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Chile Innovation Opportunities

by: Tatjana Guznajeva, Technopolis Group

 

Why should I read this document? 

 
When confronted with the differences between your own market and the market of Chile you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proof to be a great opportunity for your company! Adapting to a new market, like Chile, will allow your company to innovate. Not only will operating in Chile lead to new insights to be more successful in Chile, you will most likely also pick up on ideas to be more successful in your home market. 

This document provides a short overview of innovation aspects, business opportunities and challenges in Chile. It will also give advice on best practices for starting and developing an innovative business venture, considering Chile’s country context. May it help you to explore Chile and lead you to innovation and success.

 

Opportunities and tips for innovation and doing business in Chile

 

  • Chile has the most dynamic economy in Latin America, stable environment for business and it is a good place for business cooperation with other countries in Latin America.
  • Among the promising sectors in Chile are the mining sector (the dominant sector in Chile) and the energy sector. Considering the rising energy demand and limited natural resources, Chile is exploring opportunities for conventional and renewable energy. In addition, the development of biotechnology (biomedicine, biorenewables, bioprocess in agriculture and aquaculture) has become a priority for Chilean government and therefore it is supported through various policy instruments. 
  • As the number of elderly people grows fast in Chile, there is a growing demand in personal medical and health services, socio-sanitary services, care homes for seniors. 
  • For small start-ups with little capital, viable business opportunities could be within the real estate sectors, as there is a large demand for housing, tourism, education (particularly, in teaching English) and food business, particularly in fast food.
  • Online and mobile advertising are booming in Chile, together with the demand for technologies and credit card use. E-commerce is growing across all industries and sectors. Electronic goods, cosmetics, various tickets (for events, travel) and personal services are most commonly purchased online. Coupons and social media advertising help to stimulate e-commerce.
  • The Chilean government introduced several programs to assist start-ups and growing companies. Start-up Chile is the major government-sponsored program, each participating company is granted 34.400 EUR and a Chilean work visa. To support young entrepreneurs the government launched “Seed” (acceleration program for start-ups) and “Scale” (financial assistance program for growing companies) programs. To foster female entrepreneurship, the government introduced the TSF program, which will provide a grant for start-ups if at least one female is the co-founder of the company.
  • Chile offers several tax reductions or exemptions: it has the 2nd lowest corporate tax rate in Latin America (only 20%), there are several free trade zones, as well as, due to a number of trade agreements, some exports could be exempt from custom duties and VAT.
  • The irrigation technologies, precision agricultural equipment, fresh fruit harvesting equipment and environmentally friendly machinery are much needed in Chile. The development of such technologies might be relatively easy is Chile, due to available resources, research and business support of companies in the following sectors.

 

On Level 2 you can find information about innovation climate in Chile, while Level 3 will tell you more about business activities in Chile.
 

 

This page will tell you about innovation ecosystem, major technology sectors, innovation and business practices in Chile.

 

Innovation ecosystem

 

The collaboration between academia and business communities has been growing in recent years, partially due efforts of Chilean Economic Development Agency (CORFO). The Chilean science base is relatively undeveloped, due to a small scientific community and little research, which focuses on local economic and social challenges. The particular attention is devoted to the following areas - aquaculture, the food industry and mining. Currently, there are several business incubators in Chile, such as IncubatecUFro and Incuba UdeC, which are supported by research institutions and specialise in assisting companies engaged in engineering or agricultural sectors.

 

Innovation in Chile is at its starting phase, as in the past the government did not invest a substantial amount of resources in science, education or technology.  However, since 2000s the government introduced several R&D instruments to improve entrepreneurial and innovation climate in the country, particularly in Santiago. Valparaiso and Concepcion are two other Chilean cities, which have a stronger research and business community than other cities.

 

The private sector has been devoting a modest share of its turnover for R&D, therefore companies lack competitive pressure which encourages innovation. Many Chilean companies have chosen an easier approach to innovation by adopting or replicating imported innovations. 

