bUSiness CHILE

business Chile
The voice of the Chilean-American chamber of commerce
N°278, April 2012
Fact and Fallacy
Trade
Testimonial
Gone to Carolina
Labor Shortage
Calling all Miners
Special Report
Decentralizing Chile
DISPONIBILIDAD
REGISTRADA
Líderes en Leasing Operativo de la Región
Más de 33 años de liderazgo en la industria.
Confíe en el número uno, confíe en RELSA.
Contents
bUSiness CHILE
THE VOICE OF THE CHILEAN-AMERICAN CHAMBER OF COMMERCE
N°277, APRIL 2012
6
Fact and Fallacy
TRADE
TESTIMONIAL
Gone to Carolina
LABOR SHORTAGE
Calling all Miners
SPECIAL REPORT
Decentralizing Chile
12
Taxation in Chile
As Chile debates a
possible tax reform,
bUSiness CHILE looks
at the facts and
fallacies surrounding
the issue.
© 2012 AmCham Chile
Reproduction in whole or in part is
strictly forbidden without permission
from the publisher. Opinions expressed in
bUSiness CHILE are those of the authors
and do not necessarily reflect those of
AmCham or bUSiness CHILE. We accept no
responsibility for the accuracy of the articles
and any unforeseen errors. bUSiness CHILE
is published monthly, 10 months a year
and mailed free of charge to AmCham
members. Letters are welcome.Theyshould
be accompanied by the author's name
and daytime telephone and sent to
[email protected] For reasons of
space limitation, AmCham reserves the
right to edit letters published.
Advertising inquiries should be addressed
to AmCham's Sales Department: Paulina
Dellafiori: E-mail: cristina.ordenes@
amchamchile.cl;Phone:2909741.Fax2120515
Av. Presidente Kennedy 5735, Torre
Poniente, Of.201, Las Condes, Santiago de
Chile; E-mail: [email protected];
www.amchamchile.cl;www.businesschile.cl
Production
K&DComunicacionesLtda.OlgaKliwadenko,
General Manager, 11 de Septiembre 1945 Of. 213, Providencia. Phone: 481-6940 /
481-6941, Cell: (09) 6601-5505;
e-mail: [email protected];
[email protected];www.kyd.cl
8
TRADE TESTIMONIAL
Gone to Carolina
Wood products maker Arauco’s
recently acquired manufacturing
plant in North Carolina will help
it diversify production and reach
new markets.
Labor Shortage
Calling all Miners
A shortage of skilled
professionals in the mining
industry is pushing up salaries
and forcing companies to
invest more in training and
recruitment.
12 Cover Story
Taxation in Chile: Fact and
Fallacy
bUSiness CHILE looks at how
Chile’s tax system and structure
compare with those of other
countries in the region and the
OECD.
18 Special Report
Decentralizing Chile
Chileans from Antofagasta
to Aysen are demanding
greater decentralization,
but strengthening regional
governments will take time.
24 Spotlight
Raising Hopes for US
Business
The Global Business
Conference in Washington, DC,
was a chance for the private
sector to be heard, but was
Secretary Clinton listening?
38 Life in the Slow Lane
Why Doesn’t
Everybody Love Me?
34 Economic Snapshot
Oil: Chile’s Achilles Heel?
The latest oil price spike has hiked
inflation expectations and could trim
economic growth, but measures to
reduce Chile’s exposure would help.
Presidents Piñera
and Obama are not
getting much love, but
neither are the possible
alternatives.
35 Breakfast
Winning the ZMOT
Google’s Fernando Lopez
told AmCham members why
winning the Zero Moment
of Truth is key to capturing
Internet savvy customers.
18 Special Report
Decentralizing Chile
36 Interview
Running to AmCham 3.0
AmCham’s new executive director,
Rodrigo Ballivián, discussed his
plans to offer the Chamber’s
members more and better services.
The inhabitants of
Chile’s far-flung regions
are demanding more
resources and benefits,
but improving the
quality of life in these
areas requires public
policies adapted to the
needs of each region.
EDITORIAL BOARD 2012
CHAIR, Kathleen Barclay, Asesorías KCB; VICE CHAIR, Karen Poniachik, British American Tobacco
Chile; VICE CHAIR, Manuel José Vial, Grupo Vial Abogados; PAST CHAIR, Michael Combes, Marco
Chilena; GENERAL EDITOR, Julian Dowling, AmCham Chile; ASSISTANT EDITOR, Mariana Ossa,
AmCham Chile.
MEMBERS
Rodrigo Ballivián, AmCham Chile; Ari Bermann, 3M Chile; Pelayo Bezanilla, Coca-Cola de Chile; Ruth
Bradley, The Economist; John Byrne, Boyden Consultores Chile; John P. Dill, Project Management;
Francisco Garcés, Banco de Chile; Javier Irarrázaval, The Walt Disney Company Chile; Olga Kliwadenko,
K&D Comunicaciones; Gideon Long, BBC; Vincent McCord, Asesorías e Inversiones Carcon; James
Newbold, Tanager Investment; Roberto Ossandón, Ossandón Abogados; Rodrigo Silva, Silva &
Asociados; Mitch Larsen, U.S. Embassy; Paulina Dellafiori, AmCham Chile.
business Chile
April 2012
3
AmCham Global Sponsors 2012
4
April 2012
business Chile
Editorial
AmCham’s Leadership:
Building on a Strong Foundation
This month AmCham incorporates a new leader –
Rodrigo Ballivián, the Chamber’s recently appointed
executive director. Rodrigo joins AmCham from the
private sector where he has held leadership roles in
business associations, non-profit organizations and
multinational companies. He speaks of the challenges
and opportunities facing AmCham in this month’s
interview in bUSiness CHILE.
