business Chile The voice of the Chilean-American chamber of commerce N°280, JUNE 2012

Chile’s Labor Shortage Trade Testimonial Trade Integration Special Report Developing Drugs Forging the Pacific Urban Planning in in Chile Alliance Santiago

Contents bUSiness CHILE TRADE TESTIMONIAL THE VOICE OF THE CHILEAN-AMERICAN CHAMBER OF COMMERCE N°280, JUNE 2012 6 Developing Drugs in Chile US biopharmaceutical company Medivation’s lab in Santiago helped develop a new prostate cancer drug that could soon be Life in the Slow Lane available in the United States. 42 Driving Me Mad Chile’s Labor 8 regional Integration 29 AACCLA Special Shortage Allies of the Pacific Hemisphere Leaders Commit After his car was stolen, TRADE TESTIMONIAL TRADE INTEGRATION SPECIAL REPORT The PacificA lliance between to Free Trade Mr. Eneldo bought a new Developing Drugs Forging the Pacific Urban Planning in in Chile Alliance Santiago Chile, Peru, Mexico and The Association of American Very Smart XV instead Colombia was formally Chambers of Commerce in Latin of a Harley but he may created in June and is aimed 12 America (AACCLA) held its annual regret the decision. Chile’s Labor at expanding trade with Asian Business Future of the Americas Shortage markets. Conference in May.

With Chile close to full Cover Story Economic Snapshot employment, skilled 12 36 workers are in high Chile’s Labor Shortage: Euro Crisis Redux: Contagion demand and Workers Needed Fears Mount (Again) Despite the crisis in Greece companies are The jobless rate in Chile has fallen to its lowest level in 15 years, and contagion that has affected seeking new ways to bond yields in Italy and Spain, fill job vacancies. which is good for workers but it poses problems for companies. Chile’s exposure to Europe remains limited. 20 Special Report © 2012 AmCham Chile 38 Breakfast Special Report Reproduction in whole or in part is Urban Planning in Santiago 20 Chile: The Road to Development strictly forbidden without permission Santiago’s urban problems are from the publisher. Opinions expressed in Economy Minister Pablo Longueira Urban Planning in typical of a large and rapidly bUSiness CHILE are those of the authors told AmCham members that Santiago and do not necessarily reflect those of developing city, but solving them Chile must avoid the specter of AmCham or bUSiness CHILE. We accept no requires better coordination Traffic congestion, air responsibility for the accuracy of the articles protectionism as it continues on its between municipalities. pollution and rampant and any unforeseen errors. bUSiness CHILE path to development. is published monthly, 10 months a year construction are and mailed free of charge to AmCham Spotlight members. Letters are welcome. They should 26 40 Interview daily rites endured by be accompanied by the author's name and daytime telephone and sent to Chile-US Energy Solutions Chile’s Year of Entrepreneurship Santiago’s residents, but [email protected] For reasons of An AmCham seminar at the Hernán Cheyre, executive how can these symptoms space limitation, AmCham reserves the International Fair of Technologies right to edit letters published. vice-president of Chile’s of economic growth be (IFT Energy 2012) focused on Advertising inquiries should be addressed Economic Development Agency mitigated? to AmCham's Sales Department: Paulina innovative solutions for Chile’s (CORFO), talks about promoting Dellafiori: E-mail: cristina.ordenes@ energy shortage. amchamchile.cl; Phone:2909741. Fax 2120515 entrepreneurship and innovation. Av. Presidente Kennedy 5735, Torre Poniente, Of.201, Las Condes, Santiago de EDITORIAL BOARD 2012 Chile; E-mail: [email protected]; www.amchamchile.cl; www.businesschile.cl CHAIR, Kathleen Barclay, Asesorías KCB; VICE CHAIR, Karen Poniachik, British American Tobacco Chile; VICE CHAIR, Manuel José Vial, Grupo Vial Abogados; PAST CHAIR, Michael Combes, Marco Chilena; GENERAL EDITOR, Julian Dowling, AmCham Chile; ASSISTANT EDITOR, Mariana Ossa, Production AmCham Chile. K & D Comunicaciones Ltda. Olga Kliwadenko, MEMBERS General Manager, 11 de Septiembre 1945 - Of. 213, Providencia. Phone: 481-6940 / Rodrigo Ballivián, AmCham Chile; Ari Bermann, 3M Chile; Pelayo Bezanilla, Coca-Cola de Chile; Ruth 481-6941, Cell: (09) 6601-5505; Bradley, Freelance Journalist; John Byrne, Boyden Consultores Chile; John P. Dill, Project Management; e-mail: [email protected]; Francisco Garcés, Banco de Chile; Ricardo Inostroza, AES Gener; Javier Irarrázaval, The Walt Disney [email protected];www.kyd.cl Company Chile; Olga Kliwadenko, K&D Comunicaciones; Gideon Long, BBC/The Economist; Vincent McCord, Asesorías e Inversiones CarCon; James Newbold, Tanager Investment; Roberto Ossandón, Ossandón Abogados; Paulina Dellafiori, AmCham Chile. business Chile June 2012 3 AmCham Global Sponsors 2012

4 June 2012 business Chile Editorial

The Power of Consensus Building

Chile has distinguished itself economically and statements from members of the local business politically over the past 30 years. Clearly defined rules community warning that a lack of consensus around of the game, applied equally to all players – domestic certain policies, most notably the country’s energy and foreign – and built upon the basis of broad-based policy, is hindering their ability to make investment political consensus, have been the hallmark of the decisions. If a consensus on this matter is not reached country’s success. quickly, foreign investment could be affected and one As a result of this foundation, Chilean and foreign of Chile’s greatest assets could be in jeopardy. businesses have felt confident investing in the country. However, President Piñera has recognized the Of particular note is the high quality of the Chilean importance of this issue and has acted rapidly to political and business elite that has been reflected initiate a dialogue. It is a positive sign that the business by the commitment of the local business community community accepted his invitation and has been to invest even in the most difficult of times. This has, willing to publicly articulate its concerns. This shows a in turn, forged a strong base upon which foreign new maturity in dealing with complex issues that arise investors have been confident to participate. naturally in the course of making strategic long-term This seems obvious; however, the uniqueness decisions that are in the country’s best interests. of the broad consensus that helped create such a The public dialogue on the energy issue indicates fertile investment climate is perhaps the single most that such matters will continue to be handled in an important factor that makes Chile stand out in the open and transparent manner. Moreover, in a world developing world. The fact it was able to achieve where social media, the Internet, and higher levels this consensus early on, gave it a kick-start in the of participation by civil society are facts of life, it is race to become a fully developed country and is the critical that this discussion involves all interested reason so many other nations look to Chile as an parties. Chile’s embrace of these new realities bodes example of success. well for the country’s future. Chile has enhanced this base by building a network We, at AmCham, look forward to participating in of trade agreements around the world, the most this necessary and stimulating dialogue. We hope to recent being the Pacific Alliance between Chile, Peru, contribute to the process with activities such as the Mexico and Colombia, which is discussed in this first International Technologies Fair (IFT Energy 2012) month’s edition of bUSiness Chile. These numerous held in Santiago last May that was organized by the and far-reaching agreements have driven economic US-Chile Energy Business Council in which AmCham growth and helped to strengthen the country’s political plays a leadership role. We are confident that this consensus for the benefit of its people. dialogue will lead to a consensus that will generate At the same time, however, we have recently seen new opportunities for trade and investment.

BOARD OF DIRECTORS EXECUTIVE COMMITTEE

EXECUTIVE DIRECTOR Enrique Ostalé, Walmart Alfredo Ergas, Enersis PRESIDENT VICE CHAIR FINANCE AND ADR COMMITTEE Javier Irarrázaval, The Walt Disney Company Rodrigo Ballivián, AmCham Karen Poniachik, British American DIRECTORS Tabacco Chile Guillermo Ochoa, 3M VICE-PRESIDENT; CHAIR LABOR AND HUMAN CHAIR COMMERCE AND BUSINESS CAPITAL COMMITTEE VICE CHAIR EDITORIAL COMMITTEE Carolina Valdivieso, Kimberly Clark Pablo Achurra, Aramark Sudamérica CHAIR TRADE AND INTERNATIONAL Luis Siles, IBM de Chile Mauricio Ramos, VTR Global Com SECRETARY GENERAL; CHAIR LEGAL BUSINESS Mitch Larsen, U.S. Embassy Kathleen Barclay, KCB Asesorías COMMITTEE CHAIR EDITORIAL COMMITTEE Michael Grasty, Grasty, Quintana, Majlis & Cía Fernando Concha, Citigroup EX OFFICIO CHAIR FINANCE AND CAPITAL MARKETS

TREASURER Felipe Cerón, AES Gener Gonzalo Iglesias, Coca Cola de Chile ADVISORY COUNCIL CHAIR CORPORATE AFFAIRS AND AmCham Mision Statement PAST PRESIDENT SUSTAINABILITY COMMITTEE Rubén Covarrubias, “Promote free trade and business between Chile and the United States" Ricardo García, Camanchaca Inc. Universidad Mayor Luiz Marcelo Moncau, Microsoft Chile

business Chile June 2012 5 TRADE TESTIMONIAL Developing Drugs in Chile US biopharmaceutical company Medivation’s laboratory in Santiago helped to develop a new cancer drug that is soon to hit the market in the United States and could lead to more companies doing biomedical research in Chile. By Julian Dowling

xcept for the security and biochemist and director of at a molecular level, by acting as ID badges, the lab on the research at US biopharmaceutical a plug to block testosterone from second floor of a concrete company Medivation. acting on “androgen receptors” building in Santiago’s Despite being stuck indoors on a and causing malignant tumors. E Ñuñoa neighborhood sunny afternoon, Bernales and his But why did Medivation come has the feel of a high school team are all smiles. That’s because to Chile for this? It all started in chemistry class. A dozen Medivation, and its US partner California, recalls Bernales, who researchers in lab coats are Astellas Pharma, are on the verge has a PhD in biochemistry from the peering through microscopes or of launching a prostate cancer University of California and worked squirting brightly colored liquids drug they helped to develop called as an intern at the biopharmaceutical into racks of test tubes. But Enzalutamide (a.k.a. MDV 3100). firm Chiron, co-founded by world- close the blinds on the majestic The drug, which could extend renowned Chilean biochemist Andes Mountains visible through the lifespan of patients by 40%, Pablo Valenzuela. the large east-facing windows, is expected to get US regulatory When Valenzuela returned to and you could be anywhere in approval in the coming months, Chile and established the non- the United States – or India. says Bernales. profit Life Sciences Foundation “This is where it all happens, And that means potentially huge (Fundación Ciencia Para La Vida) this is where we have fun,” says profits. After positive results of in 1997, he stayed in touch with Sebastián Bernales, a Chilean clinical trials were announced last former colleagues in California. November, shares for Medivation Years later, when Medivation’s (NASDAQ:MDVN), which is based Hung was looking to outsource in San Francisco, rocketed from research to cheaper locations, he US$16 last November to US$88 thought of Valenzuela. in May and the company’s market In 2007, Hung asked Bernales valuation has soared to over to lead Medivation’s first lab US$3 billion. outside the United States – using The drug wasn’t created in Chile facilities provided by Valenzuela’s – it was licensed by Medivation’s Life Sciences Foundation which president and CEO, David Hung, charges a small overhead. from a professor at the University of Bernales jumped at the chance California five years ago – but Bernales’ and has never looked back. team played a key role in gathering “Opening a lab in Chile for a US data on how the drug works, which is company was a crazy idea, but required for its approval. you never know where the next Sebastián Bernales, Medivation They discovered that it works, discovery will come from,” he says.

