bs u iness Chile The voice of the Chilean-American chamber of commerce N°282, AUGUST 2012

F ishing in Chile: A Race Against Time Trade Testimonial Healh t S pecial Report M ining Tools Made B ioequivalent Drugs: C hile's Wine Industry: in Chile Worth the Risk? A Premium on Quality

Contents bUSiness chile The voice of The chilean-american chamber of commerce n°282, aUGUST 2012

46 Life in the Slow Lane 6 TRADE TESTIMONIAL 36 E cONOMIC Snapshot M ining Tools Made to Order M exico: Time to Join the Rest of A Love-Hate fishing in chile: The Santiago-based mining Latin America? Relationship Mexico has not lived up to its a race against Time equipment manufacturer FMA Golf can be a frustrating Trade TesTimonial HealTH special reporT Industrial produces custom-made, economic potential but, with the tide mining Tools made bioequivalent Drugs: chile's Wine industry: in chile Worth the risk? a Premium on Quality safety-oriented mining tools for the shifting in its favor, this may be its game, but Santiago Eneldo mining industry. moment to catch up to the rest of thought he’d got his swing 12 the region. back until he lost his head Fishing in Chile: A Race (and his club) during a Against Time 8 H eALTH 38 B reakfaST recent game. Chile’s fishing law expires B ioequivalent Drugs: The Economic Moment: in December and if the Worth the Risk? Chile and the World government fails to pass Chile’s recent decision to certify Former Chilean Finance Minister a new law that ensures and legalize bioequivalent Hernán Büchi discussed the the sustainability of the drugs aims to reduce costs uncertain world economic resource, it could be a for consumers by providing an situation at an AmCham breakfast perfect storm for the alternative to branded products. at the Grand Hyatt Hotel in July. industry. Corover St y Sp t oTLIgh 12 40 20 Special Report F ishing in Chile: US Private Equity and Venture © 2012 AmCham Chile A Race Against Time Reproduction in whole or in part is Capital Mission Chile’s Wine Industry: strictly forbidden without permission Chile’s fishing companies and AmCham worked to bring a group A Premium on Quality from the publisher. Opinions expressed in artisanal fishermen are vying to of US private equity and venture bUSiness CHILE are those of the authors Strong competition, get the best deal possible from and do not necessarily reflect those of capital firms to Chile in August higher costs, and a weak AmCham or bUSiness CHILE. We accept no new legislation to replace the to meet with local investors and responsibility for the accuracy of the articles current fishing law. entrepreneurs. dollar are squeezing and any unforeseen errors. bUSiness CHILE the margins of Chilean is published monthly, 10 months a year and mailed free of charge to AmCham Special Report 44 Interview wineries and affecting members. Letters are welcome. They should 20 be accompanied by the author's name C hile’s Wine Industry: Dispatches from Washington, volumes in some export and daytime telephone and sent to A Premium on Quality Chile’s Ambassador to the U.S., markets. But demand for [email protected] For reasons of Chile’s reputation as an exporter Felipe Bulnes, talked to bUSiness space limitation, AmCham reserves the premium Chilean wine is CHILE about his meeting with right to edit letters published. of inexpensive, good value wine rising and the industry is Advertising inquiries should be addressed needs to change in order for President Obama and the repositioning for future to AmCham's Sales Department: Paulina producers to increase prices and Embassy’s current areas of focus. Dellafiori: E-mail: cristina.ordenes@ growth. amchamchile.cl; Phone:2909741. Fax 2120515 penetrate new markets. 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. 516, Providencia. Phone: 376 9877, Rodrigo Ballivián, AmCham Chile; Ari Bermann, 3M Chile; Pelayo Bezanilla, Coca-Cola de Chile; Ruth 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 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. bs u iness Chile August 2012 3 AmCh am Global Sponsors 2012

4 August 2012 bs u iness Chile Editorial

Biodiversity and Sustainable Development

I n its simplest form, biodiversity is the variety of life there is still much work to do. This month’s cover – ecosystems, species and genes – that is essential story outlines the debate surrounding new fisheries for human development and growth. It is the basis legislation which is designed to ensure the sustainable for production, trade, investment and innovation, and development of this important resource. even the survival of the human race. The private sector is also acting. Through Chile has benefited greatly from its tremendous social responsibility and environmental programs, wealth of biodiversity. From its mineral-rich desert in the companies are working to protect biodiversity in the north to the fertile plain of the central value, the majestic communities where they operate. They understand fjords of the south and its abundant ocean resources, that protecting natural ecosystems is fundamental to Chile’s natural ecosystems have provided the foundation the survival of their businesses in the long term. of its strong and vibrant export-based economy. Greater awareness about this subject has created From tourism to astronomy, biodiversity also the need for a public-private dialogue in Chile, leading opens up new value-added business opportunities to a national agenda on biodiversity. This agenda is as Chile continues its transition to an innovation necessary in a world where environmental issues are economy. The wine industry, which is highlighted increasingly important to a country’s competitive in this month’s special report, is an example of an positioning. export-based industry that has thrived on Chile’s AmCham strongly supports Chile’s sustainable biodiversity. development and recognizes the importance of But this biodiversity should not be taken for protecting biodiversity to achieve this goal. We granted. As Chile grows and prospers, it must be look forward to participating in this dialogue and to protected and will require careful stewardship to contributing through our Good Corporate Citizenship permit further development for the benefit of future awards that recognize socially responsible generations. businesses. We are also developing links with US Chile has taken steps to face this important organizations that have useful expertise in these challenge. It has developed laws to protect its matters. We believe that these efforts will serve to coastline, to develop and strengthen its environmental promote and build trade and investment opportunities institutions, and to protect its native forests. But between Chile and the United States.

BO ARD 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, Asesorías KCB Ltda. 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

bs u iness Chile August 2012 5 TRADE TESTIMONIAL Mining Tools Made to Order The Chilean mining equipment manufacturer FMA Industrial has found a niche producing safety-oriented mining tools for the domestic market and, increasingly, for export. By Steven Bodzin omewhere in the 1,500 Growth has come from listening The company's specialties are miles of tunnels at the El to customers, he says. The devices to help change tires on Teniente mine in Chile’s company employs eight full-time heavy mining vehicles and tools central O’Higgins Region, engineers in its staff of 110. It to handle the fat cables that feed S a mammoth truck gets recently opened a workshop and electricity to mining scoops. It a flat tire. For decades, such a yard in Antofagasta to be closer to is also selling a new device that simple breakdown was cause for the big mines, where it gets ideas. collects the used steel cables worry. Workers had to squeeze He says new designs often come that often litter mine sites. Anglo into the space between truck from hearing mine managers American, one of the company's and tunnel wall. A wrong move in describe what causes injuries. many clients in Chile, just bought freeing the one-ton wheel could "There are two mining problems a unit for its Los Bronces mine let it slip, potentially crushing that urgently need to be solved. near Santiago, Restini says. Cable a miner. And speed counts, as One is worker safety," he says. and wheel-handling machines mines can't leave tunnels blocked Some tasks have never been account for three quarters of the all day. Today, a wheel-hoisting automated, while others leave company's receipts he adds. robot made by Santiago-based workers exposed to peril. FMA also makes attachments for FMA Industrial does much of the "The second is that there are loaders, excavators and forklifts work,reducing risks. operations that can be automated, made by bigger manufacturers. "Our trick was to look for mechanically or hydraulically, "You can buy a piece of equipment niches," says CEO and co-owner cutting the number of people who from Caterpillar and it might come Hernán Restini. "Big companies are working." with an FMA attachment," Restini don't provide solutions for these In its 45,000-foot workshop on says. Representatives of global sorts of problems, because they a 30-acre Santiago lot, worker brands sometimes buy made-to- are case-by-case. There's no safety and automated processes order specialty tools from FMA to standard equipment." are apparent. A welder in nearly reduce delivery time, he says. FMA, originally a maker of opaque goggles and steel-toed Each mine has its own needs, agricultural implements, is now boots glances back and forth he says. An attachment to extract entirely dedicated to the mining between a computer screen and truck wheels will differ depending sector. The company aims to use its the blazing light of a digitally on what kind of forklift or presence on the ground in one of the controlled plasma cutting torch. earthmover it's connected to, and world's top mining countries to help The machine, when fitted with its there may be other differences it keep growing at 10 to 15 percent most powerful torch, can slice steel between mines. Such bespoke per year, Restini says, noting that plates as thick as battleship armor work is easier for a smaller sales are expected to reach around into smooth curves. Robotic drills company, he says. US$11 million this year, 10 times and cutters take orders straight The company has three ISO more than a decade ago. from engineers' desks. certifications, for quality, safety

6 August 2012 bs u iness Chile Mining Tools Made to Order

Hernán Restini, FMA Industrial

and environment, which it renews FMA holds three patents, Restini a visa and fly through a series of annually. It got certified three says. But most of its work has other countries in order to arrive. years ago after about a year and been in adapting existing ideas for All the same, he says service is a half of "relatively difficult" effort, new demands. Adaptations may the company's hope for surviving Restini says. not qualify for patents, he says. the business cycle. If mineral FMA started working on mining Rather than relying on industrial prices decline and purchases equipment in a joint venture with property protection, FMA tries to of new equipment slow, Restini Imac Design Group of Canada use reliability, prompt delivery and hopes service and support on in the 1990s. That period gave innovative solutions in order to the company's installed stock will the company more expertise in keep clients. provide income through lean times. welding and how to fit attachments The company's latest invention Another growing risk is public on a variety of heavy machinery. remains within its core areas of opposition to big mines. FMA The Chilean owners bought out handling wheels and cables. FMA machinery has been selected for the Imac in 2003, and have since engineers heard that removing lug Conga mine in Peru, for example. focused on developing niche nuts from the wheels of mining But mine development has been tools. It now exports 70 percent of vehicles can be dangerous. With halted since November because its production, registering sales as the release of the final nut, a wheel of protests over possible impacts far afield as Mongolia, Botswana that could weigh as much as three on agriculture. Barrick Gold’s and France. tons could roll free and injure or kill Pascua Lama mine on the Chile- In the United States, Asarco's Ray workers. The company developed a Argentina border, another FMA Operations in Arizona, Luminant tool that unfastens nuts while holding client, was delayed for years as the Mining in Dallas and Drummond the wheel in place. Restini plans to two countries decided whether to Co. in Alabama have all bought show the device at the MinExpo accept environmental impacts. FMA equipment, Restini says. show in Las Vegas in September. For now, the big mines keep Working out of Chile is an Customers' need for immediate buying. On the company's lot is a advantage for an exporter, he says. worldwide service can pose a flatbed fitted with a cable handling Chile's free trade agreement with challenge, Restini says. When an machine able to spool 900 meters China means that his customers FMA machine has trouble, it is often of 2-inch cable. It's about to ship there pay no import duties - an the only one of its kind at a mine, to Botswana. bUSiness chile advantage over US manufacturers and it needs to be fixed at once. A recent service trip to Mongolia took of mining equipment that are Steven Bodzin is a freelance journalist based in subject to Chinese duties. weeks as the technician had to get Santiago

bs u iness Chile August 2012 7 health Bioequivalent Drugs: Worth the Risk? C hile’s pharmaceutical market is worth US$2 billion, but in recent years it has cost patients both their pesos and their trust. The government’s recent decision to certify bioequivalent drugs in Chile aims to increase access for consumers by providing an affordable alternative to branded products. But industry specialists wonder whether bioequivalent drugs are paving the way to risky industry innovations.