AmCham’s board welcomes Rodrigo and, together
with the Chamber’s members, enthusiastically looks
forward to working with him to further promote trade
and investment between the United States and Chile.
At the same time, the board would like to thank
Jaime Bazán, AmCham’s outgoing general manager,
for his 16 years of outstanding service to the Chamber.
Jaime oversaw a period of great importance to
AmCham, which included actively supporting the
process that resulted in the successful completion
of the Free Trade Agreement between Chile and the
United States (signed in 2003). This is probably the
single most important event for an AmCham in that
such an agreement institutionalizes the commitment of
both sides to a long-term commercial and investment
relationship based on mutual benefit and shared
values – it is the cornerstone on which AmCham
continues to build.
Jaime played a pivotal role for AmCham in this
process. He started by building and professionalizing
AmCham’s staff. During the FTA negotiations, he also
supported the AmCham board by focusing on activities
to answer the crucial question “why Chile?” for key
players in the US Congress, the executive branch
of US government and the business community. He
supported strategies to facilitate negotiations between
Chile and the United States. He encouraged optimism
regarding a positive outcome to the negotiations – a
sometimes difficult and marathonic task considering
that completing the agreement took over 11 years.
Once signed, Jaime led an AmCham focused on
working to educate businesses in Chile and the United
States about the benefits of the agreement while
promoting networking events, studies and missions to
turn it into trade and investment opportunities.
He wisely advised eight separate AmCham
presidents including the current president, Javier
Irarrázaval.
He carried out his responsibilities with great
diplomacy, reflecting his 22-year career in the
diplomatic service, as well as his incredible
personal commitment and tremendous team spirit,
leaving behind a legacy of much value to AmCham’s
members and the broader business community.
Moreover, he completed his work in a self-effacing
and respectful manner that was, in turn, admired
and respected by all.
We, AmCham’s board, thank Jaime for his service
and wish him well in his future endeavors. We also look
forward to receiving his ongoing advice as we move
into a new chapter in the history of the organization.
We remain optimistic and appreciative of AmCham’s
past achievements, a past that Jaime helped to frame
and to make a reality.
BOARD OF DIRECTORS EXECUTIVE COMMITTEE
PRESIDENT
Javier Irarrázaval, The Walt Disney Company
EXECUTIVE DIRECTOR
Rodrigo Ballivián, AmCham
VICE-PRESIDENT; CHAIR LABOR AND HUMAN
CAPITAL COMMITTEE
Carolina Valdivieso, Kimberly Clark
DIRECTORS
SECRETARY GENERAL; CHAIR LEGAL
COMMITTEE
Michael Grasty, Grasty, Quintana, Majlis & Cía
TREASURER
Felipe Cerón, Aes Gener
PAST PRESIDENT
Ricardo García, Camanchaca Inc.
Pablo Achurra, Aramark Sudamérica
CHAIR TRADE AND INTERNATIONAL
BUSINESS
Fernando Concha, Citigroup
CHAIR FINANCE AND CAPITAL MARKETS
Gonzalo Iglesias, Coca Cola de Chile
CHAIR CORPORATE AFFAIRS AND
SUSTAINABILITY COMMITTEE
Enrique Ostalé, Walmart
Alfredo Ergas, Enersis
VICE CHAIR FINANCE AND CAPITAL MARKETS
Karen Poniachik, British American
Tabacco Chile
VICE CHAIR EDITORIAL COMMITTEE
Guillermo Ochoa, 3M
CHAIR COMMERCE AND BUSINESS
Luis Siles, IBM de Chile
Mauricio Ramos, VTR Global Com
Mitch Larsen, U.S. Embassy
EX OFFICIO
Kathleen Barclay, KCB Asesorías
CHAIR EDITORIAL COMMITTEE
ADVISORY COUNCIL
Rubén Covarrubias,
Universidad Mayor
AmCham Mision Statement
“Promote free trade and business between Chile and the United States"
Luiz Marcelo Moncau, Microsoft Chile
business Chile
April 2012
5
TRADE TESTIMONIAL
Gone to Carolina
Wood products maker Arauco is the latest Chilean company to take
advantage of bargain asset prices and low manufacturing costs to gain a
foothold in the US market.
By Julian Dowling
O
n the wall of Charles Kimber’s
office in Arauco’s headquarters
on the 14th floor of a Sanhattan
skyscraper hangs a huge map
of the United States. Pointing to
North Carolina on the Atlantic
coast, Kimber traces an imaginary
railway line through Georgia, Alabama,
Mississippi, Louisiana and Texas.
“We can use rail to reach Mexico from
our mill,” says Kimber, Arauco’s corporate
affairs manager. “It’s a big market and
there is little manufacturing there.”
With annual sales of some US$4
billion, Arauco, which exports panels,
mouldings, sawn timber and other
wood products from Chile, Argentina
and Brazil, is one of the largest forestry
companies in the world.
Now its sights are set on the North
American market. In January, it
completed the acquisition of a wood
panel plant in Moncure, North Carolina,
6
April 2012
business Chile
from Uniboard USA, a subsidiary of
Germany’s Pfleiderer, for US$56 million.
The deal makes Arauco the latest
Chilean company to acquire production
facilities in the United States since
Concha y Toro forked over US$238
million for California’s Fetzer Vineyards
last year.
“There is a big cost advantage to
shipping direct from the domestic market
rather than from Brazil, Argentina or Chile,”
says Kimber. “We save on transportation
and service costs among others.”
The plant, one of the largest of its
kind in the country with 284 employees,
makes medium-density fibreboard
(MDF), particleboard and melamine
for the flooring, furniture and cabinetmaking industries in the United States
and Canada, adding 600,000 cubic
meters of annual panels production to
Arauco’s global capacity.