6 June 2012 business Chile Chile’s main advantage, according to Bernales, is the Developing Drugs high quality and low cost of its scientists. “There is a limited pool of people to hire from and supplies are more expensive, but human in Chile resources are much cheaper and our scientists are really well prepared,” he says. Bernales himself doesn’t spend much time in the lab these days. He spends half his day on the phone and Skype talking to colleagues in the United States and India. “The time difference with Chile is no excuse, I try to be online all the time,” he says. But he stresses The Medivation team at Santiago’s Life Sciences Foundation that personal relationships are important and are a big part of “Pablo Valenzuela has given us speed up the process. the reason why Medivation chose freedom from regulations, which Then there is the issue of Chile: “It’s all virtual so you have you need for innovation because intellectual property. Some to trust people on the other side you have to be able to work very companies in Chile produce and of the world.” fast,” he says. sell generic drugs for less than The strong ties forged by This need for quick results is why the original, which is a sore point Valenzuela in California are another Medivation works with a dozen in relations with the United States. reason. The Foundation continues Contract Research Organizations But companies like Medivation to promote this relationship (CROs) in Taiwan, France, the are mainly concerned about through its Science and Friendship United States and India amongst protecting their products in key program that brings graduates other countries. The advantage of markets, which is why it patents from California’s universities to these organizations, basically labs- any product developed in Chile in Chile to work and study. for-hire, is that they do specific the United States. One thing Bernales learned experiments quickly, confidentially Intellectual property is especially in California is that companies and efficiently, but often at a high important as Medivation need the freedom to fail. For price, says Bernales. continues to look for new drug example, Medivation’s Alzheimer It’s easier if the CRO is across opportunities, or what Bernales drug Dimebon recently fizzled in the road, as in the case of calls “biological pathways”, that advanced clinical trials, but the Medivation’s lab in India, but in could be discovered in Chile. company did not give up and now Chile there are no such research “It’s important for us to have new it is in good shape. organizations. This presents a programs, we cannot live on one Innovation is another crucial business opportunity for Chilean drug alone,” he says. ingredient. Public funding for companies, points out Bernales. Medivation’s experience in Chile research and innovation is With an office in the United has been a striking success, but available in Chile, for example the States to receive orders, a Bernales is careful not to look Foundation receives funds from Chilean research lab could offer too far ahead or to overstate the Scientific and Technological this type of service at a discount, the importance of hard work, Development Fund (FONDEF) he suggests. Sending samples wherever it is done. “Too much and the Basal Program, but it abroad can be expensive and publicity is not good; you have to must continually reapply and time-consuming for companies do the work first.” bUSiness chile there are too many rules that like Medivation, but the Free inhibit the development of new Trade Agreement between Chile Julian Dowling is Editor of bUSiness CHILE ideas, says Bernales. and the United States could help

business Chile June 2012 7 REGIONAL INTEGRATION Allies of the Pacific After endless talk of regional integration in Latin America, but little action, the Pacific Alliance between Chile, Colombia, Peru and Mexico seems to be a step in the right direction. By Sebastián Pérez-Ferreiro

eru’s Former President the shared principals and Alan García has called the objectives that helped to facilitate Pacific the “ocean of the negotiations. future”. It’s not hard to see A spin-off of the wider and P why - on the opposite side fruitless Pacific Arch initiative, of the ocean lies Asia, a vast and which in turn derived from the populous trading partner hungry failed US–led Free Trade Area of for commodities produced in Latin the Americas (FTAA), the Pacific America. But, as García has pointed Alliance integrates countries that out, Peru, Chile, Colombia and are already committed to each Mexico are better positioned to tap other through bilateral agreements. this huge market if they are united. But it also establishes the basis The four countries represent a for admitting future members. combined market of 215 million In fact, two of the Pacific Arch people with an average per capita “The cumulative rule of countries are waiting in the wings: income of US$13,000. They also origin is the most evident Panama and Costa Rica acted as account for about one third of Latin observers during the signing of the America’s GDP - some US$2 billion, gain of this agreement.” framework agreement and may be equivalent to the ninth largest ready to join the open accord as economy in the world (California) Rodrigo Contreras, early as 2013. - and half of Latin America’s total DIRECON trade with the rest of the world. Rules of origin In early 2011, then-President trade agreement, it seeks the free García proposed a trade integration movement not only of goods but Crucially, the new accord includes initiative called the Pacific also services, capital and people… cumulative rules of origin, which Alliance. The first meeting of the together we can go further and means that Chilean producers can four countries was held in Lima faster than if we acted on our use Peruvian and Colombian inputs in April last year and established own,” said President Piñera at the to export to Mexico, and still have the framework for negotiations. signing ceremony. preferential access to that market Chile hosted the fourth meeting “In today’s world characterized under the Free Trade Agreement on June 6 and the leaders of the by recession, stagnation and between the two countries. four countries - Chilean President economic slowdown, it is satisfying “The cumulative rules of origin is Sebastian Piñera, Mexico’s Felipe to note that our countries are the most evident gain of the Pacific Calderón, Colombia’s Juan Manuel leading the way in growth, free trade Alliance agreement,” the director of the Santos, and Peru’s Ollanta Humala and integration,” he continued. Foreign Affairs Ministry’s Department - met at the Paranal Observatory Colombia’s President Juan of International Economic Affairs near Antofagasta to sign an Manuel Santos called the (DIRECON), Rodrigo Contreras, told agreement that formally created agreement “the most important bUSiness Chile. the Alliance. process of integration in Latin “Other advantages are tariff “This is much more than a free America” and he emphasized convergence, free movement of

8 June 2012 business Chile businesspeople, and the possibility of university exchange programs. So, we’re not limiting ourselves to mere commercial issues in this negotiation - we’re going a step further,” says Contreras. Although the United States was not invited to join the initiative, US companies still stand to gain, according to the US Chamber of Commerce’s senior director for the Americas, Patrick Kilbride. “US companies invested in the region can benefit from the President Piñera at the IV Summit of the Pacific Alliance. efficiencies and the networks established by the Pacific steps, such as making it easier the Paranal ceremony. Alliance,” he says. for business travelers to move As part of its strategic interest “From a broader policy around the Alliance, facilitating in the Asia-Pacific region, Chile is perspective, though, we regret student exchanges, and integrating involved in ongoing negotiations to that the United States did not electronic markets. widen its Trans-Pacific Partnership take a more active role. It was All in all, though, the biggest (TPP) agreement. Chile was a frustrating to see the FTAA not takeaway for the newly minted founding member of the trade pact, brought to fruition, but some of the Pacific Alliance members is the previously known as P4, when it countries engaged in the Pacific knowledge that they are not alone. came into force in 2006 along Arch, and ultimately the ones “There’s a feeling of strength when with Brunei, New Zealand and that were ready to move forward, you go before a third party as Singapore. Now the United States formed the Alliance. Those that an association of at least four and other countries are keen to did not will have to catch up later,” countries, instead of negotiating join the agreement which is seen says Kilbride. individually,” says Contreras. as a vehicle for trade liberalization Apart from Costa Rica and across the Asia-Pacific region. Panama, the members of the Bound for Asia But considering that China has Pacific Arch not included in not expressed interest in joining the Alliance are Ecuador, El The naming of the Pacific Alliance the TPP, not everyone thinks Chile’s Salvador, Guatemala, Honduras is no accident. It is focused on participation is a good move. and Nicaragua. expanding trade across the Pacific “For South America today, it’s As for the founding members, with Asia, where the four countries more important that the Chinese Contreras explains that Chile, exported a combined US$71 billion economy grows a percentage Peru, Colombia and Mexico will worth of goods and services last year, point than a one-point growth in implement the agreement in two registering an annual average growth the US economy,” says Osvaldo stages. The first will strengthen of 13% between 2007 and 2011. Rosales, head of the International the trade agreements already in Together, Chile, Peru, Colombia Trade and Integration Division place (Chile, for instance, is close and Mexico aim to negotiate better at the United Nations Economic to achieving a zero tariff zone with terms of trade and investment with Commission for Latin America and Colombia and Peru). The second their Asian partners. “The Asia- the Caribbean (ECLAC). will interconnect the existing Pacific region is not just the world “If China is the pretty girl at the bilateral accords between the of the future, but the world of the party, then is the TPP the best four countries and add additional present,” said President Piñera at way to get to her? I have serious

business Chile June 2012 9 REGIONAL INTEGRATION

“US companies can benefit “The Alliance will allow “One thing is having an from the efficiencies and these countries to collectively agreement and another is networks established by manage their commercial the norms to implement it.” the PacificA lliance.” relationship with the Asia- Patrick Kilbride, Osvaldo Rosales, Pacific region.” ECLAC Hedmond Ríos, U.S. Chamber of Commerce CelfinC apital

doubts,” he says. and Peru launched the Integrated among these countries, increase According to Rosales, China is Latin American Market (MILA by legal certainty for operators and waiting for a collective response its Spanish acronym), creating the traders, and reduce interest rates, from Latin American countries first private cross-trading platform all of which favors investment and about how they want to relate in the region. has a potent effect on capital.” to the new engine of the global Although MILA started off slow, The business community is economy, and the Pacific Alliance with modest trading volume, the doing its part to move the Pacific is a positive step in this regard. potential addition of the Mexican Alliance forward and private sector Yet despite all the talk about China, BMV Exchange in 2013, and representatives from the four countries which has overtaken the United perhaps Brazil’s BM&F Bovespa held a parallel summit during the States as Chile’s largest export further down the road, could turn it meeting at the Paranal Observatory. market mainly due to its demand into a global financial player. From the vantage point for copper, the US Chamber of And Foreign Direct Investment of government officials and Commerce’s Kilbride believes that (FDI) in the region is growing. The businesspeople, high up in the the United States has a healthier World Investment Report, prepared Atacama Desert, the Pacific Alliance relationship with Chile and the rest by the United Nations Conference on sails west with the wind on its back. of the Pacific Alliance countries. Trade and Development (UNCTAD), But ECLAC’s Rosales, who advised “Chile has a more diverse trade shows that last year Latin America some of the governments during relationship with us, one that involves and the Caribbean received 34.6% the Pacific Arch negotiations and many different sectors of its economy of total FDI in the world, for a total of pushed to no avail for a regional and is more resilient and sustainable US$216.4 billion. free trade agreement, fears it could over time - it’s not susceptible to Colombia was fifth in the global all amount to little more than a commodity price shocks.” ranking of FDI growth and first in photo opportunity. the region last year with US$14.4 “Time and lots of gray hairs Market integration billion, an increase of 113.4% from teach you that there’s a huge gap 2010. Chile grew by 16.4% in 2011, between the headlines and the The four countries have already while FDI in Peru rose 7.4%. real content of an agreement,” increased integration in areas such “Investors have been looking for says Rosales. “For now, until as electronic markets, scientific an Andean framework for some we see results, it’s just good research, export promotion and time,” says Hedmond Ríos, an intentions.” bUSiness chile tariff elimination. economist at Chilean broker Celfin