By Olivia Crellin

n Chile healthcare, like Bioequivalent drugs can be education, is expensive. This is, between five and 20 times cheaper in part, due to the high cost of than the original. For example medication. In 2010 the average Zotran, a drug used to help alleviate I family spent 1.8 percent of their anxiety, costs 11,540 pesos (around total monthly household budget on US$24) in Chile if sold as a branded medicines, according to the Ministry product. The bioequivalent version of Economy. This represents 60% of of the same drug sells for 540 their total spending on healthcare, pesos, just over US$1, a savings of which is a hefty proportion that 95.3 percent. the country’s Institute of Public Once the patent on an original Health (ISP) aims to reduce with the drug has expired, other companies introduction of bioequivalent drugs. can produce bioequivalent drugs Currently there are only 70 more cheaply, not needing to recoup approved bioequivalent drugs in the financial costs already incurred Chile but the ISP and the newly by the original manufacturer for created national drug regulator, research, development and testing. Anamed, plan to increase this to This introduces competition into around 236 by the end of the year. “ By the end of 2014 the market, driving down the retail A bioequivalent drug is “a copy price of the drug for consumers and of an original innovator drug which every generic drug in enhancing access to the product. contains the same active ingredient. Chile is going to have the This ingredient operates at the same bioequivalence seal.” Affordable medication molecular rate and concentration in the bloodstream as the original The scheme has been welcomed to achieve an identical therapeutic Jaime Mañalich, by Chileans, who, unlike in countries effect,” according to the ISP, which Minister of Health with free public healthcare such as bases its definition on that of the the U.K., have to pay for medicine. World Health Organization (WHO). It will also help ensure the supply

8 August 2012 bs u iness Chile of medicine in the public health the price of its original, three times Health benefits system and, in turn, generate further as much can be purchased, thereby savings for patients; something enlarging stock, improving access Bioequivalent drugs are not just urgently needed according to Dr. and saving the public money. In about saving money though – in Enrique Paris, president of the addition, Cenabast, the government fact studies show that the savings Chilean College of Physicians. agency that supplies medicines to generated by bioequivalent drugs In Chile 90 percent of primary the public health system, receives plateau after the first initial drop healthcare clinics are operated an additional 30 percent discount in price. by municipalities, not the state. In from laboratories, which means that Instead, “bioequivalent drugs are recent years the mismanagement the price of drugs could fall by at about economy in general and about of this system has resulted in a least 50 to 60 percent. improving health,” says Dr. Iván “chain of debt” between clinics According to Jaime Mañalich, Saavedra, director of the Center and the laboratories that supply Chile’s Health Minister, President of Equivalence at the University them, which has ultimately left Piñera’s administration has reduced of Chile, one of ten laboratories the patient to foot the bill. Despite the amount owed to laboratories that currently test drugs for their 80 percent of people in Chile by Cenabast from US$160 million bioequivalence in Chile. having access to free drugs to US$70 million and aims to pay Unlike generic drugs, bioequivalent under FONASA, the public health off the rest by the end of the year, drugs need to be certified before they insurance system, there are many leaving the public health system can be approved for sale; a long and times when the necessary drugs free to do what it was created for – costly undertaking that in Chile falls to are not in stock. provide healthcare and medicines the ISP. But once this task has been “What does a person do then?” to the public. completed, patients can be sure that Paris asks. “They go to buy the “We are moving very fast in the the drug they are consuming is exactly medicine at the pharmacy on the direction of making drugs part of what it says it is. corner, and spend their own money. the health guarantee,” Mañalich This was not the case previously. This is why the public’s spending said at a press conference held When the quest for cheaper medical on medicine is very high.” to coincide with the visit to Chile alternatives began in Chile during The bioequivalence plan will of WHO Assistant Director-General the presidency of Eduardo Frei in leave government finances in a Keiji Fukuda, who considered the 1964, the drugs that were introduced healthier state too. If, on average, a government’s thinking on the matter were generic, not bioequivalent. bioequivalent drug costs a third of “future-orientated and solid”. Generic drugs, like bioequivalent

bs u iness Chile August 2012 9 health

“People will need more “Unlike generic drugs, “ In Chile people often take help than ever to navigate bioequivalent drugs are medication that someone the medicine market after certified to be identical recommends without the arrival of bioequivalent to the original drug on a consulting a doctor, but this drugs.” molecular level.” is a cultural shortcoming.” H éctor Rojas, I ván Saavedra, Center for Dr. Enrique Paris, Chilean Chile’s Association of Equivalence, University of Chile College of Physicians Independent Pharmacists

drugs, are cheaper and fulfill the brought attention to economic Brazil, Canada and Japan, which same medical function more or less incentives that persuade pharmacy immediately started to accept the as their patented ancestors, but workers to recommend some drugs recommendations of the WHO they are not identical on a molecular over others. Even the practice of with regards to the quality, safety level. This makes it dangerous keeping harmless products like and efficacy of medicines in the for doctors and pharmacists to make-up in display cabinets fosters late 1980s.” calculate the appropriate dosage an environment of mistrust. In many ways it is admirable that when prescribing and selling them, In addition, Chileans have an the government is racing ahead points out Saavedra. unshakable belief in the quality with bioequivalence policies - Generic drugs still account for 38 of branded products. “It is very Mañalich has promised that by the percent of industry sales in Chile, psychological. Here in Chile, people end of 2014 every generic drug in but the system of certification gives think that cheap things are bad. Chile “will have the bioequivalence bioequivalent drugs an “extra”, They want the Rolls Royce of seal” as well. But there are those says Hector Rojas, the president products,” says Paris. in the medical profession and of the Association of Independent Luckily, Chile’s bioequivalent pharmaceutical business that Pharmacists. “If the drug is good drugs will be getting a branding all think Chile is trying to run before for patients, it’s good for my of their own. The drugs will come in it can walk. pharmacy,” he says. But securing packaging with a bright yellow band the confidence of customers, and the word “Bioequivalent” in red. Certified manufacturing practices to encourage them to buy the The drugs will also keep their generic new drugs, is one of the biggest name, known as the International From a technical standpoint only challenges facing the initiative. Nonproprietary Name, which allows 40% of laboratories in Chile are customers to recognize the product fully GMP (Good Manufacturing Trusting in bioequivalence anywhere in the world. Practice) certified, which is a So if bioequivalent drugs significant drawback for a scheme It is no wonder that the public are healthy, cheap and have that requires laboratories to prove thinks twice before swallowing been around in most developed the safety and efficacy of new drugs. new pharmaceutical schemes. countries for decades, why is their “GMP is the first floor of the building In March last year a price-fixing introduction into the Chilean market and the second is bioequivalence. scandal revealed that Chileans so controversial? Obviously we are not going to prescribe had been cheated by the country’s “Chile is new to this,” says Rojas. medicines that are bioequivalent if three biggest pharmacies. “We are more backward than the they don’t also demonstrate good Then, earlier this year, the media European countries, the U.S., practices,” says Paris.

10 August 2012 bs u iness Chile This concern is shared by Pfizer These plans, which consist of ones like paracetamol – a drug Chile’s general manager, Mónica increasing the number of 24/7 that incidentally kills around 900 Zerpa. “Our main concern with this pharmacies and introducing Chileans a year – is that levels of policy is how bioequivalence will a fleet of mobile pharmacies, public awareness about medicine meet international pharmaceutical also include a bill to legalize are not yet sufficiently developed. standards and that laboratories do not the sale of drugs in places like “The benefit of pharmacies is that cut corners for a faster compliance supermarkets – a bill denounced advice is free and you won’t get that with basic requirements.” by Rojas as “criminal”. in an ordinary shop,” says Rojas. Many choose to see a silver lining, Mañalich says the bill would Bioequivalence is about improving however. With an increased focus improve access, especially in the access to pharmaceutical drugs, a on the manufacture and certification 50 of Chile’s 320 municipalities grueling and lengthy process of testing of bioequivalent drugs, the ISP may that don’t have a single pharmacy, and certification, but one that opens be forced to scrutinize manufacturing but Rojas is against the idea of up more affordable options for the practices more closely. selling medicines “like candy” in patient. As with many scientific and “The whole bioequivalency places other than pharmacies. He social advances, changes such as program is a safety step,” says the cites the example of Argentina this one often prompt more questions WHO’s Fukuda. “This entire effort which tried something similar in than they answer, but if done properly is really to increase scrutiny and 1991, only to reverse the decision Chileans will finally be able to afford ensure both the quality and the almost two decades later following something money supposedly cannot safety of the drugs being use.” problems with self-medication. buy – health. bUSiness chile Culturally as well the Ministry’s One of the fears of making policies to increase access could drugs available in every corner risk doing more harm than good. store, even seemingly mild O livia Crellin is a freelance journalist based in Santiago

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Fishing in Chile: A Race against Time C hile’s fishing law expires at the end of this year and the government has yet to come up with a new law that satisfies all parties. Some fishing companies want to introduce auctions into the industry while others want to stick with the current transferable quota system. In the artisanal sector, the big issue is regulation.

