expand is Fetzer’s organic Only time will tell how well Concha y wine importer Banfi, but any potential wine business. Its Bonterra label is already Toro manages Fetzer’s operations, synergies with Fetzer would have to be the top selling organic wine in the U.S. but it certainly has the experience and studied, said Bustamante. with 300,000 cases sold last year, and is marketing know-how to be successful. Under legislative amendments dating positioned to grow internationally. The deal is unlikely to start a wave from prohibition, U.S. wineries cannot “Fetzer’s focus on sustainability and of acquisitions by Chilean wineries sell wine directly to a retailer so organic wine was very attractive for us in California since Concha y Toro is Fetzer must market its wines through because we believe this market has a unique in its size and focus on wine, but a distributor like Banfi. lot of potential,” said Bustamante. it shows that, with the right approach, “At this time the plan is to maintain Combined with its Emiliana label in Chilean companies can find excellent the distribution network as is,” said Chile, Concha y Toro will have the largest opportunities in the United States. Bustamante. organic vineyards in the world and it aims “There is a growing Chilean footprint to increase exports to niche markets. in California, which is great for the wine Chilean know-how “With our expertise and extensive industry,” said Tieszen. Wine lovers in distribution network we will combine the U.S. can drink to that. bUSiness chile Founded in 1883, Concha y Toro is two very attractive brands in markets the second largest winery in the world like Asia where sustainable, organic Julian Dowling is Editor of bUSiness CHILE

10 April 2011 business Chile Boyden 21.5x28-amcham.indd 1 11/4/11 13:24:02 COVER STORY A Better Agricultural Yield Higher world food prices, with their impact on inflation and poverty, raise the question of whether Chilean agriculture is doing enough to produce the staples the country requires. by Ruth Bradley

he lush green expanses of southern Chile are deceptive. They may seem to stretch forever but Chile, a small T country, is even smaller in terms of its agricultural land. Take away the Atacama Desert of the north, and the fjords and icecaps of the far south and all that’s left for farming are some 15 million hectares (much the same as in New Zealand, a country a third of Chile’s size). That is tiny compared to Argentina’s 130 million, Brazil’s 265 million or Australia’s massive 440 million hectares. But Chile has done well out of what it has. Its agricultural industry accounted for a mere 2.5 percent of GDP in 2010, according to the Central Bank, but has made an important contribution to the country’s growth over the past 30 years. Directly, through the export of products like fresh fruit, or indirectly as a supplier of inputs to numerous agribusinesses, it has positioned Chile, if not quite yet as the “food power” it would like to become, at least as a significant player in world markets. According to Chilealimentos, the food industry association, Chile’s food exports - including wine, fish and processed food as well as primary agricultural products - reached US$11.2 billion in 2009, up from US$4.9 billion in 2000, and accounted for just over a fifth of the country’s total exports.

12 April 2011 business Chile approach to agriculture. A review of Chile’s agricultural policies by the Organisation for Economic Co-operation and Development (OECD) in 2008 found that government support for the industry amounted to 0.4 percent of GDP between 2003 and 2005 as compared to an OECD average of 1.2 percent. The industry has generally received special treatment under the free trade agreements that Chile has signed with its main trading partners, usually with longer periods for the lifting of tariffs, but otherwise it receives little support that is But, as well as exporting food, Chile like China and India but diets are also not also available to other sectors. Price also needs to import it. And, while the changing, shifting away from grains bands were introduced in the 1980s to strong peso is making inroads into the to animal proteins and putting further protect wheat, wheat flour, edible oils and competitiveness of its exports, the cost pressure on supply. sugar but have either been eliminated or of its imports - basics like wheat, maize, Hovering on the horizon, there is are well on the way to being phased out beef and edible oils - has been rising. also the threat of climate change, (and, anyway, at today’s high prices they In Chile, the price of food accounts with its potential impact on patterns don’t kick in). for almost a fifth of the consumer of agricultural production and yields. “Chilean agriculture has gone where price index and, in the 12 months to And, in a related problem, biofuels are its competitive advantages lie,” says February, increased by 5.6 percent, biting into land that could otherwise be Ema Budinich, head of research at the ahead of inflation of 2.7 percent. used to produce food. National Agricultural Society (SNA). Volatility in world food prices is “That’s why it farms fruit and, indeed, its nothing new and, this time, some of the Letting the market decide top fruit producers are among the best in usual suspects - poor harvests, floods the world.” and droughts - are again to blame. By comparison with most industrialized But that has meant a reduction in the There is, however, concern that the countries, Chile takes a laissez-faire area under more traditional crops. Over current spike - the second in less than four years - may signal more permanent pressure on supply. No-one is seriously suggesting that “Chilean agriculture the world is no longer able to feed itself. has gone where Some measurements, indeed, show that it produces more than twice its nutritional its competitive needs - in many parts of the world, advantages lie.” including Chile, obesity has replaced malnutrition as a key public health problem - and vast quantities of food simply get wasted. It is, however, possible that the world Ema Budinich, is facing the end of an era of cheap food National Agricultural that began in the early 1970s when the Society (SNA) so-called Green Revolution in agricultural technology and practices led to an increase in output. Not only is demand for food rising in populous countries

business Chile April 2011 13 COVER STORY

rice, domestic output covers only half or difficult to import wheat technology and less of consumption. local varieties need to be developed and, Chile is not, of course, alone in depending although that would require significant on food imports. Colombia obtains 55 investment, it might be worth the expense percent of its cereal needs from imports as if prices are to remain high, he says. compared to Chile’s 52 percent, according The performance of dairy and beef to the Food and Agriculture Organization farming is much more difficult to evaluate, (FAO), and, in Costa Rica, the figure according to Melo, partly because reaches 82 percent. Chilean farmers tend to prefer dual- But, for Chile, there is an added concern. purpose animals that, although offering The area it uses for agriculture, including lower yields, have the flexibility that, forestry, has held steady at around 37 depending on prices, they can be used million hectares for the past 30 years for either milk or beef. Dairy farming is, and - unlike Brazil which, by reducing soil however, an area in which New Zealand “The government’s acidity, has been able to harness its vast investors are attempting to introduce a commitment is to help cerrado grasslands to the production of new model of seasonal, rather than year- the free market work.” soya beans - there is little room for the round, milk production that lowers costs Gustavo Rojas, industry to expand. by eliminating or substantially reducing Office for Agrarian Research the need for winter feed. and Policies (ODEPA) More from less The underlying problem of Chilean agriculture is, however, small farmers the last 30 years, the area under wheat has The obvious answer, of course, would who lack the management expertise and halved while that devoted, for example, to be to increase yields but that is not so equipment of their larger competitors. beans - a traditional Chilean staple - has easy. To start with, yields in Chile, at least Their yields - as generally with smallholders fallen by almost 90 percent. among large producers, are already quite around the world - are, therefore, much The Araucanía Region, one of Chile’s respectable. lower and, according to Gustavo Rojas, main wheat growing areas and also one of Since the early 1980s, the average yield national director of ODEPA, perhaps only its poorest, used to have 250,000 hectares for maize has almost trebled, according to half the area currently under wheat or under wheat but that has dropped to ODEPA. Small producers are inefficient, maize is competitive, with the rest often close to 100,000 hectares, says Gastón says Oscar Melo, director of the department operating at a loss. Caminondo, president of the Temuco of agrarian economics at the Catholic Many hopes are pinned on genetically Agricultural Promotion Society (SOFO). University in Santiago, but large producers modified (GM) crops. A bill currently The difference, he says, is explained by are near the forefront of technology and before Congress would resolve the the expansion of the forestry industry as grow good imported varieties. existing anomaly under which GM seeds well as by land left idle after its transfer to Where there is room for improvement, can be reproduced in Chile but only for indigenous Mapuche communities. he suggests, is in wheat. It is more export and local farmers aren’t allowed to The result is that, according to the government’s Office for Agrarian Research and Policies (ODEPA), Chile imported 29 percent of its wheat in 2010, mostly from the United States. Similarly, although the area under maize, around 100,000 hectares, is much the same as in the early 1980s, 38 percent of Chile’s consumption - principally for poultry and pig feed and in processed foods - was imported, mainly from Argentina and Paraguay. For milk, Chile is virtually self-sufficient, importing some and exporting a slightly larger amount, but, for edible oils, apart from olive oil - a rising star of its food exports - it is almost wholly dependent on imports while, in the case of beef and