In May last year, the stock Capital. “An agreement of this kind Sebastián Pérez-Ferreiro is a freelance journalist based exchanges of Chile, Colombia can lubricate the economic p olicies in Santiago

10 June 2012 business Chile BOYDEN 21,5X28 Amcham.indd 1 16-03-12 15:43 COVER STORY Chile’s Labor Shortage: Workers Needed The jobless rate in Chile has fallen to its lowest level in 15 years and by some measures the country is at (or close to) full employment. That’s good for workers but it poses problems for companies, many of which are struggling to find well-trained employees at competitive rates of pay.

By Gideon Long

couple of years ago, around a quarter of the people who walked through Ignacio González’s office door in A the Santiago suburb of Las Condes were unemployed. Most were well-qualified professionals with impressive CVs but they were struggling to find work. “That’s changed,” says González, general manager of Mandomedio.com, a headhunting company. “These days everyone has a job. They come to us because they’re looking for a better one.” Chile’s unemployment rate has fallen dramatically in the past three years. In mid-2009, at the height of the global financial crisis, it was close to 12%, but in the three months to the end of April this In December 2011, unemployment “We’ve overseen the best period year it had dropped to just 6.5%, in the Santiago area (home to around of job creation in our history,” said according to data from the national a third of Chile’s population) fell to Larraín. “Some people say we’re statistics institute, the INE. 6.2%, figures from the university’s at full employment, and perhaps It’s difficult to make historical Microdata Center show. That was we’re close to that.” comparisons using INE unemployment its lowest level since March 1996. Unemployment is unlikely to data because the institute changed In a speech in New York in April, stay so low and, indeed, there its methodology in 2010. But statistics Finance Minister Felipe Larraín are already signs that it’s rising in from the University of Chile, which said the government had created some areas, due in part to seasonal has measured the jobless rate 720,000 new jobs since coming to factors (it usually climbs during in the Greater Santiago area using power, at a rate nearly four times the Southern Hemisphere winter unchanged criteria since 1957, faster than under the previous due to agricultural redundancies). suggest how low the current rate government. Around 400,000 of In its most recent survey, the really is. those jobs have gone to women. University of Chile said the jobless

12 June 2012 business Chile rate in Santiago jumped to 8% in Secondly, there are important March, up 1.8 percentage points differences between the from three months earlier. respective employment rates for Even so, national unemployment men and women. More than 70% is impressively low by historical of the potential male workforce standards, and David Bravo, an is employed while for women the economics professor and director rate is barely 50%. of the Microdata Center, says he Thirdly, the headline figures mask expects it to average a lean 7% a stubborn youth unemployment in 2012. problem: 19.8% of the potential As ever, though, the devil is in workforce aged between 20 and the detail. 24 is out of work compared to just Firstly, there are big discrepancies 4.4% for those aged between 50 between different sectors of the “There’s a disconnect and 54. economy. Employment in the between the skills that Job quality is also an issue. construction industry in Greater companies need and those Critics of the government Santiago soared 14.8% year- say many of the new jobs are on-year in March and 11.5% that the country’s education temporary, insecure or poorly in industrial manufacturing. system provides.” paid. Wages remain relatively low. But during the same period, More than half of Chilean workers Andrea Repetto, employment in the retail sector earn less than US$460 a month, Adolfo Ibañez University fell 10.5%. points out Andrea Repetto, an COVER STORY

are available don’t have the necessary skills and training. The technical colleges have done their best to adapt their curricula to meet company needs, but there’s still a gap.” Sergio Cavagnaro, general manager of the Chilean Chamber of Construction (CChC), says his sector is “already at full employment” and describes the situation as “critical”. The chamber is training women to take jobs that were once the preserve “We’re proud of the low of men and even looking into the “Faced with a labor possibility of taking on prisoners shortage you can operate unemployment rate, but on day-release schemes. at the same level with we’re still concerned The problem is by no means fewer staff, but you can’t about the 500,000 limited to construction firms. sustain that for long.” people seeking work.” Retailers like Walmart are finding it tough to entice and keep staff Claudio Hohmann, Bruno Baranda, – either unskilled workers to fill Labor Ministry Walmart Chile supermarket shelves or skilled professionals to run the company. economics professor at Adolfo Yet still there is a labor shortage “In periods of high unemployment, Ibañez University. and in the construction industry people come to us to look it is particularly acute. Not only for work, but in times of full A race for talent has the sector bounced back employment like now, it’s the strongly from the global financial other way around,” says Claudio For private companies, the meltdown of 2008/9, with projects Hohmann, manager of corporate low jobless rate means, first and like Santiago’s emblematic affairs at Walmart Chile. “Now, it’s foremost, a scarcity of labor. Costanera Center back on track, the company that has to go out “There’s a significant deficit of it also received a shot in the arm and look for workers.” workers in mining, agriculture, from reconstruction following the Hohmann says Walmart, which construction, transport and some earthquake of February 2010, which employs 40,000 people in Chile, industrial sectors, although not all,” generated demand for everything has become more proactive. says Bruno Baranda, undersecretary from builders and carpenters “We’re going out to the universities for the Labor Ministry. “In the to plasterers and welders. The and showcasing the company to metalworking sector, for example, sector expanded 8% last year, young people, because attracting there’s a shortage of electricians outstripping the wider economy talent has become much more and welders.” by two percentage points. Up and competitive.” One initiative that’s helped bring down the country, construction He says staff turnover has liquidity to the labor market is a companies are struggling to find increased. Young people are now government website, the National the workers they need. in an enviable position: they can Employment Service (Bolsa “This is a problem which has leave a job after just a few months Nacional de Empleo, www.bne. been growing over the past two and walk straight into another cl). Launched in 2011, it allows years,” says Carolin Carboni, one, often with better pay. workers to upload their CVs human resources manager at Many companies complain of and companies to advertise job Besalco, a construction company losing staff to the big mining vacancies. Some 200,000 CVs employing 9,300 people. companies in northern Chile. have been posted on the site and “There’s a lack of quality too,” “Mining firms have the advantage 300,000 jobs advertised. she adds. “The people who that, at the margins at which

14 June 2012 business Chile

COVER STORY

they operate, they can offer more companies find more workers at a attractive wages,” says Hohmann. reasonable price? “Retailers operate at very tight One obvious answer lies in the margins so we can’t always offer great potential of Chile’s women. those kinds of salaries.” At around 50%, the country has Unsurprisingly, wages are rising. one of the lowest rates of female According to the INE, salaries in participation in the workforce Chile have risen 6.6% in real terms anywhere in the Organization since 2009 and the cost of labor has for Economic Cooperation and risen 9%. The Chilean Chamber of Development (OECD), although it Construction says wages in its sector has improved in recent years. have risen by 20% since 2009, and by “Given Chile’s level of “The fiscal stimulus even more in the north, where the lure development, that rate should package of January 2009 of the mines is strongest. In his May be at least 15 percentage points 21 address to the nation, President higher than it is,” says Andrea has helped bring down Sebastián Piñera said wage inflation Repetto. “From that point of unemployment and this was running at 6% a year, a full 2.5% view, Chile isn’t even close to full government has continued ahead of consumer price inflation. employment. There’s still a lot of where the last left off, with That’s good news for workers, but not potential to bring more workers a firm hand on the tiller.” so good for payrolls. into the labor market.” The government says it’s David Bravo, More workers please! trying to unleash that potential. University of Chile Undersecretary Baranda points to So, where can these private the Women Miner (Mujer Minera) program, launched in February addressed, the untapped potential workforce is Chilean. this year, as one example. The of Chile’s female workforce is likely The CChC’s Cavagnaro says program offers training to 2,000 to remain just that – untapped. many construction companies women from the poorest sectors Another potential source of would like to take on more of society to help them find work labor lies outside Chile’s borders. Peruvian, Bolivian and Colombian in the mining industry. There are millions of unemployed migrants but they can’t, for fear of But there are still obstacles to Europeans and work-hungry Latin breaking the law. “We’re talking to the employment of women, not Americans who could potentially the Labor Ministry about modifying least Chile’s extremely generous find jobs here. González, whose that rule,” he says. maternity leave provisions, which headhunting company has offices It’s not just foreigners who make some companies reluctant in Peru and Argentina as well as are being lured to Chile by the to hire women. Ignacio González at Chile, says Chilean firms are often prospect of work. Chileans are Mandomedio.com says he’s noticed reluctant to import labor from too. As the economic situation a fall in the number of women being abroad, but that is changing, due in Europe remains dire, many hired since those provisions were to necessity. He says companies Chileans there are returning to strengthened last year. are starting to look to Spain, their homeland. “I’m getting a lot Some women say they would be where the jobless rate is over of calls and CVs from Chileans in tempted to work if they had better 20%, for potential well-qualified Europe who feel it’s maybe time to access to childcare, could work professional recruits. come home,” says González. flexible hours, if wages were higher But there is a limit to how many or if public transport were better, foreigners can work in Chile. At Stuck in the Stone Age allowing them to travel to work present, any company with 25 or more easily and more cheaply. more employees on its books has The other great source of Until these various problems are to ensure that at least 85% of its untapped potential labor in Chile COVER STORY