By Gideon Long n the early hours of Tuesday July sector, fishermen burn boats and stage 10, firemen in the southern Chilean marches, so it’s never been possible port of Coronel were called to a to implement the reforms that Chile blaze on the waterfront. When they needs.” arrived,I they found a ship burning in the harbor. They tried to extinguish the Tortured history flames but were driven back by angry fishermen who had set it alight. The history of the draft law can be Further up the coast, fishermen traced back to the mid-1990s, when fish blocked access to the city of were still relatively plentiful in the South Constitución and set up barricades in Pacific and Chile’s commercial fishing Valparaíso. To the south, there were fleet landed up to 7 million tons a year of dockside protests in Puerto Montt and jack mackerel, pilchards, sardines, hake on the island of Chiloé. and kingclip. The catalyst for this anger was the Back then, Chile operated a Total passage through the Chilean Congress Allowable Catch system, often referred to of a new fishing law. The current one, as an “Olympic system”. The authorities which has been in force for over a decade, decided how many tons could be caught expires at the end of 2012 and the and left the fishermen to get on with it. government has drafted a replacement. The result was disastrous. Commercial It has not proved easy. Chile’s big fishing fishermen rushed out to sea to net as companies, environmentalists, local many fish as possible before their rivals fishermen, salmon farmers and workers got to them. at fish processing plants have all lobbied So, in 2001, the government switched furiously to ensure they get the best deal to a system of Individual Transferable possible from the new legislation. Quotas, used in most of the world’s On July 18, Chile’s lower house major fisheries. Companies were approved the draft law. It is now before assigned a percentage of the overall the Senate where the arguments are catch on the basis of their historical likely to be just as intense. record. “Every government that’s tried to That has stabilized the industry and reform the fishing industry has run into allowed badly depleted fisheries to problems,” says Economy Minister recover somewhat. But critics say it Pablo Longueira, who has the task of makes it difficult for new companies, shepherding the bill into law. “Every time with no historical catch, to enter the we try to perfect, improve or regulate the market. Those criticisms have intensified

12 August 2012 bs u iness Chile in the light of a series of recent mergers. R odrigo Sarquis, president of These days, according to data from the Sonapesca. “The remaining 55% will be Economy Ministry, four conglomerates in the hands of thousands of artisanal (Orizon, Camanchaca, Blumar and fishermen. In what other sector of the Marfood) account for 91% of the Chilean economy are there so many industrial quota for the main species different players involved?” in Chile. “These guys have built a cartel,” Auction or no auction? says Rodrigo Vial, president of the ship owners’ association Anapesca and If, as Vial suggests, power is co-founder of Lota Protein, one of the concentrated in the hands of a few, smaller companies that account for then what can be done about it? For the remaining 9%. “My prediction is Lota Protein, the answer is auctions. that this group of big companies will “Why should we wait until The company says that rather than be reduced further still, to maybe one fishing stocks recover allocating quotas on historical grounds, company in the north and one in the so that the authorities the authorities should sell them to the south.” can then simply auction highest bidder. Sonapesca, the association that President Sebastián Piñera is keen on represents Chile’s industrial fishing off the rights to others, this idea and the government tried to companies, says Vial’s cartel claim is to the Chinese or the include an auction system in the bill, but absurd. Norwegians?” Congress members voted it down. Luis “Once this law is introduced, 35 Zoila Bustamante, Felipe Moncada, general manager of industrial companies will be responsible Conapach Asipes, the industrial fishing association for landing 45% of the catch,” says in the Bío Bío Region, says they were COVER STR O Y

right to do so. legislation. Sonapesca says there have More regulation “The vast majority of people in been over 400 such sales since 2001. the fishing industry are opposed But Solano says that’s easier said While quotas and auctions are a to auctions,” he says. “They haven’t than done. “If we’d had the chance to concern for the industrial fishing fleet, worked elsewhere in the world and they buy we would have done so,” she says. the main issue for the owners of smaller don’t lead to increased competition. “It’s true that the quotas are transferable boats is regulation. On the contrary, they lead to further but if people don’t want to sell then you Chile makes a clear distinction concentration because it’s the big can’t force them to.” between its industrial fishing ships and companies that can afford to bid high.” She cites a ruling from Chile’s its artisanal boats. The cut-off point Moncada points to the experience of antitrust authority (Tribunal de Defensa is precisely 18 meters. Any vessel Russia and Estonia, which privatized de Libre Competencia, TDLC) that longer than that is considered part of their fishing industries through auctions found that between 2001 and 2011, the industrial fleet. The government in the 1990s with unsatisfactory results. not a single new company entered says there are 384 such ships in Chile But Riola Solano, Lota Protein’s the industrial fishing sector in Chile. although, faced with dwindling stocks head of corporate affairs, says the All the transfers were between market in recent years, only 185 are operative. comparison is unfair because, unlike incumbents. In 2011 those ships landed 1.6 million Chile, both countries were emerging But Sarquis says the reason is that, tons of fish, or just under half of the total from the economic debacle of the with stocks and quotas declining, there Chilean catch. former Soviet Union. She says a well- was no incentive for new companies The rest of the boats – those under designed auction system would benefit to enter the market. They could have 18 meters in length -- belong to the Chile, and cites the United States and done so if they’d wanted to. They simply artisanal fleet and are subject to far New Zealand as examples to follow. chose not to. fewer checks and balances. There are “This year they’ve auctioned quotas Part of the difficulty of buying extra over 13,000 of them in Chile. for 14 different species in the U.S. _ in quotas is that they have, until now, As industrial quotas have shrunk, the Maine and the state of Washington,” she been registered to ships rather than ship artisanal sector has grown in importance. says. “And if the Chilean government owners. If you want to buy the quota, In 2000, it accounted for 22% of the doesn’t want to auction quotas, they you have to buy the ship too. country’s total catch but by 2010 that could at least oblige companies to On this point, there is consensus that had risen to 52%. While the size of the auction fresh fish - the first catch - as the law needs to be changed, and the bill overall Chilean catch dropped by 30% they do in Norway.” reflects that. This reform (assuming the during that period, the artisanal catch Critics of Lota Protein say the way Senate approves it) should help make rose by 80%. to grow is to buy quotas from other the secondary market in transferable The government says the time has companies, as allowed under current fishing quotas more liquid. come to regulate the artisanal fleet and has included several measures in the draft law to that effect. For the first time, it draws a distinction between medium- C hile´s Commercial Fishing Catch sized boats (those between 12 and 18 ( Tons) meters in length) and boats that are less than 12 meters long. 6,000,000 This distinction is stark. The medium- sized boats represent just 10% of the 5,000,000 artisanal fleet but account for 90% of its catch. Minister Longueira says the 4,000,000 owners of these semi-industrial vessels should be forced to pay for fishing 3,000,000 licenses, certify the size of their catches 2,000,000 and (in the cases of boats between 15 and 18 meters in length) install on-board 1,000,000 satellite navigation systems so that authorities can monitor where they fish. Unsurprisingly, some boat owners object to these proposals, saying

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 they will be expensive and lead to redundancies. The government has A rtisanal Id n ustrial Total Source: Economy Ministry included incentives in the bill to meet

14 August 2012 bs u iness Chile invest banking remolino Rev Business 215x28.pdf 1 5/28/12 6:00 PM COVER STR O Y

those concerns. It says, for example, there is a bay, a line should be drawn that owners can deduct the price of between the two headlands and the satellite navigation equipment from the five miles should be measured from that cost of fishing licenses. line rather than from the coastline. This would effectively push the industrial fleet Protecting the minnows further out to sea. “That was a very important demand The government also says it wants to for us,” says Zoila Bustamante, protect the owners of the very smallest president of the artisanal fishing vessels, the rustic wooden rowing federation Conapach. “In some places, boats of popular imagination. For the where there are headlands, our access first time, the owners of those boats to the continental shelf is next to nothing will have exclusive access to “the first at the moment.” mile” – the mile of water closest to the But the industrialists oppose the “Auctions are the only coast. Medium-sized boats will only change and have vowed to fight it in way to allocate goods be allowed inside that mile in certain the Senate. Moncada describes it as areas, to fish certain species, and only “absolutely unnecessary” and warns it fairly and maintain in agreement with owners of the smaller will mean job losses. independence from vessels. The draft law grants artisanal fishermen political influence.” All boats measuring 18 meters or less a greater share of the overall quotas for will still have exclusive access to the first each species. For example, they will be five miles, as under current law. But in allowed to catch 60% of the hake quota Rodrigo Vial, response to complaints from artisanal in the Chacao channel, between Chiloé Anapesca fishermen, the government has changed and the mainland, compared to 50% the point from which those five miles are now. Their share of the pilchard catch in measured. The bill proposes that, where the area between Regions V and X will increase from 56% to 78%. In all, the following the bill’s progress through government calculates that these quota Congress. Workers at fish processing changes will result in the transfer of plants are watching too, because their US$34 million a year from the industrial jobs depend on it. Chile’s industrial sector to the artisanal sector over the fleet employs a relatively modest 5,000 next 20 years. fishermen but the fish they catch provide Taxes are another point of conflict. an additional 32,000 jobs on land. The government wants the owners of industrial ships and the larger artisanal Taking the politics out of fishing boats to pay a royalty, but there is little consensus on how it should be Environmentalists, for their part, are calculated. The bill proposes a 3.3% worried about the way in which total royalty on the commercial value of allowable catches are calculated. At quotas, but the industrial fishers say present, catch limits are determined that is unfair. They say that if a royalty by the state’s Fisheries Development is to be imposed, it should be levied Institute (IFOP) but are reviewed by on operating profit, as in the mining regional fishing councils. Industry “The royalty should either industry, or on the value of each ship’s representatives sit on those councils, be calculated according catch rather than on its nominal quota. creating a clear conflict of interest. “If the mining companies make To resolve this problem, the to operating profit, as in money, they pay a royalty, but if they government plans to set up 11 the mining industry, or don’t make money they don’t pay,” independent scientific committees, according to the size of the Sarquis says. “We don’t understand responsible for setting catch limits actual catch.” why the government is proposing a for the 11 most important species in different tax regime for us.” Chilean waters. Minister Longueira says Luis Felipe Moncada, Asipes Chile’s fishermen are not the only ones this will “take the politics out of fishing”

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PwC Chile, en su calidad de “Certified Training Partner” de la “Global Reporting Initiative (GRI)”, cuenta con expertise y credenciales únicas en Reporte de Sustentabilidad a nivel Latinoamericano. Contamos con un equipo multidisciplinario, especializado en Reporting, que ayuda a las organizaciones a enfrentar con éxito el desafío de reportar, acompañándoles durante todo el proceso.