14 April 2011 business Chile FACULTAD DE MEDICINA Magíster en Salud Pública y Planificación Sanitaria (S) Magíster en Gestión de Seguridad de Pacientes y Calidad de Atención (S) Magíster en Medicina y Ciencias del Deporte (S y T) Magíster en Gerontología Clínica (T) Magíster en Psicología Educacional (S y T) Magíster en Psicología Clínica con menciones en: Psicoterapia Constructivista Cognitiva y/o Psicoterapia Constructivista Sistémica (T) Magíster en Teoría y Práctica Gestáltica (S) Magíster en Teoría y Práxis Gestáltica (S) Magíster en Intervenciones Sistémicas (LS) ¿Cuándo Magíster en Psicoterapia Familiar, de Pareja e Individual, enfoque Constructivista Interaccional (S) Magíster en Psicología Jurídica e Intervención Psicosocial con menciones en: Evaluación decidirás Pericial y Forense y/o Mediación Familiar y Penal (T) FACULTAD DE CIENCIAS SILVOAGROPECUARIAS Magíster en Administración de Empresas Silvoagropecuarias (S) Magíster en Conservación de la Biodiversidad y Ecotoxicología (S) Magíster en Gestión de Calidad en Empresas Pecuarias (S) potenciar Magíster en Medio Ambiente y Desarrollo Sustentable (S) Magíster en Teledetección (S)

FACULTAD DE EDUCACIÓN Magíster en Ciencias de la Educación con mención en Administración y Gestión tu profesión? Educacional (S y T) Magíster en Ciencias de la Educación con mención en Currículum y Evaluación (S y T) Hoy es el momento de volver a estudiar Magíster en Ciencias de la Educación con mención en Orientación, Relaciones Humanas y Familia (S) Magíster en Educación Tecnológica y Entornos Virtuales (S) Magíster en Educación Artística (S) Magíster en Educación Diferencial con mención en Trastornos de la Comunicación (S) Magíster en Entrenamiento Deportivo (S) Magíster en Motricidad Infantil (S y T) Magíster en Pedagogía Universitaria (S y T) Magíster en Actividad Física y Salud (S) Magíster en Diseño y Gestión Socioeducativa de la Infancia (T) Magíster en Asistencia a Víctimas y Prevención Integral del Delito (T)

INSTITUTO DE COMUNICACIÓN Y NUEVAS TECNOLOGÍAS Magíster Internacional en Comunicación y Periodismo Digital (S) Magíster en Análisis de Inteligencia Comunicacional (S) Magíster en Comunicación Estratégica y Branding (S) Magíster en Comunicación y Ciencia Política (S) Máster Oficial en Gestión Estratégica e Innovación en Comunicación (S) Master in Business Communication (S) Magíster en Comunicación e Interculturalidad (T) Magíster en Comunicación Estratégica y Marketing Corporativo (T) Magíster en Comunicación, Educación y Nuevas Tecnologías (T)

FACULTAD DE ARQUITECTURA, DISEÑO Y CONSTRUCCIÓN Máster en Economía Urbana (impartido en convenio académico con la Universidad Torcuato di Tella, Argentina) (S) Magíster en Dirección de Proyectos de Edificación con Eficiencia Energética (T)

FACULTAD DE CIENCIAS ECONÓMICAS Y EMPRESARIALES MBA - Executive (Magíster en Administración de Empresas) (S y T) MBA - Salud (Magíster en Dirección y Gestión de la Salud) (S y T) MBA - Marketing (Magíster en Dirección de Comunicación y Marketing Estratégico) (S) MBA - Tributaria (Magíster en Planificación y Gestión Tributaria) (S y T) MBA - Recursos Humanos (Magíster en Dirección y Gestión de Recursos Humanos) (S y T) Magíster en Alta Gerencia Pública (S y T) 4)(°+LWVY[L4HNxZ[LYLU(KTPUPZ[YHJP}UKL,TWYLZHZ+LWVY[P]HZ: MBA - Educación (Magíster en Gerencia Educacional) (S) Magíster en Estrategia (S)

(S) Santiago (T) Temuco (LS) La Serena COVER STORY

Crop Areas in Chile (hectares)

1979/80 1989/90 1999/00 2010/11 *

Wheat 545,740 582,820 391,580 243,541 Oats 92,380 78,300 88,701 80,586 Barley 48,620 26,320 17,208 14,232 Maize 116,190 101,130 69,275 115,096 Rice 40,840 32,590 25,768 25,148 Beans 110,700 68,560 31,386 12,695 Lentils 52,950 13,930 2,192 1,220 Potatoes 88,760 55,140 59,957 48,135 Sunflower seeds 32,410 11,820 6,359 3,050 Rapeseed 50,360 31,950 19,301 17,200 Sugar beet 11,060 44,737 49,207 18,920

* Planting plans as of June 2010. Source: ODEPA

plant them. G producers in countries that not only

That wouldn’t help wheat - its enormous O A subsidize the ir agriculture but also invest F genome, much larger than that of maize, in development,” points out Budinich. makes it much more difficult to achieve They have, however, got a helping genetic improvements - but could give hand from the government of Sebastián ourtesy of SO maize producers an important leg up. GM C Piñera, Chile’s president since March crops are, after all, what are determining 2010. Under a bill before Congress, it international maize prices, points out plans to extend the period under which Melo. the so-called ‘safeguard’ tariffs permitted But, even if approved by Congress, under World Trade Organization rules can the bill probably wouldn’t help small be imposed to protect local producers producers much, suggests the SNA’s against imports judged guilty of dumping Ema Budinich. One problem is the or unfair competition. biosecurity corridors that producers may At present, these tariffs are only set for be required to install around GM crops “Chile lacks a long-term one year renewable for an additional year to prevent cross-pollination of traditional agricultural policy.” - “too short a time,” says SOFO’s Gastón crops. For a small farm, the need to leave Caminondo - but would be extended this land idle could well offset any increase Gastón Caminondo, to two years renewable for another in yield or reduction in costs, she notes. Temuco Agricultural two. Farmers are, however, not entirely Budinich believes that much more could Promotion Society (SOFO) satisfied and argue that the Distortions be achieved by helping small farmers Commission, the body responsible for improve their agricultural practices. That around 12 percent from the introduction imposing the tariffs, acts too slowly - “after is an area in which the SNA has been of GM varieties. Moreover, in the case the damage has been done,” according working with Fundación Chile, a Santiago- of maize, this latter gain could easily be to Caminondo. based technology transfer institute, by wiped out by something as simple as bad But, as well as tackling distortions providing manuals, simple checklists and watering, she insists. caused by imports, the government is verification methods. also seeking to iron out asymmetries According to Budinich, the evidence Market distortions that exist in the domestic market. One suggests just by improving practices they common complaint, particularly among can obtain annual productivity gains of Farmers, of course, complain they are wheat farmers, is that they never get the 40 percent for three successive years as expected to compete but don’t have a full benefit of higher international prices compared to a one-off gain of perhaps level playing field. “They’re up against because, as compared to a small and

16 April 2011 business Chile more sophisticated group of buyers - “If prices increase, usually armed with financial tools like futures - they lack negotiating power. there will be more That weakness is accentuated by the investment in agriculture fact that small producers lack storage even without public capacity so must sell immediately after harvesting. This year, however, they found investment.” an ally in COTRISA, a state-owned wheat trading company that, after long dormancy, again began to buy from small farmers. Oscar Melo, The exercise proved not to be expensive Department of Agrarian at all, reports ODEPA’s Gustavo Rojas - Economics, “the mere announcement was enough [to Catholic University increase their negotiating power with other buyers]” - and was so successful that the government is considering extending it to maize and rice. tricks - by buyers, this would, under a bill By reducing market distortions, however, Another measure that should also help before Congress, see its transparency such measures are at least putting the to level the playing field for farmers is a increased by the requirement for a second country’s agriculture sector on a better proposed change in the sample-based sample that, in the case of a dispute, footing to adapt to changing conditions system for testing the quality of their could be presented to arbitration. and continue chasing the best returns crops. Crucial in determining the price That may help farmers but isn’t much wherever they may lie. bUSiness chile they receive and currently vulnerable to consolation to Chilean consumers faced Ruth Bradley is a freelance journalist based in Santiago management - or, as critics would say, with the prospect of higher food prices. and a former editor of bUSiness CHILE.