is its youth. There are far too To her credit, Minister Matthei many young Chileans stuck at has taken the commission’s home, without work, reliant on recommendations to heart their parents for financial support. and promised to send a bill to Here, training is key, and Chile’s Congress to overhaul employee record in this area is lamentable. training in Chile. Labor Minister Evelyn Matthei Francisco Agüero, a former recently acknowledged that when national director of SENCE and it comes to employee training, now the head of its companies’ Chile is “in the Stone Age”. department, says no decision has The National Service of Training yet been taken on whether to phase and Employment (SENCE) is out the system of tax credits, as the state entity charged with the commission recommended. overseeing training. It offers a “It’s being debated and analyzed,” range of subsidies, grants and he says. bonuses to employers and But whether it’s scrapped or not, employees to incentivize training, the emphasis is clearly moving with a particular emphasis on away from tax credits towards women, the young and the poor. “Looking for other SENCE programs. The central pillar of the SENCE’s professionals abroad “The minister is particularly work is a scheme under which interested in a new program called companies can apply for a tax is an extreme measure, Training For Work (Formación para credit in exchange for providing their but one that shouldn’t el Trabajo or FOTRAB), that offers workers with training. The companies be ruled out.” much longer training courses, of decide who is trained and how. between 500 and 600 hours, and But there is a growing consensus Carolin Carboni, targets young people from the that the system is failing. Last Besalco poorest quintiles,” says Agüero. November, a commission of Training of that duration requires experts headed by the economist money, but the government seems Osvaldo Larrañaga published in 2010. That’s not much time to committed to finding it. At US$57 a damning report on training in teach anyone anything. million, FOTRAB’s budget for this Chile, describing it as “clearly Larrañaga’s commission found year is 162% higher than last year, deficient” and “regressive”. Some that SENCE’s tax credits were and other SENCE programs are 27% of funds for training were worth US$226 million in 2010, also being handsomely financed. going to the richest 20% of the accounting for 80% of total public While that remains the case workforce, it found. spending on training. The benefits there is hope that the Chilean The problem is that, all too often, to companies were clear, but the workers of the future will be better the money goes to large companies benefits to workers far less so. equipped to do their jobs, but with employees who are already The panel of experts praised that won’t solve the short-term relatively well trained. It doesn’t some SENCE programs, problem of how to find extra find its way to small companies particularly those financed workers right now. where it’s most needed. through the National Training Fund “The labor shortage is good in Furthermore, because the (FONCAP), targeting young, poor the sense that everyone has jobs, companies choose the content of people. But it said their impact but it’s bad because it means the courses, they tend to focus was minimal. In 2009, for example, the country could be growing on non-transferable skills that are there were 441,000 people aged more quickly, and it’s unable to specific to their own needs. They between 18 and 25 who were do so,” says Cavagnaro. “The don’t necessarily give workers unemployed and who belonged economy has one hand tied to the poorest 40% of Chilean skills that will benefit them in behind its back.” bUSiness chile later life. households. Of these, only 12,000, Finally, the courses tend to be less than 3%, received FONCAP- Gideon Long is a freelance journalist based in Santiago too short – 19 hours on average funded training.

18 June 2012 business Chile Suburban _AMCHAM 21,5x28.indd 1 6/4/12 1:09 PM Special Report Urban Planning in Santiago Santiago’s economic growth has brought problems that have overwhelmed the ability of the city’s authorities to cope. An urban development policy will provide a roadmap, but better public transport and institutional coordination is needed for Chile’s capital to grow sustainably. By Julian Dowling antiago consistently ranks president, Horst Paulmann. But those as one of the most liveable who live and work nearby have a cities in Latin America but different view. The project is expected that reputation is threatened to cause traffic chaos in the area and by urban development office workers are already making plans S problems that are impinging to leave their cars at home and walk or on the quality of life. take public transport. Economic growth in the last 30 years “I’d rather walk… it will be very has brought tangible benefits for the difficult to park there and the traffic will city’s residents, but the dark side of be a nightmare,” says Pilar Sepúlveda, growth has been increasing traffic an investment manager at the Chilean congestion, air pollution and rampant brokerage Tanner whose office is near construction, often with little regard for the Costanera Center. surrounding communities. But the problems faced by commuters Perhaps the most contentious – and like Pilar in Sanhattan could have been most visible – symbol of Santiago’s avoided, says Marcial Echenique, a urban development is the Costanera Chilean architect and professor of Center, a huge mall and office complex Land Use and Transport Studies at on the fringes of the business district Cambridge University. known as Sanhattan. The mall was In 2006, then-Public Works Minister scheduled to open in June and the main Eduardo Bitrán commissioned tower, which dominates the Santiago Echenique to study the road mitigation skyline, will be the tallest tower in South works in Sanhattan. But the plan, which America when completed next year. included a tunnel underneath Avenida The building, developed by local retail Andrés Bello to improve access to the group Cencosud, has been compared Costanera Center, has remained just to the Eiffel Tower by Cencosud’s that – a plan.

20 June 2012 business Chile “Nothing has been done because no economic growth has generated new one took responsibility and that’s the urban problems but the instruments Urban Planning sad truth,” says Echenique. and policies that worked 20 years ago The road works announced by the are not able to cope today,” says Luis Ministry of Public Works in May to relieve Eduardo Bresciani, head of the Urban congestion, including the elimination Studies program at Santiago’s Catholic of the Pérez Zujovic roundabout also University and a former secretary of recommended by Echenique, will not Housing and Urban Planning for the be completed for at least two years. Santiago Metropolitan Region. in Santiago And Costanera is not the only Santiago has not reached the point of building going up in the area. Within a collapse yet, but if its urban problems one-kilometre radius of Pérez Zujovic, are not addressed soon, the worst Echenique estimates there are 900,000 could be yet to come, warns Bresciani. square meters of commercial space Part of the problem is the city’s and 20,000 new parking spaces either population, which has doubled since approved or in construction. 1980 to around 6.5 million, representing “It’s physically impossible for this over 40% of the country’s inhabitants. number of cars to enter the area on the But population growth, which has “There is a grave lack of existing streets,” he says. slowed in the last decade, is not the coordination which has city’s only problem. As prosperity has Cramped by growth increased, so has demand for better brought Santiago to the housing and more space. brink of collapse.” Of course, Sanhattan is not Santiago, Compared to major cities in but its increasing congestion is a symptom of developed countries, Santiago is Marcial Echenique, wider urban development challenges. relatively crowded. According to figures Cambridge University “Santiago is at a crossroads, its from the 2002 census, Santiago has 85 Special Report

inhabitants per hectare, which is more of projects,” says Domínguez. than New York (19), London (42) and And it’s not just residential demand Paris (46), but much less than Karachi, driving development. Demand for which has over 300. education and health services is This is roughly in line with Santiago’s behind the construction of universities, GDP per capita of around US$15,000, colleges and hospitals, all of which but today the city is denser than its level require space. of development would indicate, points Santiago is not growing as fast as other out Echenique. cities in Chile, particularly those in the With Chile close to full employment and north, but it could run out of land within incomes rising, the demand for new housing five years unless a proposal to zone an is surging, says Vicente Domínguez, additional 9,000ha for development is executive director of the Association of Real approved, warns Domínguez. Estate Developers (ADI). New home sales in Santiago rose Mansions in the slums “The lack of an 24.5% to 7,256 in the first three months institutional structure of 2012 compared to the same period of Land designated for social housing last year, according to figures from the projects in Santiago is mainly on the capable of administration Chilean Chamber of Construction, and city’s periphery, which has created on the Metropolitan scale around 75% of those were departments. sprawling ghettos in districts like La is an important part of the Meanwhile, the land available for Pintana and Puente Alto that are home problem.” development is shrinking. According to to nearly a third of the city’s population. a recent study by the Chamber, there While wealthier neighborhoods is less than 2,000 hectares of land wrestle with urban problems brought Pilar Giménez, available for residential projects within by development, these ghettos face Ministry of Housing and Urban Development the city limits. a different set of problems caused by “There is very little land for the number underdevelopment, points out Bresciani. “The political will and coordination exists to change this, but the instruments we have are weak,” he says. Some progress has been made. Economic growth has helped reduce poverty, the city’s housing deficit has been virtually eliminated (although quality of housing remains an issue), and drinking water, sewerage and wastewater treatment coverage has reached nearly 100%. But there is a chronic shortage of green space – a key measure of urban development. According to government figures, five districts of the city, including Las Condes and Vitacura, have 9.5m2 per inhabitant which is line with the amount recommended by the World Health Organization. But the 1.8 million inhabitants of southeastern Santiago, one of the city’s poorest areas, get just 1.9m2 each. According to Pilar Giménez, head of the Urban Development Division at the Housing Ministry, the lack of green space and residential segregation are pressing problems. “Santiago has a deficit of green areas, there are sectors with historical value that are not being adequately protected, many of its public spaces are deficient, it has very problematic transport connectivity, and all these things negatively affect the quality of life,” she says.