© 2012, PricewaterhouseCoopers Consultores, Auditores y Compañía Limitada. Todos los derechos reservados. Prohibida su reproducción total o parcial. “PwC” se refiere a la red de firmas miembros de PricewaterhouseCoopers International Limited, cada una de las cuales es una entidad legal separada e independiente. COVER STR O Y Share of Chile´s Industrial Fishing Quota and ensure that catch limits are based (Main species only, 2012) on science, not greed. That is important, because some of Chile’s fisheries are in a woeful state. Stocks of jack mackerel have plummeted due to the overfishing of the 1990s. Last year, Chile’s fishermen netted just 256,000 tons of the fish compared to a peak of 4.4 million tons in 1995. Some scientists estimate it will take over 100 years for stocks to recover. If the bill is approved, the concept of a “maximum sustainable yield” will be incorporated into Chilean fishing legislation for the first time, as recommended by the United Nations and the European Union. This is a calculation of the largest catch that can be taken from the stock of any will debate the so-called “Longueira farmers accounted for most of that, given species indefinitely, and was a Law”. It is then likely to return to the around US$1.4 billion came from the key demand of the environmental lobby. lower house for further discussion. If oceans. The concept has its critics but has no agreement is reached by December Nationally, fishing accounts for only been incorporated into fishing laws in 31, the current legislation will expire and 0.4% of GDP even though Chile’s overall other countries including New Zealand, Chile could in theory return to the fishing fishing catch in 2010 was the seventh Iceland and Norway. free-for-all of the 1990s. largest in the world. Lota Protein’s In regions like Bío Bío and Los Lagos, Solano says that is a clear indication Battle in the Senate the stakes are high. Chile’s fish and that the industry is not performing to its aquiculture exports were worth US$4.9 true potential. Over the coming weeks, senators billion in 2011 and although salmon “We have 4,000 kilometers of coastline in Chile. We should be a major force in fish production and we’re not,” she says. Anapesca’s Vial says he will fight “to the bitter end” to ensure auctions are re-inserted into the legislation during its passage through the Senate. On the other side of the argument, Sarquis at Sonapesca and Moncada at Asipes vow to oppose auctions vociferously. They say the companies they represent have invested heavily in the industry for over half a century and have earned their historic quotas. Meanwhile, amid this bitter dispute “The only thing we are “By pushing the industrial between Chile’s big fishing firms, the trying to do is open up fleet away from the artisanal fishermen will try to make their the fishing market in continental shelf, you’re voices heard. Chile so we can access pushing it away from “We haven’t achieved anything yet,” fish from waters that the stock of hake and says Conapach’s Bustamante. “We’ve improved the bill, but we won’t cry shellfish.” belong to all Chileans.” victory until it becomes law.” bUSiness chile Rodrigo Sarquis, Riola Solano, Sonapesca Lota Protein Gideon Long is a freelance journalist based in Santiago. He also writes for The Economist and the BBC.

18 August 2012 bs u iness Chile BOYDEN 21,5X28_A Amcham.indd 1 09-08-12 13:45 Special Re port Chile’s Wine Industry: A Premium on Quality Chile’s wine industry has built its reputation as an exporter of inexpensive, good value wines, but changing Chile’s image to sell premium quality wine at higher prices will take time. To improve profitability and penetrate new markets, especially inA sia, the key for Chilean winemakers is focusing on quality and brand image.

By Julian Dowling

hile is a winemaker’s paradise. Blessed with long, hot summers and cool coastal breezes, natural irrigation C from melting snow and a virtually pest and disease free environment, Chile has some of the finest terroirs in the world. And, with 14 wine regions from the Elqui valley in the north to the Bío Bío valley in the south, Chile offers a diversity of soil types and climates for producing a wide variety of wines. These natural advantages have given the country’s wine industry strong roots. Winemaking in Chile dates back to the 16th century with the arrival of the Spanish conquistadors and missionaries who planted the first vines. But in the last 20 years wine exports have surged as new wineries have been created and the global thirst for Chilean wine has grown. Chile is the world's fifth-largest exporter behind Italy, Spain, France and Australia with an 8% share of the market. Last year total wine exports grew 8.9% to US$1.69 billion, or about 700 million liters, which is a record for Chilean wine according to the industry association Wines of Chile, which represents 96 wineries including the country’s largest exporters. The picture is not so rosy in Chile where consumers are drinking less wine overall - per capita consumption dropped to 13 liters in 2011 from 15 liters five years ago as demand for beer and other beverages has risen - but sales of premium wine have

20 August 2012 bs u iness Chile been rising steadily. successful in the United States, Wines of Chile’s 2020 Strategic says Montes. Plan is to increase domestic Since Chile exports roughly sales to US$840 million and two thirds of its total wine nearly double exports to US$3 production, wineries are billion by the end of this decade, exposed to exchange rate risk. making Chile into the top New With most of their income in World wine exporter ahead of its dollars and their costs in pesos, main rival, Australia. But there is the weak dollar has squeezed still a long way to go. margins. “Chile has built its reputation In order for wineries to on good but inexpensive secure solid export returns, wine and we have to change exporters say the dollar should this perception,” says Aurelio be equivalent to at least 550 Montes, president of Montes pesos but it is currently near 480 Wines, a family-owned winery pesos. And it doesn’t help that which exports premium wines costs for labor and energy have such as Montes Alpha. also risen sharply in Chile. “It’s like the car industry,” As a result, Chilean wineries says Montes. “If you have been have been forced to raise prices selling a cheap car like the Lada, at a time when consumers in it is difficult to achieve the price some markets are cutting back point of a Mercedes Benz in a on spending due to economic reasonable period of time.” uncertainty. Inevitably, this has affected sales volumes. Competition and prices In the first six months of this year, Chile’s total exports Making a profit in the wine of bottled wine rose 1% to business is not easy – it 205 million liters compared to requires large volumes, efficient the same period a year ago, production processes and according Wines of Chile. access to markets. Taking out China and Japan, Chile’s wine industry is however, which increased their dominated by a handful of large imports of Chilean wine, and producers led by Concha y Toro, exports declined 2%. Santa Rita and Viña San Pedro, “The eurozone economies a subsidiary of Chilean beverage are suffering and there producer CCU. There are over are challenges for Chilean 300 wine exporters in Chile but wineries, but there is also lots the top ten accounted for 52% of of opportunity,” said Wines Chile’s total wine exports in 2011. of Chile’s European director, Economies of scale are Michael Cox. important in the wine industry In the competitive U.K. market, with Chile facing stronger which is the top destination for competition, especially from Chilean wine by volume, exports Argentina which has been very fell nearly 2% in the first half of Special Re port

this year while exports to the United States different story. As in Europe, sales of Bulk wine is not necessarily poor quality declined 11.6%. bottled wine have fallen as prices have and in some markets such as China, The main reason for the drop is higher risen, but demand for bulk wine, which is Germany, and France, these wines are prices. In the U.K., the average price for a shipped in large plastic containers, has used for blending. The fact that demand bottle of Chilean wine has edged close to 5 exploded. for bulk wine is rising in the United States pounds (about US$8), which is only a few “Volumes are down a bit because of helps relieve supply pressure and means pence more than last year, but in a highly higher prices, but bulk wine exports are prices for bottled wine should rise, says price sensitive market sales have been through the roof,” says Lori Tieszen, Tieszen. affected, says Cox. executive director of Wines of Chile Meanwhile, a bumper 2012 grape Even so, Chilean wine is still seen as USA. harvest in Chile, up 20% from last year, good value and higher prices are “a good In fact, US imports of Chilean bulk means it has plenty of wine to meet thing in the long run”, he says. “It sounds wine rose 405% in the first four months its export commitments. And, unlike strange to say that but Chilean wines have of this year, while bottled wine imports Argentina which is known primarily for been repositioning in the last few years fell 19%, according to the US Gomberg- Malbec or Australia which is associated to reflect better quality and the desire for Fredrikson Report. with Syrah, Chile offers a diversity of better profitability.” The main reason is several lower- wine styles. While Italy and Spain are gaining market yield harvests in California. “Most of this Cabernet Sauvignon remains its top share at lower prices, Chile is moving into wine will be used to satisfy domestic selling variety in the United States, but other the bracket of “super premium” wines consumption whereas their own production grapes like Sauvignon Blanc, Chardonnay (US$10-15 a bottle). This segment, which will privilege export commitments,” says and Carmenère - Chile’s trademark grape Cox calls Chile’s “sweet spot”, is where Álvaro Covarrubias, business development – are coming on strong, says Tieszen. Chile excels. manager at World Wines, a Chilean At the same time, new wines like Pinot “Wines at higher prices are selling, it’s exporter of bulk wine. Noir and Syrah are being developed. not easy, but Chile’s image is improving,” Shipping bulk wine, which accounts “Diversity is our strength,” she says. “Chile says Cox. for 42% of Chile’s total exports, is more offers something for everyone.” efficient than bottled wine, but it is a Cox agrees that Chile’s regional Bulking up commodity-driven industry with tight differences are an asset. “With complexity margins that is sensitive to transport costs, comes image, you just have to look at In the United States, it’s a slightly says Covarrubias. France to see how successful that has

