Interview to Carlos Álvarez, Director of InvestChile Director

“Chile has not lost its attractiveness to international investors”

Carlos Álvarez, the head of the foreign investment promotion agency, InvestChile, speaks to AmCham Chile about his first year in charge of overseeing efforts to implement a modern structure and new working procedures within the entity. In doing so, he provides insight into the offensive campaign launched in 2017, which has included the opening of international offices in Frankfurt, Tokyo and San Francisco. He also outlines how he disagrees with any contention that the Chilean economy is losing its potential to attract investment from abroad.

By Yael Mandler and Jorge Isla 

Carlos Álvarez has been in his post as Director of InvestChile for exactly a year; a post he assumed following the institutional restructuring of the entity responsible for attracting foreign investment to the country. This restructuring took place as a result of Law 20.848, enacted in June 2015, which transformed the former Foreign Investment Committee into the new investment promotion agency. Its main mission is to implement a strategic and coherent plan to attract, retain and expand the presence of foreign companies in Chile.

The new legal framework under which the agency is constituted stipulates a structure “with five clearly defined areas and functions that are linked to building an organization with new divisions, managers and responsibilities”, stresses Álvarez. This is in addition to “our efforts to refine procedures and recruit people with the required skills. I am very happy with the progress made in terms of consolidating a modern investment promotion agency”, he continues.

During its design and implementation phase, InvestChile received the support of consultants from the Organisation for Economic Co-operation and Development (OECD), in line with efforts “to learn how agencies from countries such as the Republic of Ireland, the Netherlands and France are working, as quickly as possible”, he explains.  Álvarez adds that part of this objective includes ensuring that InvestChile forms part of a working group of different OECD agencies that meets annually to devise benchmark studies based on joint action related to best practices.

The central aim behind this new model is to search for investors across five priority areas: mining technology, services and equipment; global services; healthy food products; special interest tourism; and energy and infrastructure. “We are going to specifically promote the chosen sectors due to their tremendous potential to contribute to national growth, ensuring that Chile becomes firmly established at the forefront of decision-makers’ thinking. The reason behind this five-pronged approach is that, although all five areas have comparative advantages and obvious competitive qualities, they are all still emerging industries. They are also ones in which Chile has objective advantages with significant potential for growth and they represent segments which make the country an attractive investment destination”, Álvarez clarifies.

One of the most important initiatives in achieving this mission is the opening of three offices in three strategic locations: Germany (Frankfurt); Japan (Tokyo); and the United States (San Francisco). “Between now and the end of the year all three will become fully operational”, he confirms. 

– So how do you measure the success of an agency like InvestChile?

– Cleary, the volume of investment in terms of the amount of money entering the country is an insufficient way of measuring the success of the work undertaken. Investment is usually the prominent factor, in addition to others including employment and exports, both direct and indirect. Therefore, the reports that we will be compiling over the coming years will not solely focus on the volume of investment in terms of incoming capital, but also on these additional dimensions. 

– Are there any concrete cases of new investors that stand out?

– In January we launched a substantial extension of the Equifax software development center; the U.S-origin airline, JetSmart, is setting up operations in Chile; Grünenthal has arrived in the pharmaceutical field; and Amazon has announced a regional services center will be opening in the country.

– There has been a sustained downturn in terms of foreign investment in the country recently, although the government contends that Chile remains an attractive destination for investors. How do you explain this situation?

– This has generated a great deal of reflection for several reasons. The main issue is, probably, that not everything measured by the Central Bank of Chile, including foreign direct investment, is transformed into gross fixed capital formation. So when a company arrives in Chile, it brings its capital and undertakes a series of investments, such as constructing buildings, hiring personnel, and so on. Whereas the Central Bank measures stock in its national accounts, including gross fixed capital formation, this figure has nothing to do with the measurement of foreign direct investment. It is for that reason that we are less interested in this particular factor.

– Therefore, do current measurements fail to reflect the real situation related to foreign investment?

– There are several factors with various elements that can distort the perception of the general public. For example, included within what appears to be the total foreign direct investment of companies are their retained earnings. This also applies to temporary capital inflows. For instance, if a company wishes to use Chile as a platform for investing in a neighboring county and, during the fiscal year, it injects financial capital into that destination, what appears to be foreign direct investment becomes inflated. As a result, this measurement, which often gives rise to the headlines in the news, does not correspond to the gross fixed capital formation of foreign companies.

– With that in mind, how can the figures from recent years be evaluated?

– Regarding investment issues, there are two relevant conversations in the public domain. In terms of figures related to foreign direct investment, my impression is that those from 2011, 2012 and 2013 were very large due to a combination of an investment cycle in the copper mining industry and an increase in company profits. Therefore, significantly large downturns can be seen regarding investment flows that have no relation to deliberate decisions taken by companies to invest in the country. However, this is not the case for figures of gross fixed capital formation from any given source and what has been observed in recent years is a small decline or stall in terms of its overall GDP participation. This is probably explained by the fall in investment in mining, which has been partially offset by an increase in investment in energy. In aggregate terms, we do not believe that we are facing a complex situation of declining foreign investment in the country.

– How does this affect perception from abroad?

– It causes a problem for us because these figures do not exist in Chile and are measured in very few countries. This makes our job of evaluating and understanding how to measure our own impact more difficult.

– Does this all mean that Chile is no longer attractive?

Not at all! On the contrary, according to the conversations we hold with international investors Chile remains an attractive country. Moreover, companies from around the world are still highly confident that Chile is the strongest destination in Latin America in which to develop and grow their investment. I have no doubt about that. We are the most mature country in terms of offering Multinational Companies the necessary conditions to begin operations here, and their success is made more likely due to the existence of a highly qualified pool of local talent. 

– Regarding the opening of the office in the United States, what are the objectives in terms of investors in this particular market?

– Overall, our goal is to cover the whole of North America, including Canada. However, the United States is the largest economy in the world and has important companies operating across all the sectors on which we are focussing our efforts. This includes clear leadership, for example, in intensive services related to information technology, issues concerning healthy foods, and in mining with companies such as Caterpillar and those working in renewable energy. Moreover, California, where the office is located, constitutes a particularly significant market for InvestChile.

– Why did you decide to locate the InvestChile office in San Francisco?

It is difficult to expect to cover all investment challenges from just one location. But in the case of the United States, this decision was relatively straightforward and based on several factors: San Francisco, thanks to Silicon Valley, hosts a significant portion of the information technology industry and its associated services sector. In addition, it is located close to the city of Davis and its cluster of businesses working in the field of highly sophisticated agricultural-based food products. Moreover, the western seaboard of the United States and Canada in general is home to a large concentration of companies specializing in mining technology and equipment.

– How do you plan to cover the rest of the county and what role will the ProChile promotion network play in this process?

– We have a strong collaborative relationship with the commercial and economic affiliates of ProChile and they will be supporting us to roll out across the country. We understand that the criteria behind our search for potential investors is very specific, but we are also taking advantage of the vast amounts of knowledge held by our commercial offices in terms of exports, markets and businesses.

– You formed part of the recent Chilean Presidential tour to North America. How did you perceive the receptiveness of American Investors in terms of the current US administration framework?

We did not perceive any increased risk following our interactions. Generally, the areas in which we are promoting Chile have such clear advantages and are so specific that there is little doubt in this regard.


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