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Randstad es una empresa holandesa de Recursos Humanos y soluciones A través del Área Professionals, se especializa en la búsqueda, selección y de trabajo con más de 50 años de experiencia, listada en Fortune 500, y Head Hunting de ejecutivos para cargos intermedios y altos en las áreas una facturación de 17 billones de dólares en 2010. Comercial, Ventas & Marketing, Ingeniería & Minería, y Finanzas & Logística. Cuenta con un equipo de consultores especializado en el negocio de sus clientes y tiene 4.400 o cinas en 44 países, permitiéndole captar En su Área Stang otorga servicios de Outsourcing (Subcontratación) y profesionales extranjeros y ofrecer vacantes en el mundo. de Servicios Transitorios en sectores como la banca, salud, retail, consumo masivo, industria, manufactura, aeropuerto. En Latinoamérica, está presente en Argentina, Brasil, Chile, México y Uruguay. En Chile tiene sedes en Santiago, Viña del Mar, Concepción, El objetivo de Randstad es que su empresa se concentre en un ciento por Valdivia y La Unión, además de coordinadores regionales en todo el país. ciento en desarrollar su negocio, dejando en las manos de expertos en Recursos Humanos los procesos de reclutamiento, selección y Randstad Chile ofrece soluciones laborales exibles y acordes a las administración de personal. necesidades de sus clientes, porque conoce en profundidad el área en la que se desempeñan y tiene relaciones de con anza con ellos.

Contáctenos: www.randstad.cl / Email: [email protected] / Teléfono: (56 2) 442 34 66 Aviso Ministro Errázuriz.pdf 1 14/04/2011 15:34:54

C PLANES DE MEJORAMIENTO DEL TRANSPORTE M

Y Y LAS TELECOMUNICACIONES EN EL GOBIERNO

CM MY Invitado: Pedro Pablo Errázuriz Domínguez CY Ministro de Transportes y Telecomunicaciones CMY K Jueves 26 de Mayo 08:30 hrs. HOTEL INTERCONTINENTAL Av. Vitacura 2885, Las Condes. Inscripciones: [email protected] / Fono: 290 9746 Cupos limitados. Valor Socios: $12.000 / No Socios: $16.000 Special Report Chile’s Drought Dilemma Chile has been hit by its second drought in just four years, threatening farming and power supplies. The government is implementing measures to mitigate its impact, but are recent low levels of rainfall part of a longer term trend and is Chile ready to tackle the challenge?

By Tom Azzopardi

n recent years, Chileans have got used to hearing about in 2007-2008 with water shortages declared in just nine La Niña. In contrast to El Niño, the climatic phenomenon zones compared to 34 zones three years ago, but central brings unusually hot, dry weather to South America’s Chile has been badly hit. Pacific Coast, reducing rainfall from southern Chile to This time it is the region of Coquimbo that has been I northern Colombia. worst affected. Last year it struck again. The latest figures from Chile’s In January, the Public Works Ministry declared a water National Water Board (DGA), part of the Public Works emergency for the whole region and parts of neighboring Ministry, show that the country’s reservoirs were at just Valparaiso, as it became apparent that low rainfall last year one third of their total capacity with water levels 45 percent could threaten water supplies to farmers. below their historic average. This gives the government power to intervene in irrigation The drought has been less severe than the previous one systems, provide emergency water supplies to rural communities

business Chile April 2011 19 Special Report

additional US$10 million this year to mitigate the drought’s impact in the region. While Coquimbo has borne the brunt of the drought, La Niña is being felt throughout central and southern Chile through its impact on power supplies.

Low reservoirs

Hydroelectricity accounts for around 45 percent of installed capacity in the country’s main power grid, the Sistema Interconectada Central (SIC), but just one reservoir in the whole country – Laja – has capacity to store water from one year to another, which makes the system highly vulnerable to annual variations in rainfall. Last year’s dry winter has left water levels at hydropower reservoirs near historic lows and, in some cases, plants are struggling to produce electricity. Water levels at the giant Rapel reservoir, 120 km southwest of Santiago, have fallen so low that buildings flooded by its construction have become visible for the first time in almost 40 years. As a result, hydroelectric generation has fallen by almost 20 percent compared to a year ago. “There has been a shortage of Unfortunately, this scenario is all too familiar to Chileans. water during the last ten years.” An energy crisis in 1998, caused by a dry winter, forced the government to implement rolling blackouts to save water, which Sergio Gahona, Coquimbo government was followed by another crisis in 2008. The government is confident that rationing will not be necessary this time but, as a precaution, it has ordered and animal feed for herds left without sufficient pasture. reservoirs further south to preserve water, cut the voltage in Given the importance of farming in Coquimbo – the region the SIC by 10 percent and urged households and industry produces 40 percent of Chile’s citrus exports and more than half to reduce consumption. Daylight saving time has also been of its potatoes – the drought threatens to have a serious impact extended by a couple of months to keep the sun up during the on its economy which, like the rest of Chile, has been recovering energy-intensive evenings. from the 2008 financial crisis. The bigger impact though will be on electricity prices as With less water in irrigation dykes, farmers are planting the power industry turns to more expensive oil-fired power less and pruning existing trees back so they don’t bear fruit plants to cover the shortfall. Power prices in the SIC have and survive the drought, says Sergio Gahona, governor of already more than doubled in recent months to around the Coquimbo region. US$220 a megawatt hour. This means less to pick and pack with a potentially dramatic This means higher bills for households and industry which impact on seasonal employment in the region’s agriculture which is driving up inflation, although it is the power companies accounts for 8 percent of the workforce in Coquimbo. themselves, exposed to spot prices, that may be worst affected. “The problem is not going to be this season but the next One solution is to build more reservoirs, but after decades one,” says Gahona. of development the best and easiest sites have already been As many as 3,000 jobs could be lost as a result of the drought, developed, says Mining and Energy Minister Laurence Golborne. while economic growth may be curtailed by one percentage Those remaining are either less efficient or in environmentally point, he adds. and socially sensitive areas. The regional government is now preparing emergency The bulk of Chile’s hydropower potential lies in the remote job programs to help keep people in work through the dry southern region of Aysén where Colbún, Endesa and Xstrata are spell. Many will be employed in projects to improve water pushing plans to develop reservoirs despite vehement opposition supplies, deepening and widening existing water wells and from environmentalists. Unlike central Chile, Aysén is not subject strengthening canals. to the same cyclical rainfall which regularly cripples hydropower In total, Gahona estimates the government will spend an further north, ensuring a much more reliable energy source.

20 April 2011 business Chile But, due to difficulties in permitting and transporting the power to centers of consumption, it remains uncertain when, or if, these dams will be developed. In the meantime, the power industry is looking increasingly to thermoelectric plants to meet Chile’s growing demand for electricity, which would reduce the impact of future droughts on power supplies but raise other concerns, especially environmental ones.