Stuck in a jam

As the city has stretched, people rely on their cars to get to jobs and educational centers. And, thanks to economic growth, more people can now afford them. The number of vehicles on Chilean roads has more than tripled since 1990 to 3.5 million in 2011, 41% of which are in Santiago. An average 172 cars per 1,000 inhabitants circulated last year, according to the national statistics institute, INE, but this is still much less than cities like Sao Paolo which has over 300. “Chile, and Santiago in particular, has a low level of motorization,” points out Marcial Echenique. As vehicle ownership rises, traffic congestion is bound to increase. A network of modern highways, built through private concessions, has helped improve traffic flow, but there are not enough of them, points out Echenique who helped design the concessions system in the 1990s. Public transport is an alternative but, unlike London, Paris or New York, Santiago’s public transport system has not kept pace with the city’s development. The Transantiago system, which was introduced in 2006, receives huge state subsidies but the new buses are unreliable and overcrowded. Santiago’s Metro system is efficient and well- regarded, but it is relatively small - it has only five lines while Moscow, with double Santiago’s population, has 14 and New York has 24. Two new Special Report

lines are under construction to better of the Housing Ministry, which is operating independently, problems service the city center, but they are responsible for drawing up a framework are bound to arise, especially in not enough to meet the demand, says for the city’s development known as a situations where there are overlapping Echenique. Plan Regulador. But each municipality responsibilities. Another solution could be charging also has its own plan, which often pulls “There should be a central government a fee to drivers who enter congested in a different direction. that harmonizes the regulations of all areas. This system, known as road For example, municipalities like municipalities,” says Domínguez. pricing, has worked in cities like London Providencia and Las Condes have The Housing Ministry’s Giménez and Stockholm, says Echenique who is created regulations that limit the height agrees: “The lack of an institutional working with the Transport Ministry on and density of new buildings, says framework that can manage a similar plan for Sanhattan. Vicente Domínguez. development on this scale is an “We are studying its impact, it’s an “Communities are much better important part of the problem.” emergency solution,” he says. organized today and are standing Other cities like London and Berlin up for their rights,” he says. have shown that central regulation in Improving coordination “Development is now limited to 10 land use, transport and other areas can stories in some municipalities.” help to manage urban development. Urban planning in Santiago starts With each municipality basically But Santiago’s Intendente, the governor with the Regional Secretariat (SEREMI) setting its own rules and ministries of the Santiago Metropolitan Region,

“It would be very difficult “Santiago is trying to to develop projects like face new urban problems “It’s not enough to impose Titanium or the Costanera with instruments and urban policy from above; Center today because institutions that were we need more channels for municipal norms are much designed 20 years ago.” citizens to participate in stricter.” their communities.” Antonia Lehmann, Vicente Domínguez, Luis Eduardo Bresciani, Izquierdo y Lehmann Association of Real Estate Developers Catholic University

24 June 2012 business Chile originally approved in 1930 and aims to present its first draft by the amended in 1975. But the purpose of end of this year, but institutional this law was to promote construction, reforms will take time. not manage sustainable development. In April, President Piñera formed a Building better communities Presidential Advisory Committee, led by the Ministry of Housing and Urban Fortunately, Chile is not starting from Development, tasked with designing scratch. Julio Poblete, an architect a new urban development policy. The at the firm Dupla, is studying urban committee is formed by 29 members development policies in different including academics, architects and countries on behalf of the United Ministry representatives. Nations Development Program and will “We aren’t reinventing the wheel, share his findings with the Committee. but the idea is to try to come up with Each city combines a unique set lacks the funding and authority, points a series of principals and strategies of cultural, social and geographical out Marcial Echenique. to guide the future of our cities,” says conditions, which makes it difficult to “The Intendente should have Antonia Lehmann, an architect at the compare. “It’s pointless to compare the power to coordinate between firm Izquierdo Lehmann who has been Santiago to postcards of other cities, municipalities and approve or reject appointed to lead the Committee. it will never be like Copenhagen new projects,” he says. “Like all countries reaching a certain where 40% of trips are by bicycle,” level of prosperity, we face new says Poblete. Creating a national policy problems that require a rethinking of But he suggests that Chile can learn our development policies,” she says. from other countries, particularly the Projects like Costanera and Mall Chile has had two attempts at creating United States. For example, in 2009 Castro – a mall built in the center of an an urban development policy – the first President Obama launched the Livable historical city on the Chiloé archipelago was in 1979 and the second, replacing Communities Task Force, a partnership – have made Chile’s lack of an urban the first, was drafted in 1985 – but neither between housing, transport and development policy painfully evident. was supported by a political consensus. environmental authorities to coordinate Urban development in Chile is In 2000, the government of Former federal funding for new urban projects. currently regulated by a collection of President Ricardo Lagos revoked this At the state level, Maryland is a good laws including the General Urbanism policy and began a process aimed at example of what Poblete calls “smart and Construction Law, which was creating a new one but failed to reach a growth”, while cities like Chicago and consensus. Until now, efforts to restart Boston are praised for their urban the process have come to nothing. development. Further north, Toronto The main reason for the failure of these and Vancouver are also considered policies was the lack of public participation well-planned cities. in their creation and their emphasis on Chile could replicate some of their the free market, says Lehmann. initiatives, but according to Poblete it should “Many community groups were develop a policy appropriate for its level of dismantled which reduced public development. “We have basic problems participation… the free market was to resolve like education and health before left as the only instrument of urban getting too sophisticated,” he says. planning,” she says. Making Santiago more liveable This time around, Lehmann’s requires building better communities Committee is holding a series of public but, as Bresciani points out, there is meetings in Chilean cities to incorporate no silver bullet. “Having a vision does “If Chile’s urban problems the views of all sectors, including not solve the problem, it just creates a had been addressed citizens and the private sector. roadmap,” he says. ten years ago, our cities One of the subcommittees is working Meanwhile, Santiago’s residents will on how to better protect Chile’s cultural have to be patient. Traffic congestion would be better off today. heritage, a priority of the government is likely to worsen before getting better, We are paying the price after the February 2010 earthquake but plans made now could benefit future for work not done in the which devastated historical buildings in generations. As Julio Poblete says, “In past.” the hardest hit area, notes Lehmann. the city, things take time”. bUSiness chile Julio Poblete, Of course, creating a new policy Dupla is just the first step. The Committee Julian Dowling is Editor of bUSiness CHILE

business Chile June 2012 25 Spotlight Chile-US Energy Solutions The firstI nternational Fair of Technologies (IFT Energy 2012), organized by the US-Chile Energy Business Council in May, brought together US and Chilean experts to discuss solutions for Chile’s energy shortage.

by Julian Dowling

Javier Irarrázaval and Rodrigo Ballivián, AmCham; Rhiannon Davies, US Department of Energy; Doyle Brewington, Power Tube Inc., and Antonio Monzón, IBM

26 June 2012 business Chile s Chile races towards development, high energy costs threaten to slow its rapid growth. According to a recent report by the Organization for Economic Co-operation and A Development (OECD), Chileans pay 60% more per megawatt than the OECD average and prices have quadrupled since 1998. Part of the problem is Chile’s lack of hydrocarbons. With virtually no oil and little gas of its own, it imports around 75% of its energy needs in the form of fossil fuels, mostly oil, coal and LNG. Chile has plenty of fast-flowing rivers and hydroelectricity accounts for around 40% of its installed capacity, but new generation and transmission projects have been delayed due to regulatory concerns. “The energy issue is important for the economic and social development of the country and, if it is not resolved in the short term, Chile will not be able to meet the increase in demand from residential customers and industries,” said AmCham’s president, Javier Irarrázaval. In this scenario, non-conventional renewable energy and energy efficiency projects could play an important role in meeting future demand growth. The United States has much to contribute in this area. One of the outcomes of President Obama’s visit to Chile in March 2011 was an agreement with President Piñera to create the US-Chile Energy Business Council which is aimed at generating business opportunities between the United States and Chile in renewable energy and energy efficiency. Launched last October with AmCham’s leadership, a key part of the Council’s mandate is bringing together US and Chilean energy experts. To this end, it organized the first International Fair of Energy Technologies (IFT Energy 2012) held in May at Espacio Riesco in Santiago. During the three-day fair, US and Chilean companies demonstrated new technologies while participating in a series of seminars on topics related to increasing the energy supply in Latin America. In parallel, AmCham hosted a seminar titled “Chile- US Solutions for the Energy Issue” with three guest speakers: Antonio Monzón, an energy & utilities industry leader at IBM; Doyle Brewington, founder and chief technical officer ofP ower Tube Inc.; and Rhiannon Davies, Senior Policy Advisor at the Office of Western Hemisphere Affairs in the U.S. Department of Energy. AmCham’s Javier Irarrázaval introduced the seminar Spotlight

and spoke about the Energy Council’s in Chile. An example is “smart grid” meet. Putting a 60-meter tube into advances to date. The Council, which is technology, which allows companies to the ground to extract this energy, at open to all members, has created four remotely gather and act on information temperatures of between 120 and 170 working groups focused on financing, about the behavior of suppliers and degrees Celcius, could solve Chile’s regulation, training, and technology. consumers. IBM’s Monzón spoke about energy problems once and for all, He said AmCham has contacted how smart grids used in Malta and other suggested Brewington. multilateral financial entities such as countries could serve as an example Finally, Rhiannon Davies highlighted the Inter-American Development Bank, for Chile to optimize scarce energy US-Chile cooperation in the energy field the World Bank and the US Eximbank, resources and reduce dependence on and outlined President Obama’s plan as well as angel investors and fund imported fossil fuels. for 80% of energy supplies in the United managers, to seek ways for financing new Smart grids could also help protect States to come from clean energy technologies and infrastructure in Chile consumers in Santiago in the event of sources by 2035. She also noted that that improve the security and efficiency a blackout by automatically detecting Chile has agreements with California of the country’s energy system. where the problem occurred and and Massachusetts, two states with In addition, the Council is working to minimizing its impact, said Monzón. important experience in the energy field. develop training activities in the generation, But, according to Doyle Brewington, The Energy Council is already planning transmission and distribution areas. This Chile could be sitting on all the energy the second IFT Energy fair to be held includes seeking opportunities to send it could ever need. His invention, the in 2013 which promises to be another Chilean professionals to learn and work in Power Tube, is designed to generate golden opportunity for US and Chilean US companies with special visas available power using heat from deep in the companies to exchange experiences under the US-Chile Free Trade Agreement. earth’s core without causing pollution and ideas. Whether any of these ideas “It’s clear that new technologies imply or requiring large amounts of water. come to fruition is up to the companies the need for people who are adequately Chile, like California where Brewington involved, but Chile stands to benefit from trained,” said Irarrázaval. developed his device, lies on the Ring of their cooperation. b US iness chile The Council is also working to promote Fire, which means it produces a large new technologies that could be used amount of heat where tectonic plates Julian Dowling is Editor of bUSiness CHILE aaccla Special Hemisphere Leaders Commit to Free Trade By Kathleen C. Barclay