Chilean Bottled Wine Exports Liters (000’s) US$ (000’s) 500,000 1,600,000 450,000 1,400,000 400,000 350,000 1,200,000 300,000 1,000,000 250,000 800,000 200,000 600,000 150,000 100,000 400,000

50,000 200,000 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 June 2011 June 2012 Liters (000’s) US dollars (000’s) S ource: Wines of Chile

22 August 2012 bs u iness Chile been.” access to distribution channels in the United States. Devil in the details “The United States is a young, exciting market with enormous potential,” says For Concha y Toro, Chile’s largest Larraín. exporter of wine to the United States, diversity and quality are key to its Message in a bottle international success, says the company’s president, Alfonso Larraín. Selling wine in a competitive market Concha y Toro has increased prices of like the United States has a lot to do with its premium wines such as Casillero del brand image. Not everyone can distinguish Diablo and Marques de Casa Concha between a fine wine and an average one, in the United States, which has affected but wine drinkers know which brands they volumes. But Larraín expects sales to prefer. rebound as wine demand, led by younger Part of Concha y Toro’s success is owed consumers, continues to grow. to its aggressive marketing strategy. In “Quality is the most important aspect addition to its sponsorship deal with the which has allowed us to increase prices,” Premier League football club Manchester says Larraín. “Once consumers know the United, it has worked hard to get its wines “The United States quality of our wines and are willing to pay into airplanes and restaurants to raise their is a complex market more for them, there is no going back.” profile, saysL arraín. Concha y Toro has improved the quality As for smaller wineries, marketing is but there is always of its wine by investing in technology and costly and not many can afford to sponsor opportunity there.” developing new terroirs; today it has more a football club. The solution, says Aurelio than 10,000 hectares of planted vines. Montes, is for them to work together to Lori Tieszen, It also purchased Fetzer Vineyards in promote Chile’s brand. “If we fight together, Wines of Chile USA California last year, which has improved everyone benefits,” he says. Special Re port

C hilean wine in Asia. Some Chilean wineries like Concha y Toro, which has its regional headquarters in Singapore, have also set up their own distribution networks. “The Asian culture is becoming more like the West which is reflected in the consumption of wine,” says Alfonso Larraín. “But we are just beginning in Asia, consumption is still relatively low.” Chilean wineries are well positioned to help quench the thirst of China’s growing middle class, but they must study the market, says Alvaro Echeverría, director of “Despite the recession, “China is a huge the Asia-Pacific Chamber of Commerce. “There is a huge opportunity in China Chilean wine is still seen opportunity for Chile but wine exporters have to do for the wine industry, but Chilean wineries as value for money but at must do their homework first,” he says. higher price points.” their homework first.” Chinese consumers don’t know much Álvaro Echeverría, about wine, but this is changing as young Michael Cox, Asia-Pacific Chamber people who have studied abroad return European Director, Wines of Chile of Commerce home with a taste for wine. And they are willing to pay high prices for imported C hile’s Export Promotion Bureau, statistics. brands including Chilean ones, says ProChile, is also working closely with Chile’s Asia-Pacific Chamber Echeverría. Wines of Chile in the United States to of Commerce estimates that wine Cultural differences are a barrier but promote Chilean premium and organic consumption in China could triple from Chileans don’t have to speak Mandarin to wine through tastings and trade shows. just less than 1 liter per capita to 3 liters sell wine in China. In fact, Hong Kong has ProChile’s signature event, the Chilean by 2017. With a population of over 1.3 emerged as the wine distribution center for Wine Tour, gives wineries a chance to billion, total wine consumption in China is Asia and a “link between East and West”, showcase their wines for consumers and projected to reach a staggering 6 billion which makes it an ideal base for Chilean a specialized trade audience. This year’s liters by 2015. companies, says Echeverría. tour, involving 30 Chilean wineries, will Wines of Chile plans to open a new But there are obstacles. China is known take place in Chicago and San Francisco office in Hong Kong next year to promote for producing falsified merchandise in October, says Francisco Correa, ProChile's trade commissioner in Los Angeles. But more could be done. “We are considering additional resources to promote our Wine Tour and generate a high impact, not only in trade but also in awareness of our country brand image,” says Correa.

Chinese takeaway

ProChile is also working to promote Chile’s image in Asia. Sales of Chilean wine are surging in China and Japan where sales of bottled wine rose 33% by volume in the first half of this year compared to the same period last year. In fact, Chile was third in China in terms of wine imports last year after France and Spain, accounting for 17.3% of total imports, according to Chinese customs

24 August 2012 bs u iness Chile MET REV BUSSINES 28X21.5 institucional T.indd 1 17-08-12 15:12

Special Re port

“Once consumers know “We have exceptional “The Chilean market is the quality of our wines conditions to produce not evolved enough for and are willing to pay quality wine in Chile but people to be willing to more for them, there is no the competition is getting pay a lot for wine.” going back.” tougher.” Gonzalo Belemmi, Alfonso Larraín, Aurelio Montes, Lapostolle Concha y Toro Montes Wines and wine is no exception. Some small Chile’s wine image. a night and they are booked solid through Chilean wineries have found that their The Lapostolle winery, founded by the the summer months, mainly by well- brands are already registered in China French group Grand Marnier in 1994, heeled Brazilians and Americans who and their reputation harmed without produces low volumes – about 200,000 think nothing of flying down toC hile for the their knowledge. To avoid this situation, cases a year – with a focus on quality. weekend. Echeverría recommends that wineries hire Its flagship brand Clos Apalta retails for Wine tourism is helping to strengthen a local consultant to register their brands about US$200 a bottle and nearly all of Chile’s image. Concha y Toro’s Pirque before going to China. its production is exported to the United winery near Santiago attracts more than Another challenge is competition. Chile States, Asia, Europe and Latin America. 200,000 visitors every year and foreign has a good reputation in China due to its “The market in Chile has not evolved visitors value Chile for its stunning scenery. natural virtues, but it’s not the only South enough, people are not willing to spend But more could be done to promote American producer vying for a greater this much on a bottle of wine except for Chile as a wine tourism destination, says share of the fortune cookie. Argentina is very special occasions,” says Lapostolle Belemmi. racing to sell more wine and Chile could CEO Gonzalo Belemmi. Finally, the key for Chile in Asia and other be left behind if it does not step up its Unlike in Chile, customers in the United markets is not to price its wines too high or marketing campaign. States are willing to regularly spend over too low. Not cheap plonk, but not Château But the Asian market is big enough US$30 for a bottle of wine and, at this Lafite either, what Chile does best is mid- for both countries. In fact, Echeverría price range, sales have been relatively price, good quality wines that don’t cost suggests Chile and Argentina could work unaffected by the world economic crisis, a fortune. But changing Chile’s image will together to promote the image of South points out Belemmi. take time. American wines, which would benefit both Although the US market can be As Aurelio Montes says, wine is really countries in the long term. challenging for Chilean exporters which about families, passion and putting a face must work with an importer and a local behind the label. As Chile’s wineries focus World class wines distributor, it is a very attractive market for on their brand image, wine drinkers from ultra-premium wines, he says. Beijing to San Francisco will finally learn to Chile doesn’t yet have the wine mystique As part of its luxury image, Lapostolle associate Chilean wine with high quality at of France, but sales of ultra-premium has developed a five-star boutique hotel a fair price. bUSiness chile wines such as Don Melchor, Almaviva and near its winery in the Colchagua valley. It Viñedo Chadwick are helping to improve has four rooms that go for about US$1,000 Julian Dowling is Editor of bUSiness CHILE

bs u iness Chile August 2012 27 AMCHAM News US Energy Expert Visits AmCham

O nAugust 1 the U.S .State Department's Special Envoy and Coordinator for International Energy Affairs, Ambassador Carlos Pascual, gave a presentation at AmCham titled “Energy in the Americas”. Those in attendance included the US Ambassador to Chile, Alejandro Wolff, amongst other guests. Pascual is leading the new Bureau of Energy Resources (ENR), which was created by the Department of State last year to ensure that all diplomatic relationships advance the interest of the United States in having access to “secure, reliable, and ever-cleaner sources of energy”. During his presentation, Pascual spoke about the importance of shale gas (natural gas trapped within shale formations) in the United States, which has helped to reduce its dependence on oil. “Natural gas can help in the transition process but it is not the solution, which is why it is important to continue with Rodrigo Ballivián, AmCham; Ambassador Alejandro Wolff; Ambassador Carlos Pascual, and other initiatives in energy efficiency, solar Javier Irarrázaval, AmCham energy, wind and investments in new technologies such as carbon capture and storage,” said Pascual. AmCh am Committees AmCham Workshop on O n July 24, AmCham’s Communications Committee met with guest speaker Guillermo Turner, director of the Chilean business newspaper Pulso. He explained Women and Power Pulso’s multi-platform media environment to members O n August 31 the and what makes it different from other business media New York-based in Chile. Argentine writer and motivational speaker Mariela Dabbah will lead a workshop at the W Santiago Hotel titled: “Women and Power: Paths to Professional Success.” Mariela recently published the book Women and Power, which is aimed at professional women who are also mothers. For more i n f o r m a t i o n contact eventos@ Javier Irarrázaval, AmCham; Guillermo Turner, Pulso, and Rodrigo amchamchile.cl Ballivián, AmCham

28 August 2012 bs u iness Chile AmCham Launches 2012 Good Corporate Citizenship Awards On July 9 AmCham announced the start of the application process for the 10th annual Good Corporate Citizenship Awards during a meeting with this year’s panel of judges at the La Moneda Palace in Santiago. This year, unlike previous years, there will be two main awards; one for big companies and one for small and medium-sized companies. The awards in the secondary categories (environment, innovation, and associativity) will remain the same. A workshop was held at AmCham in August to inform interested companies and answer any questions. The workshop was led by Maia Seeger, executive director of the environmental consulting Judges for the 2012 Good Corporate Citizenship Awards firm, SustentaRSE, which advised AmCham in developing the rules for budget doesn’t always win; we reality,” said Seeger. the contest. measure the impact on the community The 2012 awards will be announced "The program with the biggest and its capacity to transform the social on October 17 at the Sheraton Hotel.