Arauco, controlled by Chile’s Angelini
group through its holding company
Empresas Copec, is not the plant’s first
Chilean owner. In 2004, at the peak of
the US housing boom, the plant was
acquired by ATC Panels, part of Chilebased Aconcagua Holdings. But when
the bottom dropped out of the market
in 2008, ATC sold the mill to Pfleiderer.
The downturn in the US construction
industry has cut sales of wood products
and led to overcapacity in the lumber
industry, which means prices for
sawmills and processing plants have
plummeted. Pfleiderer invested over
US$200 million in the Moncure plant
since 2008, but it cost Arauco a quarter
of that amount to purchase.
“As the US economy picks up and
people start investing in housing again, the
business will recover,” predicts Kimber.
Another advantage is the plant’s low
operating costs. Despite higher wages
in the United States compared to South
America, Kimber says manufacturing costs
at Moncure are “very competitive” due to
higher productivity and lower expenses on
services like security and cleaning.
The plant also offers synergies with
Arauco’s distribution business. The
United States accounts for 14% of
Arauco’s exports with sales of some
US$400 million annually, and is its second
largest export market after China, which
accounts for 34% of exports.
Using its marketing expertise
developed in South America, Arauco
has established distribution channels that
allow it to sell panels and mouldings
direct to retailers like Home Depot
and Lowes.
Arauco's wood panel plant in Moncure, North Carolina
“People used to buy a new home
every few years instead of fixing their
old one, but in this market they prefer to
do their own renovations,” says Kimber.
As a result, sales of do-it-yourself wood
cabinets and mouldings are booming.
Arauco has a 25% share of moulding
sales in the U.S. and a 12% share of the
panels market, which it aims to increase
through Moncure that supplies 18% of
the national MDF market.
“We plan to add value using our
product development and marketing
expertise,” says Kimber.
Then there is the location. Close to
Arauco’s US headquarters in Atlanta
and forestry suppliers in the southeast,
the plant is ideally positioned to export
wood products to Mexico and even the
Caribbean in the future, he says.
The plant will not compete with
Arauco’s Chilean exports, since the
fibreboard produced in Chile is ultra-light
and suitable for niche markets where
weight is important, explains Kimber.
But it will help to diversify Arauco’s
manufacturing base and mitigate
the exchange rate risks inherent in
exporting from South America. It also
marks a departure from the company’s
traditional model of integration along the
production chain from forest to market.
In the Southern Cone, Arauco
supplies its own raw materials from its
sustainably managed forest plantations.
In the United States, however,
Timberland Investment Management
Organizations (TIMOs) receive tax
benefits to manage forests on behalf of
institutional investors.
“We don’t see the need [for foresty
operations] because there are many
suppliers of wood chips, pulp logs and
Charles Kimber,
Arauco
sawdust,” explains Kimber.
Arauco’s investment in North Carolina
is a drop in the bucket compared to
its South American investments. For
example, it plans to invest US$2.3
billion in its Nuevo Horcones program in
Chile’s Bío Bío Region, which includes
modernizing and expanding its Arauco
plant, installing a 120-megawatt wind
plant and building a new plant nursery.
It is also expanding in the region last year it began building a pulp mill
in Uruguay in partnership with the
Swedish-Finnish firm Stora-Enso with
investment estimated at US$1.9 billion.
But while continuing to increase
production close to home, the
diversification of markets and manufacturing
facilities in North America is key to the
company’s long-term growth strategy.
So far the news is good. In its first 45
days of operation since Arauco took
over on January 15, the Moncure plant
produced record sales.
Kimber smiles and spreads his arms
to cover the whole map on his wall:
“We hope this will be Arauco’s first
step into manufacturing in the North
American market.” bUSiness chile
Julian Dowling is Editor of bUSiness CHILE
business Chile
April 2012
7
Labor Shortage
Calling all Miners
Chile’s mining industry will require thousands more skilled
professionals to work on new projects through the end of this
decade, but with graduates in short supply companies are using
diverse strategies to attract and retain employees.
By Tom Azzopardi
C
hile’s mining boom is set
to run and run as investors
rush to cash in on sky-high
prices for copper, gold and
other minerals.
Speaking at a major industry
conference in Canada last month, Chile’s
Mining Minister Hernán de Solminihac
estimated investment in the industry
through 2020 at a staggering US$91
billion. But he warned new projects are
increasingly under threat from a shortage
of trained workers.
A report by non-profit institute
Fundación Chile released earlier this
year suggests the industry’s human
resources problem is at least as serious
as the difficulties it faces securing
8
April 2012
business Chile
reliable supplies of water and electricity.
Looking just at projects at the
feasibility stage, the report estimates
that the industry will need to recruit
another 44,000 operators, professionals
and maintenance staff through the end
of the decade.
The figure could be on the high side,
says John Byrne, managing director in
Chile for global head-hunters Boyden.
Past experience suggests that only
half of the projects in Chile’s swollen
pipeline will make it into production in
the next few years.
But that still leaves the industry
struggling to fill more than 20,000 posts
for skilled workers and professionals.
“The problem is that this is still an
enormous amount of people,” he says.
Take into account the number
required to build new mines, estimated
at over 190,000 by Fundación Chile, and
the situation grows critical.
The shortage is already causing
headaches for mining companies.
Turnover is up as firms poach
each other’s employees. Amongst
professional staff, it reached 10% last
year, double its level a decade ago, says
Edwin Ugarte, head of human resources
at Anglo American Chile.