he Association of American Chambers of Commerce in Latin America and the Caribbean (AACCLA) held its annual T Business Future of the Americas Conference in Mexico City in May. Fervent support for free trade was the recurring message at the mid-year meeting of the Association of American Chambers of Commerce in Latin AmCham leaders at the XVI Business Future of the Americas Conference America (AACCLA) held in Mexico City (AmCham Chile’s Javier Irarrázaval and Rodrigo Ballivián, 3rd and 4th from on May 14-16. right, respectively) The meeting brought together all 23 AmChams in Latin America. AmCham AmChams including AmCham Chile. Ambassadors held a panel discussion Chile was represented by its president, The agreement provides for the on how to most effectively work with Javier Irarrázaval, and executive director, exchange of information regarding the US business community across Rodrigo Ballivián. Kathleen Barclay, a business opportunities for small and the region. An open and constructive member of AmCham's advisory council, medium-sized companies in the United dialogue followed with delegates from was also in attendance. States that arise within the region and the AmChams. The conversation was a Mexico’s President Felipe Calderón, which will be channeled through the follow-up to the February meeting hosted who gave the keynote speech at AmChams working in partnership with by Hilary Clinton between the US State the conference, spoke eloquently of US embassies across the region. Department and AmChams from around the advantages of free trade for the Francisco Sánchez, Under Secretary the world where AmCham Chile was people of Mexico and the region. He for International Trade at the United represented by Javier Irarrázaval. vigorously defended free trade and States Department of Commerce, AACCLA and the AmChams also took open markets as critical to building signed the agreement and delivered the the opportunity to confer their highest global competitiveness. In addition, he luncheon address outlining the United honor – the Eagle of the Americas emphasized the importance of investment States’ trade agenda. Under Secretary award - on former Peruvian President in infrastructure and education as Sánchez stressed the importance of the Alan García for his work in support of complements to free trade policies and agreement, indicating that it is directly hemispheric free trade as embodied in strongly rejected protectionism. related to President’s Obama’s jobs the US- Peru FTA that came into effect President Calderón also spoke of creation priorities. in February, 2009. Former President the importance of regional integration, The AmChams were pleased to hear of García spoke passionately about the indicating strong support for the Pacific the United States’ ongoing commitment contribution of free trade to successful Alliance (Mexico, Chile, Colombia and to free trade and celebrated the development in the hemisphere. Peru), as well as for the Trans- Pacific implementation of the US-Colombian Overall, the meeting was highly successful Partnership. Both alliances demonstrate Free Trade Agreement that came into in bringing together AmCham leaders from strategic support for strategies that effect on May 15. Latin America and the Caribbean to network enhance increased competitiveness of The US State Department was well and reinforce their commitment to the the Latin American Region vis-à-vis Asia. represented. The US Ambassador to promotion of free trade and investment in Another highlight of the conference Chile, Alejandro Wolff, was joined by the Western Hemisphere. bUSiness chile was the signing of a memorandum his colleagues from Mexico, Jamaica, Kathleen C. Barclay is past chair of AACCLA, of understanding between the US Peru, and Costa Rica, as well as Deputy principal of the consulting firm Asesorias KCB Ltda., Department of Commerce and several Secretary of State, Thomas Nides. The and chair of bUSiness CHILE’s Editorial Board.

business Chile June 2012 29 AMCHAM News AmCham Annual General Meeting

On May 30, AmCham held its annual general meeting in its offices at the Marriott Hotel. AmCham President Javier Irarrázaval presented the Chamber’s 2011 highlights and its plans for 2012. In line with its mission of promoting free trade and business between Chile and the United States, "AmCham will lead efforts to anticipate market trends and we will address important topics such as clean production, biotechnology, energy and sustainability,” said Irarrázaval. Finally, Iván Pinto, AmCham’s financial manager, announced the Chamber’s 2011 financial results, which were approved by the members. Later, the guests enjoyed a cocktail sponsored by Aramark. Javier Irarrázaval, AmCham

AmCham MEMBERS Committees New Azerta Comunicación FEG On May 29, AmCham’s Human Capital Estratégica Entertainment industries Committee, chaired by Diego Barroilhet of Consultants Gabriel Bursztyn, Kimberly Clark in replacement of Carolina María Cristina Bitar, Director Valdivieso, heard from four guest speakers: Executive Director Alejandra Loyola, manager of corporate Aleutian Capital Partners PERROT Financial & investment services development for Matrix Consulting; Transport & logistics Jorge Carrión, Alejandra Mehech, director of the private Efraín Rodríguez, Senior VP banking division at Banco Santander Chile; Acquisition Manager Lucia Opazo, human resources manager at Robbins South America 3M Chile; and Rocío Trejo, vice-president Cat Consulting Chile Engineering & construction of human resources for Nextel Chile. The Consultants Rolando Justa, women discussed how their companies’ Beth Hunt, General Director General Manager human resources strategies have produced Alcatel-Lucent de Chile good results in employee satisfaction Colliers Prosin Telecommunications surveys, positioning all four of them in the Real estate Daniel Fitipaldo, Great Place to Work ranking of the 40 best Rafael Araya, Strategic Industries Sales companies to work for in Chile. Commercial Manager Manager Go-In International Outgoing Travel Corp. Tourism Forestry & related Jorge Alarcón, products President Claudio Puentes, President MDF Mining & industries DIRECTV Chile Kevin Patrick Wilson, Satellite TV General Manager Julio López, General Manager Protorq Business services META4 Carlos Reacart, Computer & related Development Manager services Roger Marull, Fugro Panama Country Manager Geology & engineering services Lucía Opazo, 3M Chile; Alejandra Loyola, Matrix David Sackett, Consulting; Rodrigo Ballivián, AmCham; Alejandra Mehech, Banco Santander, and Rocío Trejo, Nextel Chile Director

30 June 2012 business Chile Concha y Toro Receives 2012 Free Trade Award

On May 24, AmCham’s president, Javier Irarrázaval, presented the Chamber’s 2012 Free Trade Promotion Award to the president of Viña Concha y Toro, Alfonso Larraín, during an AmCham breakfast with the Economy, Development and Tourism Minister, Pablo Longueira. Irarrázaval highlighted the history of Concha y Toro, which was founded in 1883, and its penetration in the US market, where today it ranks as the top exporter of Chilean wine and one of the world’s most respected wine brands. In early 2011, it purchased California winery Fetzer Vineyards. "This has been one of the most important Chilean investments in the United States, which is a clear sign of the development of free trade between the two countries," said Alfonso Larraín. Economy, Development and Tourism Minister Pablo Longueira; Alfonso Larraín, Concha y Toro; Javier Irarrázaval and Rodrigo Ballivián, AmCham Washington Trade Mission Visits AmCham

On April 25, a group of 40 businesspeople from committee; Gonzalo Fanjul, Asset Investment Seattle, Washington, were invited to AmCham to Bank; Jackie Mandel, Korn Ferry International; learn about Chile’s economic, political and social Skip Kotkins, Skyway Luggage Company; Delee conditions with a view to doing business with Chile Schoemaker, Microsoft, and Sherry Schwab, HCS in the future and learning new business strategies. Construction Services. AmCham President Javier Irarrázaval and The panel answered questions from the visitors in Executive Director Rodrigo Ballivián attended the relation to construction, mining, the energy sector meeting. The panel of speakers was comprised of and Chile’s main export products such as copper, Kathleen Barclay, a member of AmCham’s advisory wine, wood, salmon and fruit.

Kathleen Barclay, AmCham; Gonzalo Fanjul, Asset Investment Bank; Jackie Mandel, Korn Ferry International; Rodrigo Ballivián, AmCham; Skip Kotkins, Skyway Luggage Company; Delee Schoemaker, Microsoft, and Sherry Schwab, HCS Construction Services.

business Chile June 2012 31 AMCHAM members News AAdvantage Program Sweeps Freddie Awards The American Airlines’ loyalty program AAdvantage received four awards at the 2012 Freddie Awards announced on April 26 in Texas. The awards, more than any other airline, were: Airline Program of the year; Best Elite Program; Best Promotion (earnings); and Best Customer Service. "Over the past year, the AAdvantage team at American Airlines has worked hard to offer the best options, rewards and – most importantly – customer service to our loyal members," said Suzanne Rubin, president of the AAdvantage Loyalty Program. "It's a tremendous honor to receive these awards directly from our customers. It is their loyalty and enthusiasm that makes the AAdvantage program so successful." Since 1988, the Freddie Awards have recognized achievements in the travel loyalty Suzanne Rubin of AAdvantage accepts the industry based entirely on votes by travelers across the world. Program of the Year award Ronald McDonald Golf Tournament

On April 20, Ronald McDonald Children’s Foundation held its Jorge Atton, Undersecretary of Telecommunications; second annual golf tournament at the Club de Golf La Dehesa in Claudio Hidalgo, Nextel Santiago. More than 120 amateur and pro golfers participated in Chile, and Leonardo Cerda, the competition. Funds raised by the event will go to the charity’s corporate communications manager at Nextel Chile Family Rooms project, which allows parents with hospitalized kids to spend more time with them in a warm, safe environment. "We had a great experience last year and this year we have Nextel Offers Cellular Service seen how the Ronald McDonald Cup is earning a place in the local In May, Nextel Chile announced the launch of its cellular sports scene," said Carlos González, president of the Chilean arm service with next generation voice and data. It already offers of the Ronald McDonald Children’s Foundation. a mobile broadband service, which began operations in March. "Two years ago we took on a great challenge: to enter the Chilean market as an integrated mobile communications operator. The task was daunting and challenging because very few dare to develop a new business in a market so consolidated as ours. But here we are today,” said Claudio Carlos González, Hidalgo, president of Nextel Chile. Ronald McDonald Nextel Chile is owned by NII Holdings Inc., a US-based Children’s Foundation, provider of mobile communications services to clients in and Alejandro Wolff, US Latin America. Ambassador to Chile

Fundación Chile Launches Partner Up Contest On April 19, the non-profit institute Fundación Chile, angel investors’ network ChileGlobal Angels and law firm Albagli Zaliasnik, launched the Partner Up contest for start-ups in the food, biotechnology and ICT areas. The contest is for start-ups that have an important component of innovation, a strong possibility of generating an economic impact and the potential for scaling up their business models. The objective is to help them to be successful when they enter the market and to promote entrepreneurship and innovation in Chile. First place will receive a year of free legal assistance from Albagli Zaliasnik, worth around US$40,000, and second place will receive assistance worth US$20,000. In addition, Fundación Chile’s Exploration Fund and ChileGlobal Angels will give participants the possibility to present their ideas before their Rodrigo Albagli, Albagli Zaliasnik, and Marcos Kulka, investment committees to obtain venture capital. The winning projects will be Fundación Chile announced on June 20.

32 June 2012 business Chile ESCO Elecmetal Opens Steel Foundry Executive Appointments In May, ESCO Elecmetal, a strategic alliance between local ferrous Cristóbal Riffo has joined the foundry group ME Elecmetal and US engineering products firm ESCO law firm Alessandri & Compañía. Corporation, opened a new US$100 million manufacturing plant in Colina A lawyer from the University that will produce components for the mining and construction industries. of Chile, Riffo has a Master’s The opening ceremony was led by Mining Minister, Hernán Solminihac, in International Taxation from and was attended by top executives including Cal Collins, president and the University of Florida and a CEO of ESCO Corporation; Jaime Claro, president of Elecmetal, and Master’s in Business Law from Rolando Medeiros, president of ESCO Elecmetal Foundry. the Adolfo Ibáñez University. "Our joint venture will initially produce 12,000 tonnes of steel castings. He specializes in national and The market will be the mining and construction industries in Chile and Cristóbal Riffo, Alessandri & Compañía international tax consultancy, throughout Central and South America,” said Elecmetal’s Claro. corporate law and tax litigation.

