InvestChile: Role Model Nation – Juan Antonio Figueroa
Over the past decade, Chile's emergence as one of Latin America's leading regions in terms of economy, living conditions and political stability has been well-documented. InvestChile's Juan Antonio Figueroa tells Ross Davies about the country's arrival on the world stage and explains how it continues to facilitate this growth by encouraging foreign investment.
On a recent tour of Latin America, US President Barack Obama lauded Chile's burgeoning economy as a "role model" to neighbouring countries within the region. In its bid for global integration, last year it became the first Latin American member of the Organisation for Economic Co-operation and Development.
In addition to this, Chile has more than 20 trade agreements with 57 countries - including all EU member states, the US, Australia, China and India - representing approximately 90% of the world's GDP. Consequently, these minimal barriers have proven to be particularly attractive to foreign investors, including companies from fellow Latin American countries, seeking a springboard to infiltrate further global markets.
"Free trade allows us a great opportunity to develop, especially within the global services industry," says Juan Antonio Figueroa, business development manager of InvestChile, an investment programme forming part of the Chilean Economic Development Agency (CORFO).
"We already have 60 global centres in Chile exporting a range of services to the world such as IT, customer service and telecommunications. What really differentiates us from other countries within our region - and also within emerging countries - is our overall ranking in areas such as competitiveness, political harmony, fiscal discipline and economical stability - this is how we market ourselves."
While other national economies have been savaged by the global recession, a hardline stance on fiscal responsibility and discipline has seen Chile remain economically buoyant. According to Figueroa, the country's financial ethos, which centres on transparency and regulation, was developed and fostered during the financial reforms in the wake of the Chilean banking crisis in the 1980s.
"We really learned a very important lesson, especially within the banking sector. It gave us the opportunity to restructure regulations, enabling us to achieve the lowest country risk in Latin America," he says.
Having received favourable appraisal from the international community for its monetary order - Chile was upgraded to AA status by Moody's in 2010 - economic stability has also been complemented by exponential growth. As a result of this, Chile currently has the most competitive economy in Latin America, and the 30th in the world.
InvestChile was formed in 2000 to promote and assist the integration of subsidiary companies and offshore investments. Initially targeting the high technology sector, today its offshoring programme incorporates other divisions within the knowledge and services market, including customer support and telecommunications.
"Despite our intention to become a developed economy by 2020, we live in an age where emerging countries such as ourselves are growing faster than some developed economies. Foreign investors are attracted by our highly trained talent pool, but with lower labour costs," explains Figueroa.
Chile is responsible for more than a third of the world's copper output, hence mining is one of the nation's flagship industries and a sector that InvestChile is particularly keen to promote. Currently, there are 4,000 mining supply companies across the country.
"In recent years, large multinational companies such as Sandvik and P&H MinePro have transferred some of their operations to Chile," he says. "It is a lucrative sector in which we are looking to invest $50bn in the next six years."
Whilst Figueroa is keen to provide a broad overview of Chile's considerable resources so as to differentiate it from fellow Latin American nations, he is quick to elucidate that InvestChile appraises opportunities for foreign investors depending on a number of factors and specific features relevant to the respective industry. This bespoke approach is also incorporated in its promotional campaigns. Before it approaches investors, InvestChile holds an initial vetting process to source potential companies.
"While we do provide a broad overview of the Chilean business climate when sourcing prospective investors, we look to produce specific models for matching industries rather than just following a general policy," says Figueroa. "We have a set of relationship managers that contact medium-large multinational companies that are willing to invest - these managers are in charge of preparing bespoke agendas. It is a very direct form of promotion."
Among its value-added services, InvestChile offers potential investors the opportunity to visit the country in a bid to garner local knowledge, as Figueroa explains. "Once a year, we hold a set of investment forums in Santiago to encourage businesses and representatives to meet with potential partners and local business experts," he says. "There are also opportunities to visit prospective regions and companies.
"We also have grants that we can provide in some cases," he adds, "but once again, it has to be specific to each project. Any investment project that is worth more than $5,000 is applicable. We then evaluate factors such as high technology, intensive labour, added-value labour - it is processed on a case-by-case basis."
In 2008, CORFO began offering sponsorships to employees wanting to learn English. Over the past three years, more than 5,000 scholarships have been awarded, as Chile aims to tackle the language barriers that have hindered the offshoring industry in developing BRIC nations such as China.
"The scholarship programme has been very successful and is something we value highly, especially in the global services industry," says Figueroa. "Companies have also been especially supportive because if we are to successfully infiltrate the offshoring industry, we need to be able to provide a high-quality service to English-speaking countries."
While smaller foreign companies have established subsidiaries to tackle the local South American markets, there have been a number of notable success stories involving multinational companies such as Oracle, McAfee, Citibank and JP Morgan. Attracted by Chile's highly-trained workforce and lower labour costs, the offshoring industry looks set to remain lucrative, with further projects scheduled for the near future.
"We don't just want a company to base itself in Chile," says Figueroa. "We also want that company to continue to grow and expand its operations. Last year we secured Oracle's financial services division. We see this as an important investment as the reach will extend to the US besides our own region.
"When assessing the offshore industry, I think it's important to acknowledge that services can vary from low added service to high added service. With regards to the latter, McAfee Labs, a multinational organisation, is set to open another R&D laboratory in Chile, adding a number of further jobs to the existing ones."
Despite a recent, temporary rise in the corporate income tax rate - from 17% to 20%, to accommodate the reconstruction programme enacted in the wake of 2010's earthquake - Chile still remains a tax-friendly economy compared to the likes of the US and the UK. In addition to a series of joint tax agreements with a number of countries aimed at avoiding double taxation, Chile has also recently signed tax treaties with the US, Russia and Australia.
By upholding fiscal responsibility while simultaneously promoting free enterprise, Chile appears to have created a sustainable platform for foreign investors. According to Figueroa, this two-pronged approach is set to shape the country's economy in the coming years.
"In our aim to be a developed economy by 2020, we need to grow at a rate of 6% per annum," he notes. "We aim to do this by continuing to foster home-grown entrepreneurship and company growth while attracting investments from the rest of the world."