To keep staff onboard, companies
have had to offer pay increases of
around 20%, while those jumping
ship often bag rises of 30% or more,
says Byrne.
For those specialists most in demand,
pay has reached astronomical levels.
Entry-level geologists, metallurgists
and mine engineers can now expect
to earn more than graduates in civil
engineering, business administration
or even medicine. Experienced project
directors, charged with bringing billiondollar construction projects into being,
can command salaries up to US$1
million a year.
Even lower down the pay-scale, the
going is good. Mineworkers at big
copper mines, backed by strong unions,
regularly demand bonuses worth
thousands of dollars each time they
renegotiate collective pay agreements:
as even a brief stoppage could cost
millions of dollars, most companies
prefer to pay up.
But wages for contractors on mine
construction projects can be even higher.
“This is the first time in 30 years
that I have seen contractors being
better paid than direct employees,”
says Alvaro Leiva, senior human
resources manager for Goldcorp’s El
Morro project.
Although personnel represents a
much lower share of industry costs
than equipment or energy, spiraling
wages are helping to push up costs of
projects in development.
Copper boom
The volatile nature of the copper
market explains the situation facing the
industry, says Byrne. Ten to 15 years
ago, with copper trading at less than
US$1 a pound and few mines being
built, hardly any young Chileans looked
forward to a career in mining.
“Companies have to offer
pay increases of around 20%
to retain employees.”
John Byrne,
Boyden
Schools of mines in Australia, Europe
and Canada were closing while Chile’s
mining faculties produced no more
than half a dozen graduates each
year. As bust has turned to boom, the
numbers of students has risen sharply,
but not nearly fast enough to match
the industry’s rocketing demand for
new workers.
The result, says Byrne, is a stark lack
of professionals in the industry aged
between 35 and 50. Many engineers
at or beyond retirement age are
continuing to work because the pay is
good and there is no one behind them
to push them out.
But that situation is unsustainable.
Sooner or later, their mortgages paid
off and pension pots swollen, they will
hang up their helmets.
Recent events in Chile have not
helped. Nationally, unemployment
is at a 15 year low, while many
contractors, many of whom hail from
the south of the country, have found
work closer to home rebuilding after
the 2010 earthquake.
The situation is likely to worsen
as more and more new projects are
business Chile
April 2012
9
Labor Shortage
“Chilean engineers are
technically highly proficient
but they often lack soft skills.”
Edwin Ugarte,
Anglo American Chile
brought online.
Goldcorp’s El Morro project, due to
begin construction later this year, will
employ a maximum of 5,000 contractors
and another 1,800 as the mine moves into
production in early 2016, explains Leiva.
The giant Collahuasi mine, which
plans to double production to a million
tons this decade, took on 900 new staff
last year but is looking for another 1,500
during 2012.
“The trouble is that these people are
just not available,” says Byrne. And,
without enough staff, some projects will
inevitably be delayed.
Recruiting abroad
In a multinational industry like mining,
bringing in workers from abroad must
be part of the solution. But the shortage
of mining professionals, like the boom in
investment, is a regional phenomenon.
Peru, Brazil, Colombia and Mexico all
face similar shortfalls in personnel. So
recruiters are scouring the planet to find
workers with the right skills.
Byrne says his firm has already placed
engineers from Spain and Romania
on projects in Chile. The crisis in the
Eurozone means Spanish engineers are
not only competitive but often cheaper
than their Chilean colleagues.
However, a 15% limit on foreign
workers may be a problem. Many firms
are already operating close to the upper
10
April 2012
business Chile
“Mining companies must
work together to overcome
the shortfall in trained
personnel.” Hernán Araneda,
Fundación Chile
limit and looking for ways to get around it.
“If we don’t want to lose valuable
investment, we may have to find ways
to make [the limit] more flexible,” says
Byrne.
Another option may be outsourcing
some work to other countries.
Engineering firms that have turned
Santiago into a global hub for designing
new copper mines, are facing a shortfall
of around 15,000 engineers over the
next five years, not all of which can be
covered by new graduates or foreign
workers, says Andres Poch, president
of the Association of Engineering
Consultants (AIC).
AIC is working with export promotion
board ProChile to create strategic
alliances between companies in Chile
and other parts of the world in order
to broaden capabilities and share the
workload. The association has identified
Canada, home to many of the mining
firms investing in Chile and the region,
as a particularly promising market.
Training future miners
But these are only partial solutions as
the bulk of personnel in Chile’s mines
will inevitably be sourced locally. Here
the main bottleneck is training.
Mining firms, and the companies that
supply them, already invest significant
amounts in training future workers.
BHP Billiton’s Escondida mine runs its
““Contractors on mine
projects are being better paid
than direct employees.”
Alvaro Leiva,
Goldcorp
own technical school. Others sponsor
students in mining-related courses like
geology, metallurgy and engineering.
Goldcorp is planning to help hundreds
of young people in the Atacama Region
complete their secondary education
so that they can go on to train as
mechanics and drivers.
But such efforts have proved
insufficient. Leaving things as
they are, Chile will not produce
nearly enough skilled workers and
professionals to meet the industry
needs in the time required.
One solution could be to shorten
existing courses. While mine engineers
in the United States or Canada graduate
in four years, in Chile they take six or
seven years. Technical courses often
last four years compared to just one or
two in Australia.
Even when they do enter the
workforce, graduates often lack
the skills the industry is looking for.
Chilean engineers are technically highly
proficient, says Anglo American’s
Ugarte, but many don’t have the skills
needed to deal with “soft” issues like
human resources, community relations
and environmental protection.
According to Hernán Araneda,
Fundación Chile’s human capital manager
and the study’s author, the trouble is that
companies often base programs on their
own needs without considering those of
the industry as a whole.