Ricardo Gebauer is the new legal director of Equifax in Chile. Gebauer is a lawyer from Diego Portales University with a Master’s degree in tax law from the University of Chile. He previously served as legal and regulatory manager at Claro from Ricardo Gebauer, 1998 to 2011. Equifax

Ernesto Eglinton is the new manager of communications and public relations at General Jaime Claro, Elecmetal; Hernán de Solminihac, Mining Minister; Cal Collins, Motors Chile. Eglinton is a ESCO Corporation; Rolando Medeiros, ESCO Elecmetal Fundición journalist with more than 25 years of experience in media, corporate communications Mutual Receives Social Ernesto Eglinton, and CSR. He has a degree Responsibility Award General Motors Chile from the University of Chile. On May 23, the Chilean Chamber of Construction’s Cultural Corporation recognized the Chamber’s workplace accident Relsa Chile Recertified to ISO Standards insurance firm Mutual for its outstanding social responsibility programs. The award was presented by the president of the Standards certification company Bureau Veritas Chile has CChC Cultural Corporation, Alfredo Silva, to the president recertified equipment leasing firm Relsa Chile’s compliance of Mutual’s Social Responsibility Committee, Manuel José with international quality management, environmental Navarro. management and occupational health and safety standards (ISO 9001, ISO 14001 and OHSAS 18001). "This achievement is very important for Relsa since it confirms our level of excellence in the industry, and recognizes our process of continuous improvement," said Relsa Chile’s CEO Patricio Brinck.

Alfredo Silva, CChC, and Manuel José Navarro, Mutual Patricio Brinck, Relsa

business Chile June 2012 33 AMCHAM People Breakfast with Economy Minister Pablo Longueira

On May 24, the Minister of Economy, Development and Tourism, Pablo Longueira, was invited to an AmCham breakfast at Casa Piedra. His presentation was titled “Chile: A Great Platform for Investment”. During the breakfast, AmCham also presented Viña Concha y Toro’s president, Alfonso Larraín, with its 2012 Free Trade Promotion award. 1

2 3

4 5

1 Javier Irarrázaval, AmCham; Pablo Longueira, Minister of Economy, Development and Tourism; Alfonso Larraín, Viña Concha y Toro and Mariano Fontecilla, Ministry of Foreign Affairs 2 René Focke, Ultramar Agencia Marítima; Beth Hunt and Javier Ayala, Cat Consulting 3 Juan Luis Simunovic and Miguel Esbir, Fluitek Chile 4 Felipe Larraín, Viña Almaviva and Cristián Ceppi, Viña Concha y Toro 5 Rodrigo Moraga and Hernán Fuica, Avis Rent a Car; Michael Byrne, Boyden Chile 6 Maite de la Arena and Jaime Mejía, Procter & Gamble Chile 7 Isabel Álvarez, Concha y Toro, and Bruno Ardito, LAN Chile 8 Eduardo Escaffi,E ndesa Chile, and Jaime Cereceda, Kimberly Clark Chile 9 James Williams, U.S. Embassy, and Michael Grasty, AmCham

34 June 2012 business Chile 6 7

8 9 Economic Snapshot Euro Crisis Redux: Contagion Fears Mount (Again)

By Brian P. Chase

In the November 2011 issue of bUSiness CHILE, fellow contributor Axel Christensen poetically described the crisis in Europe as a “true Greek drama”. Brian P. Chase He wrote that “the drama seems to end (or is it just the Portfolio Manager, beginning?) with a new leadership, chosen for its ability to Head of Andean contain, at least momentarily, the wrath of the gods.” Equities, at Itau Asset Unfortunately, it appears that the drama – more tragedy Management than comedy – was just beginning and, six months on, we are entering a potentially worse crisis, with Greece contemplating an exit from the Euro ahead of a critical election on June 17. Meanwhile, Italian and Spanish bond yields have returned to late 2011 levels, now pricing the greater risk of contagion. Eurostat inspection. Populations will only be able to withstand Although the probability of a Greek exit – or ‘Grexit’ austerity measures for a limited time, thus social unrest is likely – has increased, we believe that the conclusion of Mr. to intensify, potentially reigniting political fires in a vicious cycle. Christensen’s article remains valid: there is too much at While uncertainty remains high and market volatility is likely stake for European leaders to let Rome (or Athens) fall. Not to continue, we believe that Chile (and Latin America in general) only is the credibility of the European Union at stake, but it remains relatively well positioned. In commercial terms, Chile also appears that the vast majority of the Greek population depends less on Europe than other zones, especially since the favors remaining in the Euro, according to the latest poll by economic and financial crisis of 2008 when exports to Europe Athens newspaper Ta Nea, and pro-Euro political coalitions represented 30% of the total. In the 12 months to April this year, are gaining traction with voters. Meanwhile, even if Grexit exports to Europe represented just 19% of the total (albeit 7% to occurs, there is a growing consensus that the European Italy, Spain and France, mainly copper) and reached an all-time Central Bank will look to ring-fence the rest of Europe’s monthly low of 15% in January. Given the already depressed periphery in order to contain potential contagion effects. levels of trade, the direct incremental impact of further economic Ultimately, we are likely to see a more orderly process than turbulence would be less severe than in 2008/9. during the Argentina default of 2001/2. Meanwhile, European periphery ownership in Chile remains Despite the logical arguments for a more benign scenario, rather limited. The most relevant holdings (by the likes of Enel, the outcome ultimately depends on politics, with markets Telefónica, Santander and BBVA) are in relatively defensive likely to suffer in the interim as political wrangling continues. domestic sectors and are operated independently. Therefore, a The focus will remain on the size of potential bailouts and worst case scenario would be less capital expenditure, higher sources of financing. In the latest battle, it appears that dividends and/or an outright sale of assets, none of which would France and Germany are at odds over the issuance of be particularly detrimental for the underlying companies. Eurobonds, which could provide a key source of funding, The real risk for Chile lies in the lower probability outcome but could also jeopardize Germany’s lofty credit rating. The of contagion beyond the bounds of Europe. However, debate is likely to intensify at the next Euro summit at the continued public spending in the United States, which end of June. has helped boost corporate earnings despite consumer In addition, more turmoil is likely to occur in both the deleveraging, and plenty of policy firepower in China near and medium term as tough austerity measures take (helping to secure a soft landing) should provide stability, at their toll on European economies, as evidenced by sliding least through the end of the year. GDP growth and rising unemployment, primarily in the We will leave the 2013 tail risks related to broader European peripheral countries. Spain is currently in the crosshairs recession and eventual US government austerity for a later with the IMF estimating a GDP decline of close to 2% in doomsday article. bUSiness chile 2012, with unemployment reaching 24%, while budget Brian P. Chase is Portfolio Manager, Head of Andean Equities, at Itau deficit estimates have been raised to 8.9%, triggering a Asset Management

36 June 2012 business Chile

BREAKFAST

Pablo Longueira, Minister of Economy, Development and Tourism Chile: The Road to Development By Ruth Bradley he guest speaker at an country’s track record of economic its companies access to markets that AmCham breakfast on May stability. But, according to Longueira represent 94% of global GDP. 24, Economy, Development - who, before becoming Economy, Protectionism - currently rearing and Tourism Minister Pablo Development and Tourism Minister its head again in Latin America - T Longueira started by asking a in July 2011, sat for 21 years in was, in the past, the main culprit question - why, he wondered, Congress and, before that, was one for income inequality and poverty in is Chile, a small country, the only one in of the founders of the Independent the region, he argued. “Free trade Latin America poised on the threshold Democratic Union (UDI) party - there is crucial to give citizens access to of development? is a deeper, political explanation. the best goods and services at the Why, he continued, should incoming Public opinion of politicians is, lowest prices,” he said. foreign direct investment (FDI) have today, at a low ebb, he admitted. The government of President climbed to a record US$17.5 billion “But Chile has good politicians,” he Sebastián Piñera is, indeed, planning in 2011, a year when Chile was, after argued, “and it is those politicians to further open the Chilean economy. all, in the headlines for its student who have built a country and Under its proposed tax reform, protests rather than its economic institutions that work.” announced in early May and currently achievements? And why, in the first four According to Minister Longueira, before Congress, the 6% flat-rate months of this year, has the Foreign the story started 30 years ago with duty that Chile levies on imports from Investment Committee, which reports the economic reforms introduced countries with which it does not have to the Economy Ministry, received under the 1973-1990 military a trade agreement would gradually applications for an inflow of a further government. They would, however, be eliminated, dropping to 4% in US$6.1 billion under the country’s DL have counted for little had it not been 2013, 2% in 2014 and 0% in 2015. 600 Foreign Investment Statute? for subsequent policy stability. As regards FDI, the challenge The answer, Minister Longueira told The big difference between Chile for Chile, with its small domestic AmCham members and their guests, and other Latin American countries, he market, is to develop as a platform is that Chile is a “serious country” in argued, is that Chile was able to make from which overseas companies which investors find the legal certainty the transition from military government target Asian markets, said Minister they require to develop their projects. to democracy and then maintain the Longueira. That is partly why, in June, “Companies don’t invest just because a same policy strategy through four the government hopes to sign the project is attractive; they also need an center-left governments and on into Pacific Alliance, bringing together institutional framework,” he pointed out. today’s center-right government. Chile, Peru, Colombia and Mexico in Look, he said, at the dispute that “That’s the success of Chile, that’s an area across which not only goods arose last year between Codelco, what creates confidence, that it has and services but also capital and Chile’s state-owned copper producer, two broad coalitions that alternate in people would move freely. and UK-based Anglo American. Even power but share a common project for But Chile also has to continue to though a state company is involved, the country,” he insisted. manage its own affairs well. There the rule of law is not in doubt and Free trade has been a key component are other countries in Latin America institutions are doing their work, of that policy strategy. Chile now has that are infinitely richer, pointed out noted Minister Longueira. more Free Trade Agreements (FTAs) Longueira - “transatlantic ships that, Chile’s success in attracting FDI is than any other country in the world, if they had good captains, could generally explained in terms of the pointed out Longueira, and they give already be developed countries” -