Wal-Mart Wins Great Corporate Debate Final

that abdicate voluntarily.” Around New MEMBERS 50 AmCham members and their guests attended the final. The Great Corporate Debate Jacobs Chile is an annual contest designed M ining & Related for participants to practice their English and public speaking skills. Americo Bortolozzo, In the semi-finals, Siemens VP Business Development beat DHL arguing against the motion “Alcohol should not be Latin America sold in Chile between 2:00am and 10:00am”, while Wal-Mart Wal-Mart´s team: Alejandro Saenger, Proforma Paola Zambra, Fay Diederichs y Alejandro overcame Banco Santander Barbeito from Wal-Mart. arguing against the moot: “The Training & Tax Services royalty on natural resources in Pedro del Campo, O n August 14, the debate team Chile should be eliminated.”The from Wal-Mart beat Siemens in panel of judges was compriseAd General Manager a closely fought final of the 2012 of Drina Rendic, Gonzalo Biggs, Great Corporate Debate, which James Channing, Felipe Ibarra, was held in the Sala de Lectores Peter Kennedy, Robin Kinsman, at El Mercurio.Wal-Mart argued Álvaro Fischer, Gabrielle Guimond, against the moot “Amnesty Randal Becker and the moderator, should be offered to dictators Michael Combes.

bs u iness Chile August 2012 29 AMCHAM members News Hyatt Partners with La Parva

In June Chile’s La Parva ski resort and the Grand Hyatt Santiago Hotel signed an agreement that will offer hotel guests special services at La Parva, which is about a 40-minute drive from Santiago. "We share similar values with La Parva in terms of the quality of services, infrastructure, and entertainment, so this is a natural alliance based on friendship. La Parva is the perfect place for our visitors who want to enjoy the Andes Mountains," said Peter Roth, general manager of the Thomas Grob, La Parva, and Peter Roth, Grand Hyatt Santiago Grand Hyatt Santiago.

Kimberly-Clark Cleans Up La Pintana School

Kimberly-Clark, a world leader in the development of health, hygiene and personal care products, has donated 400 cases of WypAll disposable cleaning clothes to the Colegio Marista Marcelino Champagnat in the Santiago district of La Pintana. “This is a reflection of our company’s constant commitment to improve the well- being of the communities where we operate,” said Carolina Valdivieso, the country manager of Kimberly-Clark in Chile.

Rodrigo Albagli (right) with the Partner UP winners from I-GAT I-GAT Wins Partner UP Entrepreneurship Contest

In July the Chilean mining services start-up I-GAT won the Partner UP entrepreneurship contest organized by Fundación Chile, angel investors’ network ChileGlobal Angels and law firm Albagli Zaliasnik. The online marketing firm PayParrot took second place. The 12 finalists in the contest had five minutes each to pitch their business plans to a panel of judges comprised of Oliver Flögel, Marco Kulka, Nils Galdo, Eduardo Novoa, Andrés Pesce, Alejandro Tocigl and Rodrigo Albagli. The contest aims to provide early stage start-ups with legal advice and I-GAT will receive a year of free legal assistance from Albagli Zaliasnik. “Legal and regulatory advice is vital for new projects, whether to define a better corporate and tax structure, protect intellectual and industrial property or handle complex negotiations and contracts,” said Rodrigo Albagli, a partner in the firm Albagli Zaliasnik. Carolina Valdivieso, Kimberly-Clark, Chile.

30 August 2012 bs u iness Chile Universidad Mayor Offers Ex eCUTIVE App ointments

Dual Degree Program in Felipe Morandé has been Architecture appointed dean of the Faculty of Economics at the Universidad An agreement signed between Chile’s Universidad Mayor Mayor. A prominent academic and Italy’s University of Venice (IUVA) will allow students of and executive, he has held architecture from both institutions to obtain dual degrees management positions in that will allow them to work in both countries. the public and private sector The agreement, which includes a student and academic including director of the exchange program, aims to equip students with different tools Research Department and Chief through workshops and international internships so that they Felipe Morandé , Economist of Chile’s Central can function in the most demanding and diverse contexts. Faculty of Economics, Bank and Minister of Transport “It is an honor for us to sign this important agreement. Universidad Mayor and Telecommunications under This is a major step toward the globalization of our country President Sebastián Piñera. in such an important and growing area as architecture,” said Rubén Covarrubias, president of Universidad Mayor. Microsoft Chile has appointed Rubén Illarramendi as its new commercial director of companies and business partners. He has a computer science degree from the CAECE University in Argentina, later specializing in management and business administration. Rubén Illarramendi, Microsoft Chile

José Luis Quiroz is the new Giancarlo Carnevale, dean of the Faculty of Architecture at IUVA; Amerigo Restucci, president of IUVA; Rubén Covarrubias, manager of the Heavy Equipment president of Universidad Mayor, and Fernando Marín, dean of the Division at logistics firm Relsa. Faculty of Architecture at the Universidad Mayor. Quiroz is a civil engineer from the Catholic University of Chile with a master's degree in industrial De Martino Wines at the engineering. He previously worked in Maqsa, a division of local construction firm SalfaCorp. Marriott Hotel José Luis Quiroz, Relsa In June, Viña De Martino signed a three-year agreement to supply Sebastián Arana has been wines to the Santiago Marriott appointed general manager of Hotel. De Martino wines will be 3M Chile. Arana is a commercial present at all of the hotel’s events engineer from the Catholic and at its exclusive restaurants Latin University with an MBA from Grill and Café Med. the University of Tulane, New To celebrate the alliance - and at Orleans. The executive has the same time re-launch the Latin worked with 3M for more than Grill – the Marriott hosted a dinner 13 years and has experience with De Martino winemaker Marcelo in sales and marketing. During Retamal and the Latin Grill’s chef, Sebastián Arana, the past four years he has been Luis Cruzat, who was distinguished 3M Chile country manager for 3M Chile in as the best chef of 2011 by the the health area. Chilean Circle of Food Critics.

bs u iness Chile August 2012 31

Consulta por: AMCHAM People AmCham Breakfast with Hernán Büchi O n July 13 AmCham members and their guests met for breakfast at the Grand Hyatt Santiago Hotel with the Chilean economist Hernán Büchi. Büchi, who served as Chile’s Finance Minister from 1985 to 1989 and founded the think tank Libertad y Desarrollo, gave a presentation titled “The Economic Moment”, which focused on the uncertain global economic situation and the challenges facing Chile.

1 2

3 4

1 Enrique Ostalé, AmCham; Javier Irarrázaval, AmCham; Hernán Büchi, Libertad y Desarrollo; US Ambassador to Chile, Alejandro Wolff, and Rodrigo Ballivián, AmCham 2 Andrés Montero, INTERTrust Headhunting, and Juan Carlos Molina, Relsa 3 Marco Antonio Pérez and Karen Garrido, Deloitte 4 Michael Grasty, AmCham; Ricardo Ortega, Kallman Worldwide Chile, and Fernando Concha, AmCham 5 Ivonne Merino and Germán von Geldern, Raylex Diginet 6 Ernesto Byrne, Radisson Chile Hotels; Gabriel Contesse, Motorola Solutions; Bárbara Urzúa, Interexpress, and Rodrigo Bertola, American Airlines 7 Pablo Russel, Rosen, and Fermín Cáceres, USACH

34 August 2012 bs u iness Chile 6

5 7 Economic Snapshot Mexico: Time to Join the Rest of Latin America?

By Brian P. Chase and Sylvia Bigio

B rian P. Chase I n many ways, Mexico has been the black sheep of Latin Portfolio Manager, America, growing below its potential while lagging behind Head of Andean its regional peers on many fronts. This has largely been due Equities, at Itau Asset to Mexico's lack of exposure to China and the commodities Management boom of the last decade, as well as the lack of necessary structural reforms. However, with cyclical macroeconomic forces now shifting in its favor and an apparent political consensus behind a broad reform agenda, this may be Mexico’s moment to catch up to the rest of Latin America. M ore importantly, Mexico finally appears to be ready to embark Latin American GDP growth has averaged 3.8% in on much needed reforms in energy, fiscal policy, labor and social the past decade with many countries well ahead of security. On the energy side, a key initiative would be to open that figure, including Peru (6.2%), Colombia (4.5%) and the sector to more participation by the private sector: initially Chile (4.4%). However, in the case of Mexico, GDP in the refinery business (an industrial process not subject to a growth has averaged just 2.6%, well below its potential constitutional ban on private investment in the oil industry), then of 3.5% and broadly tracking the U.S., with which it has in gas production (Mexico has one of the world’s largest gas significant trade ties. Much of this underperformance is reserves), and finally in oil (politically a more difficult issue). related to structural themes, such as limited access to In the fiscal realm, tax collection has been the biggest credit, antiquated labor laws, rising levels of drug-related challenge and could be overcome by broadening the tax base, violence, low export diversification, and the presence of reducing the number of transactions currently exempt from oligopolies, not to mention poor tax collection, which has Mexico’s value-added tax (VAT) and restoring royalties in the limited government spending. commodity space. Meanwhile, labor reform would make it Furthermore, Mexico has not benefitted from the easier to hire and fire, while social security reform would grant commodities boom in the same way that other countries in universal health access to the population. Together, these reforms the region have, especially as lack of investment by state- would contribute to increasing the formalization of the economy, owned oil company Pemex has led to declining production. and therefore broadening the target market for industries like Similarly, since China entered the World Trade Organization, financial services. Mexico has faced considerably higher competition. Although past reforms have been stifled by politics and power Despite this challenging backdrop, the tide appears struggles, there now appears to be a consensus with the two to be turning in Mexico’s favor both from a cyclical and a main political parties – the National Action party (PAN) and structural standpoint, which is rather unique these days the Institutional Revolutionary Party (PRI) – both onboard. The among developed and emerging markets. victory of President-elect Enrique Peña Nieto in the election on Mexico has very strong ties to the US manufacturing July 1 signals a return to power for the PRI, which has had 12 sector, which has seen significant improvements due to the years to prepare for this opportunity. The new government will weak dollar and low price of natural gas. This has caused be surrounded by very competent people such as Luis Videgaray, manufacturing to be the key driver in Mexican GDP growth a former finance secretary of the State of Mexico. Meanwhile, and industrial production. Meanwhile, China has become Peña Nieto has a good track record of execution and consensus comparatively less competitive as Mexican wages, which building as governor of Mexico City. were once four times higher, are now on the same level, Mexico likes to see itself as part of North America, but it aided by contained inflation and a weak currency.A s such, doesn’t want to be left behind as other Latin American countries Mexico’s share of US imports climbed to nearly 12% in 2011 race ahead. Time will tell, of course, but this could be an from 10.2% in 2005, while China’s share has declined in opportunity for Mexico to finally catch up. bUSiness chile the past two years to roughly 17% from a high of 20%, despite a high level of overlap in export products between B rian P. Chase is Portfolio Manager, Head of Andean Equities, at Itau Asset the two countries. Management. Sylvia Bigio is Portfolio Manager at Itau Asset Management.