“It’s no use training 20 geologists
when the industry needs 200, most
of them will end up working for your
competitors,” he notes.
The solution, says Araneda, is more
collaboration. Only by working together
will mining companies be able to create
the critical mass to overcome the
shortfall in trained personnel.
With the support of Fundación Chile
and the ministries of mining and labor,
the mining companies that participated
in the study (Anglo American,
Antofagasta Minerals, BHP Billiton,
Codelco and Collahuasi) agreed to
develop an ambitious joint training
program, which could train 28,000
individuals in mining-related trades by
the end of 2015.
Some companies, however, are
having second thoughts about
investing without guarantees they will
receive any benefit.
The problem is that collaboration does
not come naturally to the ferociously-
competitive mining firms which compete
for minerals, men, and money not only in
Chile but around the world.
In the longer term, better and
shorter training courses will count
for little if mining companies cannot
persuade more young Chileans to
enter the industry. To many, mining
still means living far from friends and
family, in the middle of a desert or at
the top of a mountain, and working
grueling on/off shifts.
Juicy pay is helping to break down
resistance, but the industry could
do more, says Goldcorp’s Leiva.
Technology is playing an ever greater
role in mining, allowing professionals
to design tunnels and operate shovels
without having to step foot in a mine or
leave Santiago.
Companies are also working to
attract more women into the workforce.
As well as transforming the centuries
old male-only culture in mines, this
means providing more flexible hours for
working mums, tricky when she’s driving
a truck 4,000 meters up a mountain or
deep underground. Such efforts are
paying dividends but the potential is still
enormous. At Anglo American, women
represent just 10% of the workforce,
but that figure has tripled over the last
few years, says Ugarte.
Finally, much more could be done
to make dusty northern cities like
Antofagasta and Copiapó more
attractive places to live. Most now have
malls and cinemas, but more green
spaces, top-quality schools and clinics
would persuade potential recruits that
they are suitable places to raise a family
and not just to build a career.
In fact, the labor shortage facing the
industry should transform the regions
dependent on it.
“The paradigm is changing from
mining benefitting the community to
mining depending on the community,”
says Leiva. bUSiness chile
Tom Azzopardi is a freelance journalist based in Santiago
COVER STORY
Taxation in Chile:
Fact and Fallacy
As Chile debates a possible tax reform, bUSiness CHILE looks at
how its tax system and structure compare with those of other Latin
American and OECD countries.
By Ruth Bradley
I
n 2011, Chile’s Internal Revenue
Service (SII) collected a record
21,522 billion pesos - some
US$41.6 billion - from the country’s
taxpayers. That represented a
16.0% increase on the previous
year, reflecting mainly GDP growth which reached 6.0% - and the high
price of copper, the country’s main
export.
Moreover, although the government
increased spending by 7.2% in real
terms last year, it still ran a fiscal
surplus equivalent to 1.4% of GDP or some US$3.5 billion - that it will
save in its two offshore sovereign
wealth funds or use to pay down its
(low) borrowing. Yet, during April, it
is expected to announce a tax reform
that would raise some US$700 million
a year in additional revenues.
Part of the reason for the proposed
reform lies in the fiscal policy in force
since 2001 under which government
spending is tied not to the revenues
received in a particular year but to its
“permanent” or cyclically-adjusted
income or, in other words, what it
would receive if both GDP growth
and the price of copper were at their
medium-term trend level.
The corollary of that policy is that
when
“permanent”
expenditure
increases - as a result, for example,
12
April 2012
business Chile
of last year’s extension of statefinanced maternity leave or promised
higher expenditure on education - so
too should “permanent” sources of
income. That means either increasing
the rate at which existing taxes are
levied or introducing new ones.
Current debate about tax reform in
Chile is, however, a reflection of a far
broader and more complex issue income distribution. Although poverty
has dropped sharply over the past
20 years, income distribution has
changed little.
The government’s latest National
Socioeconomic
Characterization
(CASEN) survey, carried out in 2009,
found that, even after state benefits
are taken into account, the poorest
tenth of the population received
just 1.5% of national income as
compared to 39.2% for the richest
tenth. That, moreover, represented a
slight deterioration on the previous
survey in 2006.
Chile is far from alone in this problem
but impatience with lack of change
on this front appears to be one of
the factors behind the social protests
that, despite strong economic growth
and virtually full employment, have
proliferated recently. And, each
protest - whether the students last
year or the Aysén Region of the far
south and the Calama mining town
in the north this year - implies new
demands on the fiscal purse.
And it is an illusion to think that
economic growth will automatically
provide the higher tax revenues
required to satisfy these demands,
argues Eduardo Engel, an economics
professor at Yale University and the
University of Chile.
“The evidence, in fact, shows that
demand for government spending not
only grows as a country grows, but
also does so more quickly,” he says.
Tax burden
One of the simplest indicators
of how hard a country is hitting its
taxpayers is its tax burden or, in other
words, the amount raised in taxes as
a percentage of GDP. Comparison
with preliminary Central Bank figures
for GDP last year suggests that, in
Chile, this is currently running at
just under 18%, a modest figure by
international standards.
According to the Organisation
for Economic Co-operation and
Development (OECD), the average tax
burden of its member states in 2009 the latest year for which full figures are
available - was 33.8% and, in some
countries such as France, Denmark
and Sweden, well over 40% (but 24.1%
in the United States).
In most of those countries,
however, social security contributions
account for an important fraction
COVER STORY
“Chile ran a fiscal
surplus last year so why
do we need to increase
tax revenues?”