38 June 2012 business Chile compared to which Chile is a “small while a bill before Congress would time of crisis in political leadership sailboat that always has to be fixing also liberalize sea freight transport. around the world, Chile “must avoid its rigging… in order to grow at 6%”. Another crucial factor in attracting the scenarios of populism and Competitiveness is also vital and, FDI - “particularly in Latin America” - demagogy that can divert us from in this field, the Economy Ministry is social stability for which, according what is a long road, a road travelled is implementing “a very ambitious to Minister Longueira, education and not under just one government but agenda”, said Minister Longueira. entrepreneurship are key in order under a series of governments of Transport services are a key to create social mobility. “Social different colors”, he emphasized. component of many of Chile’s exports mobility is what gives the sensation After all, he warned, there are far - the salmon, for example, that of a fair society,” he pointed out, more countries that have reached the reaches European markets in just 48 “and, without it, there is the social stage of Chile today and faltered than hours - and, in a bid to increase the instability that exposes countries to have managed to stay on the road to competitiveness of those services, [political] adventures.” development. bUSiness chile Chile has become the only country And there, he suggested, lies the to unilaterally renounce reciprocity key not only to Chile’s past success Ruth Bradley is a freelance journalist based in Santiago in the air transport market, he noted, but also its future prospects. At a and a former editor of bUSiness CHILE.

business Chile June 2012 39 InteRview Hernán Cheyre, Executive Vice-President of CORFO Chile’s Year of Entrepreneurship By Julian Dowling

hen President Piñera’s government came of February 2010. This has guaranteed loans for 50,000 small to power on March 11, 2010, the priority for businesses worth over US$2.2 billion – unprecedented figures in the Chilean Economic Development Agency the history of CORFO. (CORFO) was facilitating reconstruction in areas W hit by the earthquake of February that year and How has this and other programs benefitted the areas hit helping small businesses back on their feet. by the earthquake? Now, two years on, CORFO’s programs are still helping businesses Our challenge was to help small and medium-sized enterprises recover in these areas, but its main goal is to promote innovation get back on their feet, but better than they were before. It is satisfying and entrepreneurship at the national level. In fact, President Piñera today to travel through these places and see how their dreams to has declared 2012 to be the Year of Entrepreneurship, which is become more productive companies have come true, which also one of the government’s key pillars of economic growth along with supports the country’s growth. innovation. This year our Local Enterprises Program, which is aimed at the The signs are positive. More Chileans than ever are starting new regions, will help 10,000 new enterprises to buy fixed assets and businesses and the time and cost of doing so has been reduced. improve their management. When you talk to entrepreneurs today, But there are areas where Chile can still improve, says CORFO’s what they want even more than capital is support to become better executive vice-president, Hernán Cheyre. Here he talks to bUSiness managers – it’s like the old saying, it’s better to teach them to fish. CHILE about these challenges and how successful entrepreneurs should be expected to repay their loans. How is Chile doing in terms of entrepreneurship? There are more new companies, which reflects the growth in Have you been able to make the changes you intended in the desire to innovate. When the Global Entrepreneurship Monitor CORFO? recently asked Chileans if they had started a new business in the The changes we have made in the last two years are having last three years, 23.7% answered affirmatively – roughly 1 in 4 positive results in facilitating the conditions for new enterprises Chileans – but three years ago only 17% said yes. This shows that to flourish. CORFO is focused on three areas: one is promoting entrepreneurship in Chile, which grew slowly for a decade, is now entrepreneurship, the second is innovation and the third is improving growing strongly and CORFO is playing an important role in this. the competitiveness of existing companies, especially small and The Economy Ministry has also taken measures such as reducing medium-sized enterprises. Another important area is facilitating the time and cost involved in creating a new business. access to financing. We are also changing the definition of what CORFO does from being a source of subsidies to an institution Which areas can Chile improve in? that extends bridges across roads that are cut for entrepreneurs, Chile has all the conditions to be a regional pole in Latin America in innovators and small business owners. entrepreneurship and innovation due to its economic performance, We are achieving this in three areas: one is serving our clients the fact the rule of law is respected, and there is political stability, directly while depending less on intermediaries; second is greater which other countries in the region aren’t able to claim. efficiency in the use of resources, both in terms of money and But there are two areas where it is behind; one is the culture of response time; and third is measuring the impact of our programs. entrepreneurship. We are working to improve this in different ways Since 2009 we have practically doubled the number of and one is the program Start-Up Chile which imports entrepreneurial beneficiaries at all levels, but without spending more money. In talent. In addition to the start-ups themselves, the most important some cases this has been achieved through co-financing from thing is that during their stay in Chile these entrepreneurs share the beneficiary and, in others, by leaning heavily on private their knowledge at universities and colleges while participating in resources. The best evidence of this is our guarantees program community initiatives. Another program (Programa Apoyo Entorno which started with a pilot project in the area hit by the earthquake Emprendedor) has benefited 40,000 students by encouraging them

40 June 2012 business Chile to become entrepreneurs. So we are promoting entrepreneurship from the ground up and, at higher levels, by importing talent. We are also behind in innovation. Chile spent 0.4% of its GDP on research and development in 2010, which is far from the OECD average of 2.3%. President Piñera’s goal is to double this to 0.8% which is still much less but is at least a big improvement. The new tax incentives law, which will come into force in September, will allow companies to reduce their taxes up to 35% by deducting investment in R&D. Unlike the previous law, this will allow companies to deduct internal expenditure from their taxes. The maximum tax benefit has also tripled from US$400,000 per year to US$1.2 million.

How important is the United States in all this? The US contribution to our programs is enormous, especially because the main global centers than support entrepreneurship and innovation are in Silicon Valley, Boston and New York, and many of the most innovative companies in the world are American. To date, CORFO has approved four Centers of Excellence – three European, one Australian – and next year we will hold another tender in which US institutions will have the opportunity to participate. We are also inviting companies to establish R&D centers here in specific areas where Chile has a competitive advantage. We already have agreements with California and Massachusetts to facilitate the exchange of entrepreneurs, scientists and students. We want to create a critical mass and the United States is a natural partner of Chile.

The U.S. has Facebook’s Mark Zuckerberg and other dotcom heroes, how can Chile create its own role models? As part of our program to promote entrepreneurship, we launched a competition for the media to shine the spotlight on successful enterprises and community heroes. There is also a cable TV program called Soñadores (Dreamers), co-financed by CORFO, which shows successful cases of entrepreneurship. The best known case among the elite is Fernando Fischmann’s Crystal Lagoons, which could soon list on the NASDAQ, but there are many companies people don’t know that have done amazing things in different sectors.

Is there anything CORFO could do differently in the future? We have made many improvements, but we still need to transform subsidies into loans for entrepreneurs. This implies a cultural change and is more complicated than giving out subsidies, but it’s the next logical step. Just like the education bill before Congress that would link the repayment of student loans to income, the same concept is applicable to entrepreneurship. We want to help entrepreneurs, but it’s only fair that those who succeed should repay the resources that come from all taxpayers.

President Piñera’s government only has two years remaining… Yes, but there is a lot of time left and a lot still to do. Becoming a developed country by the end of this decade means more than having a per capita GDP of US$22,000, we have to transform this into something tangible that makes sense to people. That means creating opportunities that help make Chile a more equitable country. bUSiness chile

business Chile June 2012 41 Life in the Slow Lane

Driving Me Mad By Santiago Eneldo

went to collect my new car yesterday – a Very Smart XV “with all the trimmings”, including a camera to help you reverse without running over the dog, or forgetting to open the gate, and gear levers behind the steering Iwheel – just like a Formula One driver. It comes with a dashboard screen which provides so much data I will have little time to keep my eyes on the road. I will feel good, quite cool actually, as I cruise around town between traffic jams... Leather seats and that lovely smell of “new” which one hopes will last forever. Do they sell a “new car smell” aerosol? Why did I do something so unecological as to buy a new car? Well, I did have a very useful one but it was stolen from outside a restaurant where I was having dinner with my son. they do this to me? What would it take to have Most expensive meal of my life! It was recovered a week later a little fuel in the tank when you have just handed over a fat from INSIDE a supermarket where it had been used, and check – 40% more than the insurance payment! I walked in severely abused, in a failed attempt to steal a cash machine. silent rage, kicking stones, back to the dealer who received, I filed for divorce – desertion and criminal activity – and probably, his most astonishing ever Personalized Customer subsequently received a one-time payment of 10.5 million Service Response. “How could you possibly be so @$$#*&!? pesos (about US$21,000) which was, I believe, fair. Yes, cars Where is the Boss? No, not him, the Big Boss…” Once I had are more expensive in Chile then in the U.S.A. let off some steam, I calmed down until the salesman very I had long wanted to abandon the car as my primary means foolishly remarked that gas was expensive and dangerous to of transport and decided on two bikes: one a Harley Davidson store in the Showroom… Thereupon I blew another barrel of for the major journeys and the other a lightweight mountain steam! bike for the shorter trips, but Mrs. Eneldo put her foot down When I came back to earth we solved the problem (on the brake, not the accelerator) and said it would have to amicably; well, they were very nice and I just sulked. A can of be the Harley or her. I thought this through for 48 hours and “gas” was produced, which invoked sarcasm from me… I was then voted on the options: Harley – 49%; Mrs. E – 51% and assured this would be enough to get me to a service station so that is why I decided on the Very Smart XV. where I could fill up. For just a few pesos all this could have I was surprised by the salesman. He was extremely polite been avoided, I pointed out to flat smiles. Finally, I cruised but had no idea how any of the car’s many gadgets worked home “in style” with my mood on the up. At home I spent (I love gadgets!) and so we had to look them up in the 2.5 about 45 minutes playing with the car’s gadgets. Then, when kg Technical Manual. This took ages as the manual was in Mrs. Eneldo got home, I offered her a ride in my new Very Spanish but the “systems voice” spoke only mechanical Smart XV and she smiled approvingly. We got in and I turned English (Japanese was not a very helpful option…) and, not the key; the battery was dead! I certainly did not deserve this. surprisingly, turned out to be a major test of our teamwork That was enough for one day. This car was doomed… skills. In the end, there was no way the car’s “Greentooth” For sale: 2012 Very Smart XV with only 83 km (50 miles) on (ecofriendly version of Blue…) would pick up the signals from the clock; one owner; will consider part exchange for a Harley my cellphone so that meant homework for me. and a mountain bike. I finally drove away, happier than a pig in mud, only to run I remain convinced this could only happen to me… And out of gas less than a mile from the Showroom. I mean what you? could be worse! Proud owner of a brand new Very Smart XV stranded just minutes after being given the key! My smile of Santigo Eneldo self-approval turned to a distorted look of disgust. How could (Harley and other offers to [email protected])

42 June 2012 business Chile