36 August 2012 bs u iness Chile

BR EAKFAST

Hernán Büchi, Libertad y Desarrollo The Economic Moment: Chile and the World

By Julian Dowling

early four years on 1990, he founded the think tank pre-crisis levels, noted Büchi. from the financial crisis Libertad y Desarrollo. He is But Europe is a different triggered by the collapse currently chairman of the board story. The contagion from the of Lehmann Brothers in at the Universidad del Desarrollo debt problems in peripheral N2008, the world economy and sits on the boards of several countries such as Italy, Greece still hasn’t got its confidence other companies. and Portugal is affecting growth back. The economy rebounded in According to Büchi, the in countries like France and 2010, but modest growth of 2.3% fundamental trust in the free Germany, which is reflected in in the second quarter of this year market system espoused by higher bond yields. raises the question: is the world Adam Smith was shaken by the The question is not whether on the brink of recession or eurozone countries should is it on the road to recovery? introduce austerity measures, For Hernán Büchi, the glass which Büchi says are a is half full. At an AmCham necessity, but rather whether breakfast at the Grand Hyatt this will be done in such a Santiago Hotel on July 13, way as to promote growth or the Chilean economist told if it will result in a “permanent members and their guests downward spiral”. that the world has not lost its R estrained by the eurozone capacity to generate wealth, “strait jacket”, France and but that restoring confidence Germany don’t have the is key to recovery. institutional flexibility of the Büchi’s own faith in the free United S tates to restore market has a solid foundation. 2008/09 crisis and, while it confidence, and the European Although he did his MBA at has basically recovered in the Central Bank is still considering Columbia University in New United States, this is not the if it will intervene. York, he is considered one of the case in Europe. “There will be a prolonged original Chicago Boys, a group The United States’ national recession in Europe, which has of Chilean economists most of debt remains out of control and the risk of getting out of control,” whom trained at the University of there are still some other “loose warned Büchi. Chicago in the 1970s. ends”, but the intervention of the As for China, the giant elephant in Büchi served as Finance Federal Reserve and a return the room, it has not been immune Minister under General Augusto to the economic dynamism of from the global uncertainty. Pinochet in the 1980s and, after the 1990s has got the economy The economy grew 7.6% in the Chile’s return to democracy in back on track, though not yet to second quarter compared to the

38 August 2012 bs u iness Chile same period last year, which is a three-year low. Another concern is the generational change in leadership of the Communist Party expected later this year, said Büchi. “There will be important political changes this year and we don’t know how this will change things,” he said. M eanwhile, China’s economy is transitioning from dependence on the external market to growth based on the internal market. The difficulty of this transition is demonstrated by Japan’s recent economic struggles, Büchi pointed out. But even a moderately performing China, with projected annual growth of 6%, is good for Chilean exports. “In the medium term we but that would be a mistake insists social opposition to virtually all will continue to see strong growth, the former Finance Minister. “If types of generation in Chile except but probably not at the level we we want to live better and keep non-conventional renewables, would have liked to see,” he said. increasing our salaries we have which will not solve the problem to increase our productivity, but on their own. And energy is not C hile’s economic situation this is not happening yet.” the only area where C hileans are Between 1986 and 1997, Chile’s demanding solutions but are For its part, Chile has been total productivity rose an average unwilling to pay for them. For relatively unaffected by the world 2.3% annually, which helped to example, access to credit has economic uncertainty and it drive annual economic growth been expanded but consumers continues to ride its luck in the of around 7%, but between 1998 complain when asked to pay form of high prices for copper, its and 2008 there was no increase their debts. main export, said Büchi. in productivity at all. It edged up “There is the sensation A lthough the copper price 0.3% in 2010/11, but achieving that we have rights but no has fallen recently, it has President Piñera’s goal of 1.5% obligations, and this has to averaged around US$3.60 a annual growth will be a challenge. change,” said Büchi. pound during the government Part of the problem, says Büchi, Finally, he stressed that Chile of President Sebastián Piñera, is that Chileans expect to earn has done things right in the up from US$3.00 during the more without working harder. past, but that doesn’t mean it previous administration. “We want higher salaries for the should be content to reap the The macroeconomic figures same amount of effort.” fruits of past efforts. “If we are also good. Chile’s GDP is Another problem is energy want to earn more, we have to projected to grow a solid 4.9% prices. With higher marginal produce more with the same in 2012, the Central Bank’s costs and new projects delayed amount of work. This is our benchmark rate is stable at 5%, due to regulatory uncertainty, challenge,” he concluded. 24-month projected inflation is negotiating electricity contracts bUSiness chile 3%, and the country is near to is complicated for new industries, full employment. Büchi pointed out. C hile could rest on its laurels, It doesn’t help that there is strong Julian Dowling is Editor of bUSiness CHILE

bs u iness Chile August 2012 39 SPOTLIGHT

Jorge Errázuriz, Endeavor; Rodrigo Ballivián, AmCham; Gary Gibbons, Thunderbird University; Jessica Tartell, Thunderbird University, and Gonzalo Iglesias, Coca Cola Chile US Private Equity and Venture Capital: An Opportunity for Investors E xecutives from US private equity and venture capital firms visited Chile in August as part of a South America mission to identify potential investors. Their meetings with local investors and entrepreneurs could pave the way to future cooperation between US and Chilean firms.

By Kathleen C. Barclay

or the second year in a row, delegates spending the remainder of the global Endeavor network AmCham, in partnership of the week in Peru and Colombia. which is focused on promoting with the United States The purpose of the visit was for the entrepreneurship as a key element Department of Commerce representatives of these companies in economic development. F and Arizona’s Thunderbird to familiarize themselves with the The two-day event included a School of Global Management, Chilean entrepreneurial ecosystem roundtable with local institutional brought a mission of US-based and identify potential new investors. investors, including pension venture capital and private equity This year, AmCham was supported funds and insurance companies. firms to Chile. by the Chilean Association of Institutional investors, along with The mission took place on Investment Fund Managers private individuals, have provided August 13-14 in Santiago with the (ACAFI) and Endeavor Chile, part the basis for the growth and

40 August 2012 bs u iness Chile Soluciones Sostenibles para una vida mejor

www.arauco.cl SPOTLIGHT

development of the private equity of this asset class in the United and the incentive to deepen and and venture capital industry in the States. He said that returns from broaden investments in this area. United States. Such investments private equity and venture capital He stressed the importance of have proven to be an attractive over the 11-year period considered financing ventures with the ability alternative when included in a by the study consistently beat the to scale up – potentially throughout diversified portfolio. Moreover, overall returns from a balanced Latin America. He also identified private equity funds have been an Standard and Poor’s portfolio. The the need to review and refine important source of financing for next phase of his research will domestic regulations to facilitate early stage start-ups in the United delve more deeply into defining the investment in private equity and States while promoting growth and optimal mix of private equity and venture capital. creating new jobs. venture funds. Following the seminar, the visiting Chilean institutions and individuals Following the keynote address, firms had the chance to meet one- have recently begun to evaluate and a panel discussion took place on-one with local investors to get cautiously invest in these markets. moderated by Sergio Gutiérrez, to know each other and explore CORFO, the Chilean government’s director of ACAFI and partner possible opportunities to work development agency, has been and co-founder of the financial together. The day ended with a active in co-financing venture consulting firm EPG Partners. This gala dinner hosted by Christoph capital funds. In addition, some was an opportunity for executives Schiess, a director of Endeavor Chilean institutional investors have from some of the visiting firms Chile and president of Empresas made initial investments in both to exchange ideas with Jorge Transoceánica. At the dinner, local local and US private equity firms. Errázuriz, an Endeavor director and funds and investors, entrepreneurs They have sought out successful co-founder of Chilean investment and the international delegation track records, experienced bank Celfin. The panelists included had the opportunity to network. managers and clear strategies in Francisco Burges, chairman of Overall, this event was well their initial investments. I t is early Landmark Partners; Joe Horowitz, attended and the atmosphere days yet, so investments continue managing partner of Jafco Ventures; demonstrated that there is to involve limited amounts. Family and Eileen Nelson, managing increasing interest in venture capital offices in Chile are also interested in director at Welsh, Carson, Anderson and private equity – from both the this asset class but are, in general, & Stowe. Chilean and US side. A still in the very early stages of They discussed their firms’ The personal dialogue understanding and developing a strategies and highlighted the generated by these missions strategy for such investments. importance of having experienced serves to accelerate learning The roundtable discussion was managers given the high levels on both sides and to promote followed by a seminar at the Ritz- of risk involved in this type of investment potential. We, at Carlton which was attended by business. As with any asset class, AmCham, are pleased to have nearly 100 people. This was a they also stressed the importance been a part of this mission chance for the local private equity, of diversification with investments and hope to continue working venture capital and entrepreneurial in several firms, echoing the with venture capital and private community to learn about the latest comments made by Gary Gibbons. equity missions in the future. We trends and to discuss what needs For his part, Jorge Errázuriz thank our partners in the United to be done in Chile to create a more emphasized the need for Chilean States – the U.S. Department dynamic market. The seminar was investors to take more risk. In Chile of Commerce and Thunderbird introduced by AmCham director there are high levels of savings in – and our local partners – and Coca-Cola Chile CEO, Gonzalo the domestic market and a real ACAFI and Endeavor, as well as Iglesias, and CORFO’s executive need for financing entrepreneurial CORFO and the US Embassy vice president, Hernán Cheyre. ventures. Moreover, studies have in Santiago for working so Gary Gibbons, the academic shown that this asset class, when effectively to produce a second director of the Thunderbird Global properly managed and diversified, successful mission. bUSiness chile Private Equity Center, gave the can yield attractive returns. It is an keynote address. He provided important source of growth and some fresh data from a recent employment for the economy as Kathleen C. Barclay is principal of the consulting firm Asesorías study on the overall performance well. Therefore, there is the need KCB Ltda. and chair of bUSiness CHILE’s Editorial Board.

