Radical structural reform is needed in Chile if the country’s economy is to continue growing at a fast pace, according to Roberto Paiva, the director of ProChile, the country’s export promotion bureau.
“The country cannot keep expanding economically with such a high level of inequality,” says Mr Paiva, who assumed his position in March 2014 after being appointed by president Michelle Bachelet. “But people should not get confused – Chile will remain a pro-capitalist and pro-free-market country. We very much welcome foreign investors.”
Spreading the benefits
The government feels that that not all Chileans have benefited enough from the economic boom that the country had between 2010 and 2013 – when economic growth averaged 5.3% a year, according to the International Monetary Fund. The country’s congress has approved tax reforms – which include gradually raising corporation tax for big companies to up to 27% in 2018, from 20% in 2014 – which should add $8.3bn a year to the state’s coffers and will be mainly used to improve Chile’s educational system.
“The tax rise means that state education in Chile can now be free,” says Mr Paiva, whose background is in commercial engineering, though he has a doctorate in international economics from Grenoble University in France. “Eventually we will be able to get rid of the system of co-payment, by which parents have to contribute to the cost of their children’s state education. The changes will mean that schools will no longer be run for a profit.
“The state must guarantee public goods such as education for all the population. There is never a good moment for reform but I would like people to understand that in the long run the changes will create a better Chile.”
Mr Paiva says that the country lacks sufficient technicians of a high enough standard and that he hopes that the reforms will create a much greater pool of qualified workers in this field. “It’s all about improving human capital and helping people to fulfil their promise,” he adds.
The changes in the education system will affect some 1.3 milllion students in more than 1000 Chilean schools that operate under the co-payment system, according to official figures. On average, parents contribute $25 a month to each child’s education, but that can rise to up to $125 a month at some schools.
One of the most important initiatives that the Chilean government is pushing is to help SMEs to export their goods overseas. ProChile is spearheading this drive. “Chile has more than 200,000 SMEs, but only 3600 are really involved in exports,” says Mr Paiva. “We want to reach out to these companies and help them explore what markets exist for their products abroad.”
Special centres are being set up at ProChile offices in the country’s 15 regions to advise SMEs about overseas markets. The initiative – which has a budget of $1.5m for 2015, rising to $4m in 2016 – will also help some small companies with financing so that they can attend international trade fairs and market their products overseas.
Mr Paiva says that food and beverages are two of the product areas that Chilean SMEs should be more successful at exporting internationally. For example, the country produces excellent salmon and a ready market exists overseas for gourmet salmon products.
“One of the issues is the standard of English of the people who run or work at SMEs,” he adds. “Again, this comes back to education and it’s important that there is more focus on English language standards. The Hispanic market in the US – centred around Miami – is important to Chilean exports but good English skills are needed to export to Asia, for example.”