Climate change

While the impact of this year’s drought may be limited and short-lived, it appears that such events are becoming more frequent and form part of a wider trend. "This is not a new problem,” says Coquimbo’s Gahona. “There has been a shortage of water during the last ten years, evidently the problem is accumulative.” One suspect is climate change: a 2009 report by Santiago’s Catholic University into the impact of global warming on Chile suggested that the country will become hotter and drier over the next century, meaning balmier summers in the south but potentially catastrophic effects on the already arid north. The future impact of global warming is far from clear. In fact, other models suggest northern Chile could see more rain as a result, but it is a risk that companies are taking seriously. Around the world, water is increasingly viewed as a strategic asset by business and government, particularly where it is in short supply. This is certainly the case in northern Chile, home to the world’s driest desert, where, after two decades of rapid expansion, cities, agriculture and the mining industry are finding themselves increasingly at loggerheads over the region’s scant water supplies. In some river basins, the government has taken action, for instance, by banning the granting of new water rights from the

Special Report

Calama aquifer. In others, such as the Copiapó Valley, it appears to be too late. Extraction rights granted by the government Water Levels in Chile’s Reservoirs exceed the volume of water available, and the level of the (thousand cubic meters) underground aquifer has consequently been falling for years. Region Capacity Historical march monthly Every drop counts average 2011 2010 % Change II 22 15 9 14 35.7 For agriculture-dependent regions like Coquimbo, finding ways III 201 131 83 109 -23.8 to use water supplies more efficiently is vital to maintain growth. IV 1,298 711 331 553 -40.2 Coquimbo’s farmers are relatively efficient at using water and V 95 22 3 7 -57.1 more than half use advanced irrigation techniques, but up to 70 RM 258 200 144 227 -36.6 percent of the water is lost in the region’s 536 km network of VI 932 579 596 483 23.4 irrigation canals of which just 10 percent is lined, says Gahona. VII 3,288 2,065 1,336 1,977 -32.4 VIII 6,839 4,102 1,838 2,664 -31.0 The government now plans to spend US$220 million lining Source: DGA the canals at critical points, but the long-term solution is to build a series of new reservoirs over the next decade that will lift the Chile has become a major olive producer in recent years, country’s water storage capacity by 25 percent to close to five but relatively few are grown in Coquimbo. Producing more billion cubic meters. crops like this would allow the region´s agriculture to grow Seven of these will be built in Coquimbo, raising the without using more water and make it more resistant to region’s water storage capacity by 23 percent to 1.6 million droughts, says Gahona. cubic meters. According to Gahona, the expansion is better late than Thirsty miners never. "These are projects which should have been carried out 15 years ago," he says. Perhaps the industry most at threat from Chile’s water shortage More than just adding storage capacity, the new reservoirs is the mining industry. will allow Coquimbo to expand its farmland by 50 percent to The resource is of vital importance to the sector which 113,000 hectares. consumes huge volumes to separate valuable copper-bearing "This will be a major boost to development,” the governor says. minerals from heavier ore in giant floatation cells. But as well as building new infrastructure, Gahona says the But the industry consumes surprisingly little water compared region will also have to find ways of using water more effectively with other activities, says Jorge Proust, a water consultant to the including planting crops that need less irrigation such as olives. mining industry. In Chile’s northern regions, mining extracts less than 12 cubic meters per second compared to almost 40 cubic meters used by water utilities and 170 cubic meters by farming. The trouble is that mining is overwhelmingly concentrated in the arid far-north of the country meaning that it is a major consumer just where supplies are scarcest. In the Antofagasta Region, where agriculture is negligible, the industry accounts for almost two thirds of water consumption. With water already in short supply, the mining industry has strived with some success to improve efficiency, reusing water over and over to minimize extraction. According to the Chilean Copper Commission (Cochilco), the mining industry used just 0.79 cubic meters of water to Jorge Proust, process a ton of ore in 2006, down 28 percent from 1.1 Proust cubic meters in 2000. Consultores But ore grades at almost all mines have been sliding, meaning “The mining industry mining companies must process more ore to produce the same consumes surprisingly amount of metal. Alistair Marsh, wastewater manager at local chemical little water compared solutions firm Sinquiver, says Chilean industry could do with other activities.” more in terms of reusing water. Membrane technology allows industries to recycle water almost

business Chile April 2011 23 Special Report

indefinitely, drastically reducing consumption, he points out. Such technology is expensive and energy intensive but the benefits would be significant. Chilean pulp producers, under pressure over the environmental impact of their emissions, are considering it, says Marsh. And soon they may not have a choice. The DGA, together with other public bodies, is looking at introducing regulations that would force companies to recycle water and use it more efficiently. Alistair Marsh, Still, mining needs more water. Sinquiver With the price of copper and other metals at record highs, the industry is planning a massive expansion to increase copper production by 35 percent by 2020 and triple gold output. “Chilean industry could According to Cochilco, this will imply a 45 percent surge in the do more in terms of amount of water consumed by the industry. reusing water.” But finding fresh sources of water is increasingly difficult, if not impossible. And, even if new sources are found, other concerns may get in the way. Iron ore miner CAP and Canada’s Goldcorp are considering Plans by BHP Billiton to pump water from aquifers high in the desalination plants for new mines in the Atacama Region. Andes Mountains 190 km to its Escondida copper mine, the Meanwhile, Antofagasta Minerals recently inaugurated its new world’s largest, were shelved after environmental authorities Esperanza mine, the first in Chile to use 100 percent seawater in raised concern about the project’s impact on nearby wetlands. its operations. Using seawater brings additional costs. As well as the Water, water, everywhere installations, desalinating the water and pumping it to the mine requires huge amounts of electricity, especially for operations A closer source is the PacificO cean which has no shortage located far inland and thousands of meters above sea level. of water. But this is a cost mining companies are increasingly This option, whether through desalination or using untreated prepared to assume. seawater in processes, is still in its infancy but is expected to “Without seawater, it would have been very difficult given gain ground given the lack of alternatives for the industry. the volume of water that we require,” Christian Thiele, general BHP Billiton already supplies water to Escondida from a manager of the Esperanza mine, told bUSiness CHILE at the desalination plant and has submitted plans for a much bigger mine’s inauguration where it was praised as an example of plant, worth more than US$3.5 billion. innovation by President Sebastián Piñera. Some in government see it as the industry’s only option in areas where water is scarce. "The mining industry has to accept that it's got to use seawater,” says Gahona. Another plan floated by some is to build a giant pipeline to pump freshwater from Chile’s temperate south to the arid north. The costs could be considerably lower than building a series of desalination plants if done on a sufficiently large scale. But extracting water from the south to supply the north would raise political questions, says Proust. Southern water-rich regions like Biobío and Araucanía, amongst the poorest in the country, could see their economic development curtailed, while Chile’s bone-dry mining regions grow wealthier. For now the pipeline remains a pipedream, but the mining industry’s thirst must be quenched for Chile to continue growing. With La Niña a constant threat, Chile must figure out how to manage its water resources efficiently or the seedling of development may wither. bUSiness chile

Tom Azzopardi is a freelance journalist based in Santiago

24 April 2011 business Chile www.chevrolet.cl 800 800 115 Spotlight The President’s Speech Speaking at Santiago’s La Moneda Cultural Center, U.S. President Barack Obama called for a new spirit of partnership between Latin America and the United States based on shared values and responsibilities. by Julian Dowling antiago) mbassy in S US E ánchez ( ourtesy of Jorge S C

resident Barack Obama and his wife, First Lady Latin American nation – a strong democracy with a business Michelle Obama, spent less than 24 hours in Chile in friendly environment that is relatively free of corruption and between visits to Brazil and El Salvador in March, but organized crime. Chile – in President Obama’s own words a country “at Of course, Latin America is comprised of a diverse group P the end of the world” - was not just a stopover on his of countries with different styles of government, leadership, first official visit to Latin America. levels of economic development and bilateral issues with The close relationship between the United States and the United States. Chile is based on shared principles of democracy, freedom Mexico and Central America are the focus of on-going efforts and entrepreneurship as well as a Free Trade Agreement by the U.S. government to combat drug and human trafficking. that came into force in 2004 and has seen bilateral trade Brazil, for its part, is a huge market with large offshore oil and gas more than double in that time. reserves that could help meet U.S. energy needs in the future. For the Obama administration, Chile represents the ideal Chile, by comparison, is a tiny market, but it has embraced