 


Innovation sectors and technology

 

Chile has a relatively developed biotechnologies, nanotechnologies and environmental technologies sector. Among the leading technologies are agricultural equipment and related technologies, and energy efficient machinery and equipment. 

 

Recently, the Chilean government introduced a Smart Specialisation Strategy, which focuses on growth of public-private collaboration in priority sectors, such as manufacturing, construction, food, health, tourism and entertainment. Hence, a foreign company might get governmental assistance if it produces, designs products in above-mentioned areas. 

 


Innovation culture and practices

 

The Chilean culture does not cultivate risk-taking activities and a personal failure, bankruptcy is considered shameful, therefore innovation has been approached with caution. To stimulate innovation and entrepreneurship, since 2011 the Chilean government has introduced several grant programs for entrepreneurs-innovators, started to promote tech-focused public events and has been improving the access to finance for business. Despite that innovation in Chile is at its early stage, there is an evident progress.

 

This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in Chile. In addition, you will find the list of websites, which provide some hands-on information. 

 

What is the country known for?

 

Sectors
The biggest sectors are: copper, nitrate, coal, lithium, iron and steel, food processing, fish processing, chemicals, wood, transport equipment, cement, textiles, fruit.

 

The agricultural sector is the smallest, as it constitutes only 4.3% of GDP in 2016. The services sector is the major driver of the economy (64.4% of GDP) and industrial sector accounts for 31.3% of GDP. 

 

Iconic products
Refined and raw copper, copper ore, grapes, salmon, wine, gold, nuts, wood pulp, vinegar, gems, precious metals, inorganic chemicals, vegetables, cars.

 


How easy is it to do business in Chile? 

 

Based on the World Bank ranking:
  Chile EU Average Emerging Markets Average
Overall – ease of doing business 57 30 83
 

 

The business environment in Chile is much better than in other emerging markets. The political and social situation in Chile is stable, the public institutions are well-developed and support the rule of law. Some bureaucratic procedures and process, such as obtaining construction permits or protection of minority investors, are easier and cheaper than on average in the EU. The flexible labour laws allow companies to hire and fire people without any bureaucratic complexities or costs for business.

 

The Chilean government tries to attract foreign capital through transparent and simple policies on FDI, as getting credit is one of the biggest difficulties for companies in Chile. In addition, large scale investors are allowed to import goods VAT free for up to 4.3 mln EUR.

 

The country follows an open trade strategy. Therefore it has many beneficial trade agreements with foreign countries. The EU and Chile signed an Association and Free Trade Agreements in 2002 and 2003, hence, trade flows are facilitated between countries. Despite that Chile has removed some bureaucratic barriers, the process of paying taxes is relatively complex.

 


Business trends in Chile

 

Before the rise of e-commerce, Chilean companies have enjoyed limited interaction and focused on cooperation between regional, local companies. Since 2013, e-commerce has doubled in Chile, due to improving technological infrastructure, therefore B2B and B2C (business to consumer) have been intensified. Marketing and retail industries, as well as, cross border trade have been significantly boosted by e-commerce in Chile. Among Latin American countries, Chile has the largest number of B2B transactions.

 

For Chile, the EU is the second largest trade partner after China. The EU imports to Chile predominantly consist of machinery and transport, chemical products and manufactured goods, while Chile is exporting to Europe food and live animals, manufactured goods and crude materials (mainly copper). Most foreign companies in Chile prefer to establish branch offices of their parent companies. This reduces the financial risk and allows to test the new market.

 

Chileans have the highest purchasing power in Latin America. The technology demand starts to grow in most urban areas, therefore Chile experiences a sales growth of computers, DVDs, mobile phones, other electronic and electrical equipment. The middle class (around 65% of population, or 11 million people) is expected to grow and therefore it is likely that most consumers will be choosing more sophisticated, rather than basic, products and customised services. In addition, the energy consumption is growing and is expected to be even higher in the next few years. 

 


More hands-on info

 

 


Bibliography

 

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