42 August 2012 bs u iness Chile

InteRview

Felipe Bulnes, Chile´s Ambassador to the United States Dispatches from Washington By Julian Dowling elipe Bulnes has gone from being in the eye of the storm as access for Chilean fruit. Our agenda is to advance in the adoption Chile’s Minister of Education during the student protests of a mechanism called System Approach for fruits such as lemons that swept the country last year to heading up the Chilean and table grapes. This means that fruit harvested in certain areas Embassy in Washington, DC, but he isn’t taking his new of our country would be exempt from the requirement to fumigate, F position lightly. which would improve its quality and significantly improve its A Harvard-educated lawyer, he was initially appointed marketing possibilities. Minister of Justice when President Sebastián Piñera took office Aside from these areas, we are focused on enhancing the in March 2010 and was given the Education portfolio in July last image of Chile, which is based on its respect for the rule of law year. But, after stepping down in December as part of a cabinet and foreign investment, democratic institutions, respect for reshuffle, President Piñera asked him to take over from Arturo human rights, and its solid economic and social policies. Fermandois, Chile’s former Ambassador to the United States who returned to Chile for family reasons. How can Chile’s relationship with the United States be With only three months on the job, Ambassador Bulnes strengthened? stresses that it will take time to produce results in areas ranging The relationship is excellent and that is shown by the cooperation from education to trade and travel. Here, he talks to bUSiness that exists in the political, military, economic and cultural fields. CHILE about how the relationship between Chile and the United Our challenge is to further deepen these ties, which means States can be expanded to benefit the peoples of both countries. expanding existing channels of engagement and exchange. We believe that an excellent opportunity is to develop partnerships What was your meeting with President Obama like in May? not just with the federal government, but with certain states which It was very nice, he was very polite, asking how my family was offer opportunities for Chile. settling in and recalling his visit to Chile last year. He passed on his In this regard, the agreements we have signed with California greetings to President Piñera and the First Lady. He mentioned and Massachusetts are aimed at increasing cooperation with the good relationship between the two countries and that he public and private entities in these states that are at the forefront in expects the high level of cooperation with Chile will continue. He’s innovation, entrepreneurship, education, science and technology. very relaxed and easy going; it was a very good experience. Chile has much room to improve in all these areas and the United States offers unique opportunities for progress. During President Obama’s visit last year he focused on education, energy and trade, which areas is the Embassy So far these agreements remain at the stage of good currently focused on? intentions, when will they begin to produce results? We are working on different fronts. Firstly, we are actively That’s a good question. With the Governor of Massachusetts, working with the International Economic Relations Department Deval Patrick, we are planning a series of activities in education, (Direcon) of the Ministry of Foreign Affairs in the process of clean energy and biotechnology that should be in place by the negotiating the Trans-Pacific Partnership. Chile is one of nine end of this year. For example, in education we are working so that member countries which will rise to 11 once Canada and Mexico the public universities in Massachusetts, not just the private ones join. Given the importance of this alliance, both for Chile and our like Harvard, become destinations for Chilean students. I don’t bilateral relations, we are following the evolution of the negotiations want to put the cart before the horse, but we have been working very closely. intensely so that the Chile-Massachusetts agreement is translated Another line of action is facilitating the travel of Chileans to into actions not just words. United States. In this regard an important aim is for Chile to be admitted to the Visa Waiver program, which would make Chileans Speaking of education, an area in which you have some exempt from the visa requirement for travel to the U.S. for less personal experience, how can Chile benefit from the high than 90 days for business or tourism. quality of US universities? Also, we are supporting the Agriculture and Livestock Service Chile faces different challenges in education. Along with (SAG) and the Ministry of Agriculture to improve the conditions of making our best efforts as a country to improve the quality of pre-

44 August 2012 bs u iness Chile school and primary education, improve regulations and optimize the conditions of funding for higher education, we have to move forward in areas where the United States offers important advantages. This includes advanced human capital formation. A significant number of Chileans currently come to pursue postgraduate courses in the U.S., which has some of the best universities in the world. Our mission is to promote these study alternatives as well as cooperation between US and Chilean universities. We hope that all these efforts will result in Chile having more centers of excellence in education and research. It is also vital to further deepen English teaching efforts in Chile in order to become a bilingual country. This is why we are working with US institutions and supporting the English Opens Doors (Inglés Abre Puertas) program of the Ministry of Education to improve the skills of our English teachers.

What is the Embassy doing to promote business opportunities for Chilean firms? We are working with the government’s export promotion agency, ProChile, to promote the products and services of Chilean companies in the United States and help them to take full advantage of the Free Trade Agreement. For example, there are currently specific campaigns to promote olive oil, pisco, wine and other gourmet products. In the last few months alone Chile has been present in the Fancy Food fairs held in San Francisco and Washington, DC, in the biotechnology convention that took place in Massachusetts and at the mining fair in Las Vegas. In parallel, the Flavors of Chile event was held in Miami during which 24 Chilean companies had business meetings with approximately 15 importers and distributors in Florida.

The Visa Waiver program could help Chilean businesses take advantage of such opportunities, when will Chile meet the requirements? We are continuing the good work of my predecessor but there is still a long way to go. In order to be accepted into the program we must comply with various requirements some of which do not depend directly on us. For example, we need to reduce the visa rejection rate to less than 3%, down from 3.4% today. We hope this will happen within the next two years, but in the meantime we are working in those areas that are under our control. For example, we are in the advanced stage of negotiations for an agreement to exchange criminal records between our two countries and our goal is to sign this in the coming months.

Finally, how much influence does theC hilean Ambassador have? Chile’s foreign policy has always been a state policy and this is a great asset. There has been clear continuity – for example the Chile-California agreement was signed by President Bachelet and this government has strengthened it. I am sure the same will happen with the Chile-Massachusetts agreement launched by President Piñera. It would be a mistake for the Ambassador to forget whatever was done in the past and start over. It’s not personal - it’s part of our foreign policy. bUSiness chile

bs u iness Chile August 2012 45 Life in the Slow Lane A Love-Hate Relationship By Santiago Eneldo

write this the day after the 2012 Open Championship was played at Royal Lytham & St. Annes in England. This was won by South African golfer Ernie Els after a tragic collapse over the last four holes by the charming but I nervy Australian, Adam Scott. I did not witness this as I was playing my own championship. My relationship with the game of golf is a rather humbling story and my “feelings” for Scott run very deep. I love the game but I also hate it - with all the loathing I can muster! Why? As a young man I was quite a fine golfer; good technique Murphy raised his ugly head and reprogrammed my wiring. and quite aggressive. Except for an “attitude problem”, I was I suddenly, and very foolishly, thought I was actually quite generally pleased with my game. a good golfer and began to expect a good score on every As time moved on, I had less and less time to play (more hole. But this was just not possible. Worse, I would miss the and more work!) but on the occasions I did make it out to ball entirely (air shot) or scoop out plate-sized clumps of sod the course my game steadily deteriorated and I became an while my ball moved just six inches. Then I cracked. After embarrassment. In my own mind, of course, I was still a one particularly dreadful sequence of shots, I screamed out very competent player but for some inexplicable reason this a four-letter word in no direction in particular – but rather talent did not unfold on the fairway. My score for 18 holes too loudly. I also sensed I was no longer holding my club… headed further “south” until I arrived at 100 shots and then There was total silence around me. My playing partners slipped to 110 and even 120. My attitude problem grew until were staring awkwardly at their shoes and other players on one day I was asked if I was satisfied being able to throw nearby greens and tees were frozen in mid-swing. I started my club further than the golf ball had travelled… I was even my mumbling apology with: “Did anyone see where my club in danger of losing friends. I explained that I was sorry for went?” There being no response, I continued: “It’s very playing so badly only for a “friend” to remind me that I had humid… must have slipped from my grip”. I then heard an always played badly (!) but that screaming, swearing and elderly American woman announce: “Told ya foreigners are launching clubs into orbit caused embarrassment for all. I a bad influence on the game”. agreed that I was spoiling their pleasure and so I retired from I used the cover of the trees to creep back to the clubhouse golf for almost 15 years. and my car where, to my horror, the club’s manager was Now I have returned – a retarded golfer but (for the standing. I smiled shamefully expecting a tongue lashing. most part) a happier one. I had to convince myself that I “Ya know, son (I was old enough to be his father!), it is only a was starting a new sport and that any stored memory of game, try to enjoy it. Even the bad shots are worth laughing golf was simply a failure in my human hard drive. No longer about.” I wanted to say I know that you halfwit, but instead I would I associate my clubs with WMD. Yes, Weapons of thanked him for his wisdom, stuffed my clubs (all but the one Mass Destruction… that had disappeared!) into the car and drove off. I bought new clubs, balls, golfing shoes, a glove and I I have agreed (Mrs. Eneldo insisted) to take an anger even took a few lessons. I enjoyed my game (still 120 but management course and only after this will I be allowed fun!) and I enjoyed socializing with fellow golfers on the “out” again. All so very, very humbling… course. Life was good. I could laugh at my poor shots and I remain trapped in this “love–hate relationship” with the lost balls. great game; but will I find love? Then I had a relapse. I was in the U.S. playing golf with a sister, a brother-in-law and a friend. The first five holes Santiago Eneldo were a great success and I was hitting the ball well. Then (Golfing tips to [email protected])

46 August 2012 bs u iness Chile orig_av_corp_Amcham_280x215mm.pdf 31/7/12 13:02:03

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