26 April 2011 business Chile globalization and trade while sharing with the United States The President’s Speech a vision that promoting innovation is critical to capturing the opportunities of the 21st century economy. So it was no coincidence that President Obama chose Chile as the platform to deliver a key speech on Latin America’s progress and his vision for “a new era of partnership” with the United States. Speaking at the heavily guarded La Moneda Cultural Center before the world press and Chile’s political elite, including its current President, Sebastián Piñera, and three previous presidents: Aylwin, Frei and Lagos, President Obama hailed the country’s peaceful transition “from dictatorship to democracy.” He also praised its economic progress: “Despite barriers of distance and geography, you’ve integrated Chile into the global economy, trading with countries all over the world,” he said. The United States is Chile's second largest goods trading partner overall and in 2011 they plan to expand their FTA by eliminating tariffs on 134 products. But President Obama noted more can be done to increase trade and he agreed with President Piñera to “fully implement” the FTA to include protection for intellectual property “so our businesses can innovate and stay competitive.” He also pointed out that the U.S. is working to join the Trans- Pacific Partnership (TPP) agreement, of which Chile is already a member, by the end of 2011 to boost trade in the Asia-Pacific region, especially for small and medium size companies. In addition to trade, Obama identified priority areas including security, entrepreneurship, education, energy and democracy where Latin American countries could benefit from working closely with the United States. In security terms, Obama praised Chile’s support for international nuclear non-proliferation efforts and its decision last year to ship its remaining highly enriched uranium to the United States for disposal. Chile is also sharing its expertise with Central American countries to fight drug trafficking and organized crime, he said. Energy is another key area of cooperation. A few days before Obama arrived in Chile, and controversially in the midst of Japan’s nuclear crisis, the U.S. and Chile signed a nuclear cooperation agreement. Although there are no plans (yet) to build a nuclear plant in Chile, the agreement should pave the way to closer energy ties. President Obama also emphasized cooperation in clean energy and climate change. He announced the creation of a new U.S.-Chile Energy Business Council, focused on energy efficiency and renewable energy, and Chile has agreed to host a new regional center to study glacial melt in the Andes. Education is another area where U.S. universities and research institutions can support development in the region. Obama announced two initiatives: a plan to use social media to help students, academics and entrepreneurs collaborate, and an initiative to increase the number of American students studying in Latin America to 100,000 and to receive the same number of Spotlight antiago)

In his concluding remarks, Obama

mbassy in S referred to the drama of the 33 miners

US E last October when Chile, watched by the world, led a successful international

ánchez ( rescue effort that included U.S. and Canadian drilling teams. “When a country like Chile puts its mind to it, there’s nothing you can’t do,” said Obama. ourtesy of Jorge S C After attending a dinner hosted by President Piñera and his wife, Cecilia Morel, that evening, President Obama and his family departed early the next day for El Salvador, but the afterglow of his visit will linger for months and Latin American students in the U.S. That means more participation by years to come. Finally, Obama called on Chile and other Latin American countries in shaping Latin America’s challenges remain countries to “recommit” to defending the their own destiny: “I believe that in huge, including high levels of poverty values of democracy and human rights the Americas today, there are no and inequality in many countries across the region including in Cuba. senior partners and there are no junior including in Chile, and the role of President Kennedy’s Alliance for partners, there are only equal partners,” the United States in the region is Progress plan, announced 50 years ago, said Obama. as important as ever. But Chile can to provide aid to Latin America was well- Chile is clearly not the United States’ be proud that, at least in President i n te n t i o n e d , s a i d O b a m a , b u t “ t h e r e a l i t i e s equal in many respects, but it is well- Obama’s eloquent words, it is an equal of our time - and the new capabilities and regarded for its sound economic partner with much to offer the region confidence of Latin America - demand management and national unity in the and the world. bUSiness chile something different.” face of recent disasters. Julian Dowling is Editor of bUSiness CHILE www.pwc.cl

PricewaterhouseCoopers hoy es...

Crecer, también significa saber cambiar Porque cambian los mercados, los modelos de negocios y sus necesidades, nosotros también cambiamos para entregarte el valor que buscas.

Auditoría Consultoría y Asesoría Empresarial Asesoría Legal y Tributaria AMCHAM News AmCham Committees

On March 11, AmCham’s Finance Committee held a meeting with guest speaker Rodrigo Aravena, head economist at BanChile Inversiones.

Arturo Platt, Deloitte; Carolina Valdivieso, Executives touring the San Antonio International Terminal AmCham; Rodrigo Aravena, BanChile Inversiones and Alfredo Ergas, AmCham San Antonio Open House On March 16, AmCham’s Trade & On April 6, AmCham held the first Open House is a program created International Business Committee in a series of Open House events, by AmCham to allow members held a meeting with guest speakers in which 20 executives visited port of the Chamber to get to know Ronald Bown, president of the installations at the San Antonio leading companies in their areas of Chilean Exporters’ Association International Terminal (STI) in San interest and identify new business (Asoex), and Eduardo Santos, Antonio, Chile’s busiest port. opportunities. a consultant at U.S. firm Allen F. Johnson & Associates. The discussion focused on how the new Food Safety Modernization University of Georgia MBA Students’ Visit Act that regulates the entry of food On April 11, students from the MBA program at the University of products into the U.S. could impact Georgia visited AmCham as part of their trip to Chile. AmCham’s Chilean exporters. Research department gave a presentation that included an overview of Rubén Covarrubias, rector of the Chile’s business climate and potential business opportunities between Universidad Mayor, chaired the Chile and the United States. meeting which was attended by 80 members. Videos are available on AmCham’s YouTube channel: http://www.youtube.com/AmchamChile

Rubén Covarrubias,Universidad Mayor; Ronald Bown, Asoex, and Eduardo Santos, Allen F. Johnson & Associates University of Georgia students at AmCham

30 April 2011 business Chile Tourism Undersecretary at AmCham On March 31, Chamber members met with Chile’s Undersecretary of Tourism, Jacqueline Plass, who spoke about the government’s new policies in this area.

Charles Kimber, Celulosa Arauco y Constitución; Jacqueline Plass, Undersecretary of Tourism; Javier Irarrázaval and Jaime Bazán, AmCham

AmCham, bUSiness CHILE on Twitter New MEMBERS AmCham and bUSiness CHILE, are Grupo Urbaser Danner now on Twitter. Environmental Related Business AmCham aims to use the social Fernando Leon / General Director media tool to provide the latest information about trade and business between Chile and the U.S., and Comercial Kendall facilitate greater networking between Medical Equipment & Supplies the Chamber and its members. Ricardo Cortés / General Manager bUSiness CHILE will use Twitter to notify followers when new articles are Randstad published. Human Resources Consultants If you have a Twitter account, you can Pedro Lacerda / General Manager follow AmCham (@AMCHAMCHILE) and bUSiness CHILE (@BizChile) American Tower de Chile Telecommunications Michael McQueen / VP & General Chile-U.S. Trade Manager Info Online Agrocomercial Terramar Chile Agriculture & Related Business AmCham’s Research Department The department has also Christian Kelly / Finance Manager has published two new studies with published a list of tenders for public information about trade in goods purchases by the U.S. federal Caterpillar Leasing Chile and services between the United government on the Infocenter Financial & Investment Services States and Chile. The studies, section of its website. including graphs and tables, can For more information, contact Suzan Gibbs / Managing Director for be downloaded from the AmCham Nora Balzarotti: Southern Cone website: www.amchamchile.cl [email protected]

business Chile April 2011 31 AMCHAM members News

Executive Kimberly-Clark Houses Pichilemu Homeless U.S.-based company Kimberly-Clark, Appointments a world leader in the development of health and personal hygiene products, American Airlines has appointed Rodrigo has donated five houses to families in Bertola as its sales manager in Chile. the seaside town of Pichilemu in Chile’s Bertola is a commercial pilot with 16 Region VI who were made homeless by years of experience working with airlines and airports. In his new role, Bertola will the earthquake in February last year. be responsible for increasing passenger The families had been living in numbers, strengthening the sales and temporary shelters without basic marketing department, and generating services. The houses were built by 35 synergies within the region and the United volunteers from Kimberly-Clark who States. Kimberly-Clark workers in Pichilemu worked with the families during the entire construction process. All the families also received kits with blankets, dishes voluntarily and gave up part of their free cutlery and groceries. time to this social initiative. This reflects Carolina Valdivieso, Kimberly-Clark’s the commitment of the company to Chile manager, said: “We are very improve the wellbeing of the communities happy that our employees participated where we operate.”

