Chile’s goal of becoming a developed country by 2020, which means raising per capita GDP to US$23,000 from US$15,000 currently, seems like climbing Mount Everest. It is a long way off and getting there will take hard work and commitment. But Chile is well-equipped to make the climb, says Hernán Cheyre, executive vice-president of Chile’s Economic Development Agency, CORFO.
It helps that many of Chile’s rivals are carrying too much debt and are falling behind as a result. In fact, thanks to its fiscal discipline and sound macroeconomic position, Chile has an “unprecedented” opportunity to pick up the pace of economic growth, Cheyre told guests at an AmCham breakfast on December 22.
While European countries and the United States struggle with huge public debts, Chile’s net public debt, including its offshore sovereign wealth funds, is negative. “Only a few countries in the world can make that claim,” said Cheyre.
Chile is not only light on its feet but it also has modern transport and world-class telecommunications infrastructure. Location matters less and less in the world of business, but good communications technology is essential, said Cheyre.
Then there is Chile’s institutional strength. Contracts are respected and institutions work, which is more than can be said for some other countries in the region.
But to take advantage of this opportunity, Chile needs “more and better companies,” said Cheyre. “It is the private sector that will help us to scale the summit.”
So how can CORFO help companies make the climb? By “building bridges” where market failures exist in order to improve connectivity between entrepreneurs, said Cheyre.
CORFO aims to achieve this by promoting entrepreneurship in productive areas, stimulating innovation to improve productivity, increasing the competitiveness of Chilean companies and improving Chile’s business climate.
“We need to think big to make Chile into a pole for entrepreneurship and innovation in Latin America.”
It all starts at school by encouraging kids to “play at entrepreneurship”, said Cheyre. CORFO has financed projects, such as inter-school contests, that have benefitted 38,810 students throughout the country and involved over 1,000 teachers.
Women are also a largely untapped source of entrepreneurs in Chile. The participation of women in the workforce is low, but CORFO’s small business programs aimed at women are an “escape valve”, particularly for women living in rural poverty, noted Cheyre.
And Chile is attracting entrepreneurs from abroad. A few years ago CORFO identified the reluctance of the United States to renew visas for foreign entrepreneurs in Silicon Valley, which led to the launch of Start-Up Chile. Through this program, 384 entrepreneurs with bright ideas have been selected from around the world to receive US$40,000 each and a one-year visa.
“We’ve had 1,500 applications from 65 countries, it’s amazing how this has taken off on social media,” said Cheyre. “We hope the next Facebook will be in Chile, but the main contribution is creating a culture of entrepreneurship.”
Through another program, Global Connections, CORFO has an agreement with Silicon Valley’s Plug and Play Tech Center to send top Chilean entrepreneurs for training and coaching.
But English is an important gap. “Chile has many good projects but our young people are failing in English,” said Cheyre. This is the reason CORFO awarded 4,000 scholarships for language training in 2011, which will grow to 6,000 in 2012, he added.
CORFO also aims to strengthen links with investors in countries like the United States to attract more venture capital. “We need to tap these markets and learn from the venture capital know-how in countries like the United States and Israel,” said Cheyre.
Chile’s small and medium size companies often struggle to obtain bank financing due to their high level of risk, but CORFO helps by guaranteeing bank loans. In 2011, the agency guaranteed 43,000 loans totaling US$2 billion. “We extended a bridge between banks and small businesses that has worked well,” said Cheyre.
In terms of innovation, Chilean companies often struggle to take good ideas to market. “Innovation means you have to produce something to sell,” he said. But CORFO’s Go to Market program aims to help Chilean innovators take the next step by sending them to Silicon Valley to learn how to market their ideas.
Chile has also attracted centers of technological excellence such as Germany’s Fraunhofer biotech institute, which opened its first South America center in Santiago in 2011 with funding from CORFO. The next step is to attract more private research centers to serve the region and the world from Chile, said Cheyre.
Through these and other programs, the government aims to reach 2013, Chile’s declared Year of Innovation, having made concrete progress in innovation and productivity, said Cheyre.
But for this to happen, Chile needs to generate more competition in markets. “We need more competition in different industries so innovation is a necessity, not an option,” he said.
Chile also needs local business role models. It has plenty of sports heroes – from Marcelo Salas to Alexis Sanchez – but it needs heroes in the area of entrepreneurship.
The next Mark Zuckerberg might not be Chilean, but by building bridges CORFO is helping to create the conditions for entrepreneurs to flourish. As Cheyre said, Chile needs more and better companies to climb Mount Everest. The peak is in sight, but there is a long way to go.