Pedro Deutsch,
Cariola Diez Pérez-Cotapos y Cía.
of tax revenues - an average 26.6%
for OECD members in 2009. Chile,
however, privatized its social security
systems - pensions and, to a lesser
extent, health insurance - in the 1980s
and, as a result, contributions now go
mostly to the AFP pension system or,
in the case of better-off Chileans, the
ISAPRE private health insurers, rather
than bulking tax revenues.
If they were included, Chile’s tax
14
April 2012
business Chile
“Citizens’ demand for
government spending
grows more quickly than
the economy.”
Eduardo Engel,
University of Chile
burden would reach around 21%
of GDP, according to the Finance
Ministry. And, as Finance Minister
Felipe Larraín has pointed out, that
is without taking into account other
privatized public services such
as the roads and airports built by
private companies under concession
contracts and paid for by their users
through tolls or departure fees, rather
than taxes.
“Redistribution is achieved mainly through the
way tax revenues are
used.”
José Pablo Arellano,
CIEPLAN
Chile’s tax burden is, moreover,
fairly close to the average for Latin
America, according to a recent study
by the OECD, the UN Economic
Commission for Latin America and the
Caribbean (ECLAC) and the Panamabased Inter-American Center of Tax
Administrations (CIAT). It found that, in
2009, the average regional tax burden
was running at 19.2% as compared to
18.4% in Chile.
That made Chile heavier on taxes
than Colombia and Mexico (both
with 17.4%) and Peru (15.9%) but
much lighter than Brazil (32.6%)
and Argentina (31.4%). In these two
cases, however, social security
contributions accounted for close to
a quarter of revenues as compared to
just 8.3% in Chile.
There is, however, one area in
which Chile differs from most other
Latin American countries. Driven by
economic growth, tax revenues have
increased rapidly - doubling over the
past eight years, according to the
Internal Revenue Service - but its
tax burden has shown little change,
rising from 17.7% in 1990 to a peak of
24.0% in 2007 before dropping back
to 18.4% in 2009.
Most other Latin American countries,
by contrast, saw an increase of
between three and seven percentage
points in their tax burdens between
1990 and 2009. In Argentina, in fact,
the increase reached 15.3 points and,
in Colombia, 8.4 points.
Who pays?
One key difference between
industrialized and Latin American
countries is the way in which they
raise taxes. According to the OECD
study, total taxation of consumption
- including VAT and, for example,
import duties - accounted for 51.5% of
average tax revenues in Latin America
in 2009 as compared to 32.5% in the
OECD while direct income taxes including companies and individuals
- contributed 27.6% as compared to
33.5% in the OECD.
The gap has, however, been
closing, helped by the impact of
high commodity prices on company
earnings and better collection
practices. The 27.6% of total revenues
contributed by income taxes in 2009,
indeed, represented an increase from
22% in 2000.
VAT remained Chile’s single largest
source of tax revenues in 2011 when
it accounted for 45% of the total
collected, or some US$18.8 billion.
However, this represented a drop from
49% in 2010 in a trend described by
the director of the Internal Revenue
Service, Julio Pereira, as “a sign of
greater economic development”.
Indirect taxes have the stigma of
being regressive, hitting the poor
proportionally more than the rich and,
therefore, helping to lock in inequality
in income distribution. However,
according to Eduardo Engel, this is
a fallacy because it ignores how the
money is spent.
“Think what would happen if VAT on
food were abolished,” he says. “In that
case, the VAT on food paid by the rich
would no longer be available to finance
public expenditure that benefits the
poor.”
Chile’s fuel tax is another example
of the difficulty of determining
whether a particular tax is regressive
or progressive. Levied, like VAT, at
the same ad valorem rate on rich
and poor, it is ostensibly regressive
but, according to collection data,
highly progressive - as well as being
a “green” tax - since it is paid largely
by the richest 40% of the population.
VAT became a feature of most Latin
American countries’ tax regimes
only in the 1980s - as they struggled
with large fiscal deficits - but was
introduced in Chile in the mid-1970s.
A simple tax, it has the advantage of
being an efficient way of raising large
sums of money.
And Chile’s VAT system is a
particularly good one, says José Pablo
Arellano, a former government budget
director and co-author of an upcoming
study on Chile’s tax system. It is
levied at a single rate (19%) - without
business Chile
April 2012
15
COVER STORY
Total Tax Revenues as %
of GDP, 2009
Argentina
31.4
Brazil
32.6
Chile
18.4
Colombia
17.4
Costa Rica
20.9
Dominican Republic
13.1
El Salvador
14.4
Guatemala
12.2
Mexico
17.4
Peru
15.9
Uruguay
22.5
Venezuela
14.4
Source: Revenue Statistics in Latin America,
OECD, ECLAC and CIAT
the different tiers seen in many other
countries - and there are few of the
exceptions that make it more difficult
to manage.
Taxes and growth
But direct taxes also have their
own stigma - that of stifling economic
growth. This is one of the main
arguments being aired in Chile against
the prospect that corporate income
tax may be raised permanently to
20%, up from 17% before a temporary
increase to finance reconstruction
after the February 2010 earthquake.
Businesses are, of course,
legitimately defending their interests
but the argument goes deeper than
that. “There’s a deep-rooted belief
in most right-wing economists that
any increase in corporate taxes will
have dire effects for the economy,”
says Engel.
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But that is another fallacy, he argues.
“Studies in Chile have found that,
within reasonable limits, tax increases
don’t significantly affect companies’
investment,” he points out.
That is because tax benefits to make
investment more attractive, such as
depreciation allowances and being
able to impute interest payments
on debt as a cost, also grow with
the corporate tax rate. “In the case
of large firms in Chile, the negative
effects of higher rates are cancelled
out by the increase in benefits from
tax allowances,” notes Engel.
