A More Efficient Foreign Service

A friend in need is a friend indeed the saying goes, and when Chile was in need after the devastating February 27 earthquake, the United States provided all manner of help from satellite phones to air transport, emergency supplies and donations.

Now the reconstruction is underway, the new government has turned its attention to the longer term goal of making Chile into the first developed country in Latin America by 2018.

But Chile won’t get there alone – it will need to work closely with its trading partners, especially the United States, said Minister of Foreign Affairs, Alfredo Moreno, at an AmCham breakfast on June 10.

After thanking outgoing U.S. Ambassador Paul Simons for his support following the earthquake, Moreno highlighted the close commercial relationship between the two countries and its importance for Chile’s development.

“Political and economic relations with the United States are as strong as they’ve ever been and we will work to make sure that continues to be the case,” said Moreno.

The Foreign Affairs Ministry plays a key role not only in promoting trade and investment, but also in other areas of international cooperation including security, science and technology and human capital, said Moreno.

Foreign investment in Chile totaled US$5.1 billion in 2009, while Chilean companies invested US$4.3 billion abroad, but competition is strong and the Ministry must work hard to increase investment, said Moreno.

“We need to attract more investment to fuel growth and also create the conditions so our companies can invest in other countries,” he said.

When it comes to trade, Chile has a “huge comparative advantage” given its global network of 20 Free Trade Agreements with 57 countries including the U.S., noted Moreno.

As a new member of the OECD, Chile needs to improve its public policies to meet the organization’s high standards, but when it comes to trade openness Chile is an example to other members, said Moreno.

“Our ‘Fanatic For Free-trade’ approach means we have more trade agreements with other OECD members than anyone else,” he said.

And Chile’s number one trading partner is the United States. Excluding copper sales, the U.S. was the top destination for Chilean exports in 2009 followed by China, which was first if copper exports are included, and the top source of Chilean imports.
Bilateral trade more than doubled between 2004 and 2008 to US$20.2 billion and 94% of trade is subject to zero tariffs. “We need to keep working to include more products under the FTA,” said Moreno, adding export restrictions on baby kiwis and pomegranates were recently lifted.

But exporting more fruit will only get Chile so far towards its development goal. To really progress, the country must exploit its comparative advantages in areas like astronomy and mining, stressed Moreno.

“We need to improve our productivity to be more competitive and promoting science and technology are key elements in achieving this,” said Moreno.

The recent decision by the European Southern Observatory (ESO) to build its Extremely Large Telescope, the largest ever built, in northern Chile is an example of the country’s scientific research potential.

“It seemed the desert in northern Chile was good for nothing but the clear skies are perfect for stargazing… in the coming years, many of our best students will be studying astronomy,” said Moreno.

International cooperation in global environmental and security initiatives, such as reducing greenhouse gas emissions by 20% by 2020, is also essential for Chile to meet its development goal.

Regarding intellectual property, Chile’s inclusion on the USTR 2010 Priority Watch List of countries that have failed to protect intellectual property adequately is unjustified given recent progress in this area, said Moreno.

“Just walking down the street you can tell that piracy is not as much of a problem as it used to be,” he said.

But Moreno acknowledged there is room for improvement and emphasized the need for education so that Chileans understand why producers of intellectual property should obtain the fruits of their labors.

Protecting intellectual property is vital as Chile looks to expand or update many of its trade agreements, he said. For example, Chile recently signed a services agreement with China becoming only the second country to do so after New Zealand.

The Ministry’s export promotion arm ProChile has 57 offices worldwide, including six commercial offices in the United States, which help organize trade fairs and other events.

But more important than the number of these events, or the amount of money spent on them, are the concrete results in terms of export opportunities created, he said.

“We are like a services company – if our clients are happy we are happy, and who are our clients? You,” Moreno told AmCham members and other guests.

And that means providing services in the right place at the right time. The Ministry’s network of 70 embassies and 107 consulates serve expats and travelers around the world, while ProChile helps Chilean companies enter new markets, said Moreno.
But the world is “changing quickly” which means reorganizing embassies in Europe and other regions to better serve the needs of companies and individuals.

“The world is changing and so are the needs of our companies,” said Moreno.

For example, having a science and technology attaché in Costa Rica or a cultural attaché in Egypt “doesn’t help us much,” so the Ministry is studying where to send diplomats to better serve Chile’s national interests, said Moreno.

Another stumbling block is that Chilean diplomats are often ill-equipped for their responsibilities, whether through lack of language skills, relevant education or experience. But this is something the Ministry aims to remedy by implementing a merit-based selection system similar to Brazil.

“Our diplomats need to be constantly trained and evaluated, this shouldn’t stop when someone enters the service,” Moreno said.

Chile’s free trade agreements and its good relationship with the U.S. are important advantages on the road to development, but a well trained and more efficient foreign service is essential to link companies with business opportunities anywhere in the world, concluded Moreno.

Julian Dowling is Editor of bUSiness CHILE