Banco Itaú Obtains Green Building Certification Banco Itaú Chile has obtained the Rodrigo Bertola, sales manager at American Airlines Leadership in Energy and Environmental Design (LEED) certification from the Mariano Domínguez has been named U.S. Green Building Council (USGBC) marketing manager at General Motors for its new US$15 million back office Chile. The marketing expert from the operations center in Santiago’s Ciudad Universidad de Santiago has worked with Empresarial business park. the company since 2000. The building, scheduled to open in April, has six floors and 5,200 square meters of office space. It will include a Banco Itaú branch on the first floor with offices in an open plan arrangement on Mariano Domínguez, the upper floors designed to facilitate to 75 percent) compared to traditional marketing cooperation and generate synergies buildings, while providing a healthier and manager at General Motors between workers. more comfortable working environment. Chile The building is designed to save It also has a system for the treatment energy (up to 50 percent) and water (up and recycling of water and waste. Ricardo Leal has joined the law firm Morales Donoso & Compañía where he will lead its new legal division in charge of civil, Members in Great Place Adolfo Ibáñez in Jessup Quarterfinals commercial and arbitration matters. The lawyer, from the Universidad Diego Portales, to Work Ranking The team from Chile’s Universidad Adolfo Ibáñez, previously worked in Balbontín, Linazasoro & According to the annual led by Professor Ximena Fuentes, reached the Compañía. ranking by the Great Place to quarterfinals of the international Philip C. Jessup Work Institute, ten AmCham Law Moot Court Competition in Washington DC members were among the in March. best places to work in Latin The UAI law students qualified for the international America in 2010: Coca Cola competition after beating a team from Universidad Ricardo Leal, Chile, Banco Estado, 3M, del Desarrollo in the final of the national stage of the head of the Banco de Chile, Gerdau Aza, competition, which was organized by AmCham. legal division at Morales Kimberly Clark, Santander, Sun Rodrigo Correa, dean of the UAI Law Faculty, Donoso & Microsystems, Grupo Security said the competition “was an extremely valuable Cia. and VTR. learning experience in a highly competitive environment.”

32 April 2011 business Chile ADEXUS Opens Antofagasta Office The Chilean information technology and communications firm ADEXUS has opened an office in Antofagasta to serve its clients in northern Chile’s mining sector. The opening ceremony in March was attended by representatives from local universities as well as Minera Escondida, SQM, Minera Esperanza and Carabineros de Chile. Carlos Busso, president of ADEXUS, emphasized the importance of the company’s projects in the north, and introduced Andrés Soto, who will take ADEXUS executives: Carlos Busso, Marta Recabarren, charge of the office until a permanent replacement is found. Marcelo Busso, and Luis Pedro Sanguinetti

Chilean Lawyers to Arbitrate CAFTA Disputes Anglo American on Global The Chilean lawyers Juan Carlos Urquidi, from the environmental consulting firm, SustentaRSE, and ElielH asson, Sustainability Index from the intellectual property law firm Prieto & Cía, have been The mining firm Anglo American, one of the largest mining appointed international arbitrators by the CAFTA-DR Free companies in Chile, has been included in the FTSE4Good Trade Commission. Sustainability Index of companies that comply with a strict Urquidi is an environmental law expert educated at the series of social corporate responsibility and sustainability Universidad Católica and co-founder of SustentaRSE. He norms. The index is used by a wide variety of ethical and is a founding member of the Inter-American Network of sustainable investment funds. Environmental Law Specialists (RIELA) and a member of the “The inclusion of Anglo American in the FTSE4Good Index Advisory Council of Chile’s Environment Ministry. is another demonstration that putting sustainability at the Hasson is of counsel at Prieto & Cía and CEO of TLC core of our business is not just the right thing to do, it also Consulting. He was appointed in the first meeting of the CAFTA- brings clear benefits to our interest groups,” said Cynthia DR Free Trade Commission in February, and has previously Carroll, CEO of Anglo American.. served as arbitrator for the FTAs signed by Chile with the EU, South Korea, MERCOSUR and Central America.

Universidad Mayor Partners with Spain’s UNIR VTR Turns Students on to Reading The Universidad Mayor’s Journalism School has signed an Some 18,000 students from agreement with Spain’s La Rioja International University (UNIR) 30 schools in the earthquake- that will allow its students to work and study in Europe. hit Chilean cities of Talcahuano The agreement is in line with the school’s academic focus on and Concepción will have producing professionals with the skills to perform in the globalized the chance to read books markets of the information economy. on new e-readers thanks Under the partnership, UNIR professors will teach courses in to a project called Digital Chile, while Universidad Mayor students will have access to UNIR’s Libraries (Bibliotecas Digitales), academic resources, library and postgraduate programs. sponsored by VTR with the support of Unicef, Ediciones Mauricio Ramos, VTR president, with SM, Bazuca.com and Chile’s Education Minister Joaquín Lavín Education Ministry. Students, teachers, parents and principals attended a launch ceremony in Talcahuano in March. The aim of the project is to motivate students to read using e-readers – each loaded with 50 ebooks - as part of their normal language program. “To create digital libraries we had to innovate: integrate new technologies, test a new platform for downloading books, purchase copyrights, as well as training teachers and librarians in the use of Lucía Castellón Aguayo, director of Universidad Mayor’s Communications and New Technologies Institute and José María Vázquez García Peñuela, online books,” said VTR’s president Mauricio Ramos. rector of the La Rioja International University (UNIR)

business Chile April 2011 33 AMCHAM People San Antonio Open House On April 6, AmCham held its firstO pen House at the San Antonio International Terminal in the port of San Antonio on Chile’s Pacific coast. Around 20 executives toured the installations and had lunch.

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1 Executives at the Open House in the San Antonio International Terminal 2 Jaime Bazán, AmCham and Brendan Mahar, New Zealand Trade and Enterprise 3 Mark A. Hanna, Robert C. Hanna & Co., and Michael Wallis, BMS Technologies 4 Macarena Jara, Atlas International Movers, and Mercedes Saénz, BMS Technologies 5 María Ivón Abuawad, Laboratorio Cosmético Colorbel, and Daniel Guevara, Guevara y Cía. 6 Laura Ebert, AmCham, and Paula Marchant, General Motors 2 3

4 5 6

34 April 2011 business Chile AmCham Finance Committee Meeting

On March 11, AmCham’s Finance Committee held its first meeting of 2011 with guest speaker Rodrigo Aravena, head economist at Ban- Chile Inversiones.