Think, he says, about the increase
in corporate income tax that took
place in the early 1990s. Doom and
gloom was forecast but, instead,
Chile went on to enjoy a period of
sustained high growth.
His view is borne out by Pedro
Deutsch, senior counsel at Cariola
Diez Pérez-Cotapos y Cía., a Santiago
law firm. In his experience, when
foreign investors look at Chile, taxes
aren’t an issue, he says.
That is partly because the
corporate income tax they pay serves
as a credit against the tax levied
when they repatriate earnings which,
points out Deutsch, is capped at its
present level of 35% by the double
taxation avoidance agreements
Chile has signed with many other
countries. As a result, an increase in
corporate income tax would change
the timing of their tax payments but
not the final amount.
The tax that Deutsch does take
issue with is the top 40% rate on
personal income. That’s even higher
than it seems, he says, because Chile
doesn’t offer the tax relief available
in most industrialized and some
Latin American countries related to,
for example, spending on children’s
education and mortgages.
But opponents of that suggestion
argue that it would be highly
regressive. After all, only a small
fraction of better-off Chileans spend
on private schooling (although many
more pay university fees).
There is, however, consensus
that, in the end, taxes are only as
progressive or regressive as the
way they are spent. “With taxes,
you need to ensure there aren’t the
exceptions and special regimes
that undermine horizontal equity,”
says José Pablo Arellano, “but you
redistribute mainly through the way
the revenues are used.”
In other words, although higher
revenues might help, Chile may, in the
current tax reform debate, be getting
the cart before the horse. Whatever
it decides to do, the end result will
depend not on which particular tax is
raised or lowered but on how well the
proceeds are spent. bUSiness chile
Ruth Bradley is a freelance journalist based in Santiago
and a former editor of bUSiness CHILE.
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Special Report
Decentralizing
Chile
Chile’s far-flung regions are demanding greater decentralization,
but improving the quality of life outside Santiago requires policies
that recognize territorial diversity and make regions participants in
their own development.
By Julian Dowling
C
hileans are back in the
streets. After a brief
respite over the summer,
Chile is again making
headlines
for
social
protests. But the venue
has changed – last year’s
student protests that captured the
world’s attention were mostly in
Santiago. This year, people are
marching in the northern mining
18
April 2012
business Chile
town of Calama and the southern
region of Aysén, both thousands of
miles from the capital.
The demands in each region differ – a
greater share of copper mining profits
in Antofagasta and lower fuel prices in
Aysén – but underlying these protests
is the call for greater decentralization.
In January, as firefighters battled
to control forest fires raging in
Aysén’s Torres del Paine National
Park, the Mayor of Calama, Esteban
Velásquez, warned that there would
be “a hundred fires” to put out if
the government did not address the
issue of decentralization.
Since then, protests have flared up
across the country. In March, Mayor
Velásquez led a march through
Calama calling for more profits from
copper mining to be invested in the
region. In Aysén, protesters burned
Special Report
police vehicles and blockaded roads
and bridges preventing food supplies
from reaching residents until the
government agreed to declare the
region a fuel tax-free area.
Such demands are not new.
Social discontent in the regions
outside Santiago has been brewing
for decades. But today, perhaps
inspired by recent protests in
Santiago and other parts of the
world, there is the feeling that
change could be closer than ever.
The problem is that despite Chile’s
economic success, it remains one of the
region’s most highly centralized countries.
The Santiago Metropolitan Region
is home to over 6 million people –
about 40% of the population – and it
generates about half of the country’s
GDP (48.3% in 2009), according to
Central Bank figures. Crucially, the city
is also home to the country’s leading
universities, business organizations
and the headquarters of nearly all its
largest companies.
The rest of the population is spread
out to the north and south. Some
4,300km long and on average only
180km wide, the country’s mining
“The process of
regionalization in Chile
is progressing very
slowly.”
April 2012
“We need to level the
playing field so everyone,
wherever they live, has
the same opportunities.”
Miguel Flores,
Undersecretary for Regional
Development
Mario Marcel,
OECD
20
resources are concentrated in the
north while agriculture, forestry and
fishing are the main sectors in the
central and southern regions.
The result is a wide economic gap
between Santiago and the relatively
well-off mining-intensive northern
regions such as Antofagasta and
Atacama on the one hand, and the
poorer agriculture-intensive regions
of La Araucanía, Coquimbo and
Maule on the other.
According to the OECD’s Territorial
Review of Chile, published in 2009,
territorial inequalities are much higher
in Chile than in most OECD countries.
Chile’s Gini index of inequality across
regions (0.25) was fourth highest in
the OECD (based on 2004 figures) –
exceeded only by Mexico, the Slovak
Republic and Belgium.
Some progress has been made
in recent years, particularly in the
earthquake-hit Bío Bío Region in
the southern part of the country,
but regional inequalities remain a
key reason for Chile’s high level of
social inequality compared to other
OECD countries.
“The process of regionalization
business Chile
in Chile is progressing very slowly
compared to other countries in the
region,” says Mario Marcel, deputy
director of the Public Governance and
Territorial Development Directorate at
the OECD.
While Bolivia and Colombia have
become much more decentralized in
the last two decades, Chile remains
very Santiago-centric, says Marcel.
“Even within Latin America where
there is a history of centralization
Chile is on the low-end of the
decentralization scale,” he says.
Santiago rules
Centralization in Chile dates from
the Spanish colonization in the
16th Century when Santiago was
established as the country’s military,
religious and economic center.
“Chile has always been a nation
controlled from Santiago, that hasn’t
changed since colonial times,” says
Francisco Sabatini, a professor
at the Catholic University’s Urban
Studies Institute in Santiago.
