Chile has signed more free-trade agreements (FTAs) than any other country in the world. Its 24 FTAs with 62 countries – or more than 90% of its trade partners – includes deals with Australia, China, India, Japan, Mexico, the US, the EU and South Korea. However, its government is committed to ensuring that a greater proportion of the country’s 200,000 SMEs export overseas.
“Chile is a very small country that accounts for only 0.4% of global GDP, so the FTAs are very important to us,” says Andres Rebolledo, general manager at Direcon, a department of the Chilean foreign ministry which coordinates the country’s international economic relations. “Our economic development depends on the international markets.” Mr Rebolledo adds that the country has strong export links to Asia, with FTAs also being negotiated with Indonesia and the Philippines. China is Chile’s main export market, followed by the US, Japan and South Korea.
Chile signed its FTA with the US in June 2003, which was then enacted in January 2004. Since then, trade between the two countries has jumped by 350%. “This FTA was the most successful ever in terms of increasing trade,” says Kathleen Barclay, president of the American Chamber of Commerce in Chile. “The FTA set the basis for the very strong relationship that exists between the US and Chile today. It set the example for Peru and Colombia, which later on secured their own FTAs with the US.” As a further demonstration of the strong links between the two countries, in 2014 Chileans became the first Latin American nationals to be included in the US’s visa waiver programme.
A strong footing
Blunding, an orthopedic parts producer based in Santiago, is an example of a Chilean SME that has successfully exported its products overseas. Founded in 1987, today the firm has 135 employees and works with another 10 small Chilean companies that make parts for its products. It provides 80% of the Chilean market for its type of products and has major export links to Ecuador and Mexico (where it is supplying a network of 26 hospitals).
“You must get used to competing with producers from around the world,” says Patricia Perez, the general manager of Blunding. “Otherwise, hospitals could import the products from overseas manufacturers. You have to be on the ball.” Ms Perez adds that ProChile, the country’s export promotion bureau, helped the firm to develop its export markets by encouraging it to take part in international trade fairs and by introducing it to business contacts.
However, one of the biggest challenges for the country is the cost of energy, according to Mr Perez. “It’s very expensive and I know it’s something that the government is working on to try to bring the costs down,” she says.
Corfo, the country’s state-run development agency, is aiming to improve the competitiveness of Chilean firms and to make the economy more diversified. It can provides grants of up to 170m pesos ($270,000) to firms that pass a pre-investment assessment and that help to develop a local industry or a region.
“One of the other key considerations in making a grant is what [the firm can offer] the country,” says Cristian Diaz, an investment director at Corfo. “Whether the firm can help to foster a local industry that has important international links is something we consider.”
Corfo has helped firms in a number of key industrial sectors that Chile is trying to develop, including salmon fishing, film production and the manufacture and maintenance of motors and parts for the mining industry.
“In mining, in particular, we want to make Chile the hub for the region. We have a sophisticated mining industry and we want to service that industry throughout the Andean region, including in Peru,” says Mr Diaz.
The government of Chilean president Michelle Bachelet’s government has devised a road map to try to improve the country’s productivity, growth and innovation, and has established a productivity commission based on a similar operation in Australia. A $1bn strategic investment fund is also being set up, which aims to finance public-private partnerships in sectors with the potential for high growth and high job creation. Meanwhile, a further $26m has been allocated to the fund this year, and it is hoped that this sum will rise dramatically as the private sector shows interest in the projects involved.
“In Chile there is a lack of public goods,” says Cristobal Marshall, head of public policy at the Chilean ministry of economy, development and tourism. “There are parts of the economy that the state must become more involved in, whether that be in education or infrastructure. The public sector can play a coordinating role in helping to diversify the economy.”
The government is putting particular focus on trying to develop specific industrial sectors, including mining, fishing, tourism and logistics. It is planning to create clusters and help Chilean firms to provide goods or services at every stage of the supply chain.
Mr Marshall says that the government is helping SMEs in many ways. A new website has been established to provide all the information that a small company needs to set itself up. A network of 50 small business development units is being rolled out throughout the country and will work closely with the country’s universities and business organisations. These provide SMEs with technical support tailored to them, including details about how to attract financing and support with tax planning.
There are also plans to create 60 business and industrial districts throughout the country. They will be centred around SMEs and have specific themes; for example, crafts or leather goods. The government will provide the support and services to help transform these neighbourhoods.
BePretty is a small company that enables women to search, discover and book beauty appointments through a mobile app, and allows professionals in the hairdressing and beauty industry to scale their businesses by promoting and managing them online.
It was set up in Santiago in 2015 by Álvaro González Noain, who is from Spain but has been living in Chile for more than two years, and it already has 13 staff. It has secured grants from Start-Up Chile, the country’s seed accelerator programme, valued at about $240,000.
“Start Up Chile is an amazing programme,” he says. “It’s unique in Latin America and has really helped us to get our business up and running. Already we are thinking of expanding to other cities in Latin America, including Mexico City and Bogotá.”
One of the big advantages for companies based in Chile is the openness of the country’s economy. This means that export markets are readily available for Chilean producers and services providers of all sizes, something the government is encouraging SMEs and start-ups to take advantage of.