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2 3 4 1 Rodrigo Aravena, BanChile Inversiones, and Alfredo Ergas, AmCham 2 Carolina Valdivieso, Kimberly Clark, and Arturo Platt, Deloitte 3 Sebastián Peró, Relsa, and Gerardo Scheel, Boyden Chile 4 Alejandro Blanco, General Electric, and Jaime Bazán, AmCham CONVENIOS

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www.amchamchile.cl Mayor Información 290 9742 FdS_[fWEgH[eS5a`F[W_ba

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Consultas: (02) 290 9767 [email protected] Horario de atención al público: 09:00 a 13:00 hrs. 16 March 2011 bUSiness CHILE Economic Snapshot

Return to Fiscal Responsibility By Ricardo Matte Chile’s Finance Minister, Felipe Larraín, announced good news - it did not reflect a major increase in food in March an important reduction in the 2011 budget of prices and confirmed that underlying inflation is under between US$750 million and US$800 million, equivalent control–but it occurred in a context of weekly fuel price to 1.4 percent of the budget and 0.4 percent of projected increases and a WTI oil price above US$105 a barrel. This Gross Domestic Product (GDP). led to a jump from 3.5 to 3.8 percent in 24-month inflation As a result, and with an annual average inflation rate expectations in the first half ofM arch, putting pressure on of 3.3 percent projected in the 2011 Budget Law, real the government to take action. growth in public spending this year will be 5.0 percent This coincided with a fall in the Adimark Economic and not 6.3 percent, as would have been permitted by Perception Index between January and February, which last year’s real public spending increase of 7.0 percent was at least partly due to inflationary concerns. In versus the 7.8 percent increase initially contemplated by accordance with its “zero tolerance” policy for inflation, the government. the government responded immediately by speeding up The budget cut for 2011 represents a return to fiscal the enactment of a new fuel price stabilization system responsibility after seven consecutive (SIPCO by its Spanish initials), which was years of state spending growing at a approved in February. higher rate than GDP. In effect, this Let’s be clear, inflation is at an year real GDP growth will be almost 6.0 inflection point in Chile. No one is yelling percent and public spending 5.0 percent. “fire” yet, as happened in mid-2007 when This is very positive because it signals a annual inflation surged to 7.8 percent, return to fiscal discipline, which has been but the fear is in our subconscious. In one of the main strengths of the Chilean our inflation-indexed economy, which is economy, and the timing is important given growing strongly and closing its capacity the current macroeconomic situation. gap, inflation expectations must be There are two main reasons for the carefully managed. announcement. Firstly, most analysts That is why the 50 basis-point rate were surprised by the level of growth in increase announced by the Central Bank public spending last year, which was on March 17 is a good decision. It was concentrated in December - spending in not expected by the market, especially this month was 85.2 percent higher than Ricardo Matte after the tragic events in Japan, but it was the monthly average between April and exactly the clear signal that was needed November. Public spending grew almost 2 and establishes a “firewall” to contain percentage points above GDP growth and the state clearly inflationary expectations. did not play an anti-cyclical role in a year when private This increase has been effective in calming inflationary spending recovered strongly, up 18.3 percent from 2009. concerns - a recent survey shows that 24-month inflationary The market correctly interpreted this as a sign that expectations have fallen from 3.8 to 3.6 percent. maintaining macroeconomic stability would require a lower The government austerity announcement is another nominal exchange rate and higher interest rates, which powerful “firewall” against inflationary expectations, while have negatively affected the economy’s competitiveness also giving the Central Bank greater room to maneuver in and its capacity to achieve high sustainable growth rates future rate decisions and favoring, ceteris paribus, a higher in the medium term. exchange rate. In early February, even before events in Libya pushed The government’s decision to tighten its belt will not up the oil price sparking inflationary concerns, Libertad only help to maintain macroeconomic stability, but is also y Desarrollo called for a sign of fiscal restraint and consistent with the concern it has shown for improving suggested the amount of the possible reduction - exactly economic competitiveness, which is key to a higher, stable US$800 million. exchange rate in the long term. bUSiness chile The second reason for the budget reduction is rising Ricardo Matte is Director of the Economic Program at the Santiago think- fuel prices. Low inflation in February (0.2 percent) was tank Libertad y Desarrollo

business Chile April 2011 37 Public Policy Maintaining Momentum One year after Chile joined the OECD, the organization’s Secretary General, Angel Gurría, visited Santiago in April to launch a new study on Chile’s public policy challenges. By Julian Dowling

n May 2010, Chile became the OECD’s second Latin American member after Mexico. I The invitation to join the organization was a reflection ofC hile’s progress including its sound institutions, solid macroeconomic framework, and the measures it has adopted to liberalize trade, enhance investment and strengthen social policies. “Chile’s admission to the OECD is testimony to the extraordinary economic and social transformation it has accomplished over the past two decades,” said the OECD’s Secretary General, Angel Gurría, during a visit to Chile in April, his first since the country’s accession. But the challenge today is to maintain this momentum to improve the well- being of the Chilean population even further, said Gurría. “Notwithstanding past achievements, there is still a lot to do. Income per capita in Chile remains well below the OECD average, and inequality and poverty are still high,” he told government officials at the Finance Ministry. President Sebastián Piñera and OECD Secretary General Angel Gurría With a Gini coefficient of around 0.5, the degree of inequality in household “In the coming months, strong the worst in the OECD, behind Mexico, disposable income in Chile is the highest domestic demand - fuelled by Poland, Estonia and Turkey. among OECD countries. reconstruction spending and booming “To catch up, the country needs A new report by the OECD titled international commodity prices - more aggressive competition policies, “Maintaining Momentum: OECD threatens to stoke inflation,” he said. to promote efficiency and innovation,” Perspectives on Policy Challenges in To control inflation expectations in said Gurría. Chile,” points out some areas where the medium-term, the government must Recent legislative reforms in this area Chile needs to improve. continue to withdraw monetary and are a step in the right direction, but the Chile has weathered the shocks of fiscal stimulus, he said. government must now ensure efficient the global recession and last year’s A second area of focus is implementation, he said. earthquake well, but the key challenge productivity growth. Reducing regulatory red tape for now is to achieve a strong recovery while Chile’s labor productivity, measured business start-ups and lowering entry keeping a lid on inflation, said Gurría. in terms of GDP per hour worked, is barriers in the service sectors is also

38 April 2011 business Chile important, said Gurría, adding that the educated and highly-skilled workforce, and inequality, two of the biggest recent reform that reduces the time said the OECD Secretary General. challenges this country still faces. needed to set up an enterprise from 27 “Impressive progress in promoting Chile is already a “best-practice” to 16 days is a “key step forward.” higher educational attainment has country in many public policy areas, Thirdly, Chile has much to gain from been made over the past two decades. but it has the opportunity to learn from improving women’s participation in the The challenge is now to ensure that all the best practices of the world’s most labor market, said Gurría. children have access to high-quality advanced economies, said Gurría. The female labor participation rate education,” he said. The OECD could even serve as a is still well below the OECD average: Gurría praised government efforts to trampoline for Chile to enter the G20 in 2009, only 47 percent of women in attract highly qualified candidates into the and other organizations that coordinate Chile were employed, compared to 62 teaching profession, through scholarships policies between countries, he added. percent across the OECD. for students with good results, and higher The OECD’s first South American The government has taken important salaries for the best teachers. member has a “very bright future” ahead steps to improve the supply of childcare “Our experience in the OECD but “it must not rest on its laurels,” services and extend the maternity leave suggests that this is the right way to concluded Gurría. period, which are measures that have go,” he said. Chile needs to improve policies in proven effective in other OECD countries. In successful school systems like areas such as equal opportunities, “But in order to really tackle the roots those in Finland or Korea, the teaching access to education, female participation of low female labor force participation, profession is highly regarded and the in the workforce and productivity, but the the government needs to invest more best students often become teachers, OECD’s experience can help it to do so. in crèche facilities and address high he noted. This new report offers a policy severance payments,” said Gurría. Progress in these and other roadmap in that direction. bUSiness chile Fourthly, higher productivity growth will fields will enable Chile to continue only be possible if Chile develops a well- moving forward to reduce poverty Julian Dowling is Editor of bUSiness CHILE

Rainbow Play Systems, Inc. es el fabricante de juegos de jardín de madera más grande a nivel mundial. La variedad, diseño y versatilidad de nuestros productos ofrece una tremenda oportunidad de negocios. El entrenamiento y apoyo que damos a nuestros distribuidores les provee con las herramientas que necesitan para crecer y triunfar. Para recibir más información respecto a la distribución de Rainbow en Chile, por favor contáct enos en requests @rps-int ernati onal .com, llámenos al 001-(210)-764-1375, o visite nuestra página www.rainbowplay.com. InteRview Nine Months By Julian Dowling ine months is a long time, as and partnership with the U.S. and the U.S. Ambassador signed on every mother knows, but for The other unforgettable moment March 18. This agreement will identify Arturo Fermandois, Chile’s was the visit of President Obama to training opportunities for workers from Ambassador to the United Chile, which was a powerful sign of small and medium-sized enterprises N States, the time has flown partnership with the U.S. and included (SMEs) in both countries. Chilean since he presented his credentials the signing of seven agreements in areas workers will come to work in select U.S. to President Obama on June 28. including education, entrepreneurship, companies for up to six months with their Chile celebrated its Bicentennial last the environment, culture and energy. salary paid by the Chilean company and September during the same month These agreements will strengthen our partially subsidized by the government. that President Piñera visited California, relationship through concrete measures. The agreement also allows U.S. workers and the following month there was the to work in leading Chilean firms in areas dramatic rescue of the 33 miners in Last year, you said one of your goals such as mining, wine and salmon. Copiapó, in which a U.S. drilling team would be helping more Chileans This agreement is focused on ordinary played a key role. Then, in March, develop their English language skills, working Chileans - we’re not looking President Obama visited Chile for the have you achieved this? for CEOs. The idea was enthusiastically first time. In the case of English education, I am taken up by both parties and I’m excited The Chilean Embassy was involved happy because we have made some to have the opportunity to put it into in all these events, but Ambassador progress: Chile signed an agreement practice soon. Fermandois, a constitutional law expert with the State department, through the The second initiative is to get Chile with a Masters from Harvard University, Fulbright Commission, to send more admitted into the U.S. Visa Waiver has not lost sight of his goals when and better quality teachers to public Program. Meeting the requirements he was appointed by President Piñera schools in Chile. We succeeded in could take two years, but we believe it last year. The Ambassador spoke to bringing the issue to the table and got will benefit the regular Chilean citizen bUSiness CHILE from Washington DC commitments from Chile’s Minister while having a significant impact on about his achievements so far and the of Education, Joaquin Lavín, and the tourism, cultural exchanges and work challenges ahead. Minister of Foreign Affairs, Alfredo opportunities. The main requirements Moreno. We also secured funding this are in the exchange of information Ambassador, when we last spoke you year to send American teachers to including agreements on crime and were about to leave for Washington, the first 30 public schools selected as terrorism. We have already negotiated has it been all you expected? Liceos de Excelencia (Public Schools with the Department of Homeland It has been more than I expected on of Excellence). I’m partially satisfied Security the first of these documents all accounts. There were a series of because now there is awareness in the called “Preventing and Combatting meaningful events that shaped my first government about what needs to be Serious Crimes,” which should be nine months, including the Bicentennial done, but I won’t be completely satisfied signed shortly. in September, then the very fruitful visit until this goal is completely achieved. The other two requirements are a by President Piñera to New York and fully biometric passport, which we California, and then the rescue of the You also said that you wanted the are close to having, and a reduced miners, which was a huge deal in the “ordinary Chilean” to be able to visa rejection rate, which must go U.S. and particularly here in DC. The take advantage of Chile’s close down to 3 percent after falling to 5.1 embassy helped bring technology from relationship with the U.S. Has this percent in 2010 from 5.9 percent in a company in Pennsylvania to Copiapó happened? 2009. Since the Chilean economy is and it ended up being the crucial drill There are two things I am satisfied growing and there are more jobs with in Plan B, so we were very happy with. Firstly, there is a new training better salaries, the visa rejection rate with that. We also hosted a party on agreement between the U.S. Commerce should continue to fall. In a couple Massachusetts Avenue in front of the Department’s International Trade of years, we think Chile will be in a Embassy in October to which hundreds Administration (ITA) and Chile’s export position to be the first Latin American of people showed up including 11 TV promotion arm, ProChile. We put these country admitted to the Visa Waiver stations. It was one of the best nights of two parties together and negotiated an system, which means belonging to a my life and an incredible moment of joy agreement, which ProChile’s director prestigious group of countries. If we

40 April 2011 business Chile succeed in this, the number of trips by Chileans to the U.S. annually – around 160,000 – is expected to double.

Speaking of visas, are the special visas available for Chilean professionals being used? Our FTA with the U.S. provides for 1,400 special visas for Chileans to work in the U.S., but we aren’t using them. Only a small number are used each year and a goal of this Embassy is to promote these visas and make it easier for Chileans to come to the U.S.

Protecting intellectual property remains a challenge in fulfilling the terms of the FTA, has there been progress in this area? Significant progress has been made in terms of putting the differences between the USTR and Chile’s international trade office, Direcon, on the table and agreeing on how to resolve them. There has been concrete action with at least three visits from Chile to the U.S. and vice versa, and the creation of an inter-ministerial committee. Some international intellectual property treaties that were pending have also been passed by Congress and will be enacted soon. In terms of protection for pharmaceutical patents, a key issue between our two countries, an important announcement will be made by the Foreign Minister in the near future.

When you left Chile, you had to leave your band Rockasaurios behind, have you found a new band to play with? I miss Rockasaurios, but I have had two acoustic opportunities in DC - I was invited to play at a party by some Ambassadors, and we ended up playing the guitar and singing until 4am. I have been too busy to play in a band, but I certainly miss my music. bUSiness chile

Julian Dowling is the Editor of bUSiness CHILE

business Chile April 2011 41 Life in the Slow Lane Dear Mr. President By Santiago Eneldo ith all due respect, Mr. President, you could at least have answered my invitation for you and Mrs. Obama (or Michelle as most of us like to call her) to have tea with Mrs. Eneldo and me. W We had our very best tea service cleaned and polished, we made waffles for the girls and Mrs. Eneldo even baked a cake (orange sponge) which is always quite delicious even if she, with good reason, usually leaves the cooking to others. Our disappointment was double as we had promised the “extended family” (about 70 in all) they could camp out in the garden and watch the Tea Party through our living room windows. Our grandchildren were just longing election next year. No guarantees, of course, as both Mr. to play with your absolutely delightful daughters. Carter and Mr. George Bush Senior will tell you… However, I was told by a friend, someone “who knows people thinking positively, we feel sure you will be coming back to in high places at AmCham,” that my having an Iranian Chile and Mrs. E and I would like to extend the invitation nuclear powered generator in the garden may have put for tea (or breakfast if you prefer) now so there will be no me on some Watch List. As we are still waiting on our first excuses for not accepting. You most certainly do not lack delivery of enriched uranium this really is not a threat. I for transport, but I would recommend a local taxi (try and had even gone so far as to hire 40 retired plainclothes pick one with good suspension and a driver who has lived detectives to take care of perimeter security. This, when in Santiago for a few years) because no one would believe combined with the aggressive instincts of our labrador, you are out and about without 100 SS agents!! Local cab – Picasso, would have kept you and your family safe from safe as houses. Talking of which, we have quite a nice one any lunatics, fanatics or local football hooligans. and you will be very comfortable; a rec room with a big TV But you never came! Earl Grey tea made with freshly upstairs and no earthquake damage. filtered water – wasted. Honey from my own bees – back in You would be able to see how real, middle class Chileans the jar. When we realized you would not be coming we had live and, if you enjoy the tea as much as I think you will, to explain, somewhat embarrassingly, to the neighbors that stick around and we can share a bottle of Merlot – that’s they could go back to their homes since the “crisis” was an enjoyable red wine – while we shoot the breeze. averted. I know, you are thinking what “crisis”? Well, in Looking forward to hearing back from you this time. order to ensure security for your visit I called in a gas leak I remain disappointed, but confident that our meeting warning and went house to house advising the neighbors has only been postponed and that destiny will bring you to evacuate until it was safe to return home. and Michelle to our front door in the not too distant future. However, our biggest disappointment is that you made Gee, that orange sponge really was great! time to have breakfast with Mr. Sebastián Piñera and Mrs. Cecilia Morel, when I know you would have preferred to eat Sincerely, bacon, eggs (easy over), southern sausage, tomato, grits and homemade sourdough bread with Mrs. E and myself Santiago Eneldo without the need to talk politics. I didn’t go to Harvard (well, I’ve been but just to visit – got the T shirt!!) but we P.S. For those not invited for tea, let your feelings would have been happy just to listen to you tell stories flow: write to me at [email protected]. Your about the family. Another opportunity missed! comments could be useful or totally useless, I will decide We hope you will be successful in your bid for re- which is which.

42 April 2011 business Chile

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