In the past, the logic of industrialization
meant that Chile’s resource-rich
“Chile has historically
been organized
and controlled from
Santiago.”
Francisco Sabatini,
Institute of Urban Studies,
Catholic University
provinces were expected to sacrifice for
the greater good of the country, which
was controlled by the land-owning elite
concentrated in Santiago.
But this has changed with
globalization
and
economic
development.
Today,
Chileans
around the country, connected
by the Internet to groups around
the world, are prepared to defend
their rights and global values such
as environmental protection and
democracy.
At the same time, the demand
for greater decentralization has
increased. But this phenomenon
is relatively recent. It was not until
1974 that the country’s 25 provinces
(today there are 54) were formed
into regions, each with their own
government. This administrative
structure was comprised of 13 regions
from Tarapacá Region in the north to
Magallanes Region in the south.
A constitutional reform passed in
2005 allowed two more regions – Los
Ríos and Arica and Parinacota – to
be created, which means that today
there are 15. But while the number
of regions has grown, their identities
remain weak, says Sabatini.
“Centralization in Chile is so
strong that until recently the regions
were known by their numbers like
prisoners,” he points out.
And, like prisoners, Chile’s
regions depend on handouts. While
regions in other OECD countries like
Germany and Italy are focused on
how to compete better in the global
economy, Chile’s regions are more
concerned about obtaining benefits
from the central government, says
the OECD’s Marcel.
“Decentralization is not just
one-sided, it’s also about how the
regions are able to develop their
own identities,” he points out.
Funding the regions
The problem is not so much an
issue of money. Chile’s regions
receive funding through the National
Regional
Development
Fund
(FNDR), which has been increased
to US$1.78 billion in 2012 from
US$1.23 billion in 2009.
Moreover, the government has
increased the share of FNDR funding
not tied to specific projects to 63%
from 50% in 2011, which means
regional governments can decide
whether to spend the money on
roads, hospitals, schools or other
infrastructure projects.
“Public expenditure has become
more decentralized,” says the
Interior Ministry’s undersecretary
for regional development, Miguel
Flores. “We need to level the playing
field so everyone, wherever they
live, has the same opportunities.”
The regions can also apply
for funding from the Innovation
for Competitiveness Fund (FIC),
administered by Chile’s Economic
Development Agency (CORFO),
which aims to promote innovation and
highlight comparative advantages
for potential investors.
However, according to OECD
estimates, the total share of public
expenditure
administered
by
regions in Chile is still only about
15% compared to around 25% in
developed countries.
“It’s not so much how much money
each region gets, but who decides
how the money is spent,” says the
OECD’s Marcel.
Even though funding for the
regions has been steadily increased,
badly needed infrastructure projects
must still be approved by the central
government which means regions
are often slow in responding to the
needs of their inhabitants.
Governing the regions
Part of the problem is the
way regional governments are
organized. Each region has an
Intendente, or governor, appointed
by the President, who serves as the
central government’s representative
and oversees the Regional Council
(CORE), comprised of up to 14
councillors chosen by local elected
representatives.
“This is a hybrid structure that
does not generate the synergies
required for development in the
regions,” says Marcel.
Its main weakness is that the
central government often does
not find out about troubles in the
regions until people start protesting
in the streets, says Patricio Navia,
a Chilean political scientist and
professor at New York University.
Under the current system, regional
business Chile
April 2012
21
Special Report
governors have an incentive to hide
social problems in their regions from
the central government because
their jobs depend on it, says Navia.
“The result is that they operate in a
bubble which eventually bursts.”
The government has moved to
improve this system. A constitutional
reform approved in 2009 allows
regional councillors to be elected
directly by the residents of each
region and a bill to make this change
into law is currently before Congress.
“This will empower the regional
councils
and
increase
the
participation of local communities,”
says Flores.
But while it would be a positive
step the bill does not go far enough,
says Navia.
In theory, the councillors will elect
the president of the CORE while the
governor serves in an executive role,
but exactly how this arrangement
will work is open to debate.
”In practice the political parties
will name their own candidates and
the president will end up being a de
facto Intendente ,” says Navia.
Still, other changes could have an
impact on how decisions are made
at the regional level. For example,
a bill before the Senate will allow
the central government to delegate
responsibilities in areas such as
road construction and maintenance
to regional governments. The
government is also working to
strengthen
the
administrative
capacity and human capital of
regional governments.
“We are creating a model so
responsibilities can be transferred
to the regions without requiring
a new law,” says Flores. “This is
unprecedented in Chile.”
As Santiago loosens its grip on
the regions, decentralization should
accelerate across the country. But
this is not happening fast enough
for companies in regions that are
struggling to attract skilled workers
from Santiago.
Quality of life
Thanks to the mining boom, the
northern Antofagasta Region has
the highest GDP per capita (some
US$26,000) of any region in Chile
rivalling that of developed countries,
but there is scant evidence of this
prosperity in cities like Calama.
The lack of education and health
services, combined with a shortage
of housing and entertainment
alternatives, is the main reason most
mineworkers prefer to live with their
families in Santiago and commute
to the north when necessary.
“Infrastructure has not developed
at the same pace as industry even
though salaries have risen,” says
Juan Carlos Villegas, president of
Finning South America.
Finning, which supplies heavy
machinery to the mining and
construction industries, employs
around 5,500 people in Chile, half
of whom work in Antofagasta.
But as demand for mining
professionals grows, it is becoming
more difficult to find qualified staff,
says Villegas. “You just can’t get
people trained in Santiago to move
to the north,” he explains.
As a result, Finning is investing
US$12 million in a new training
center in Antofagasta city to be
opened in November with US$1
million in funding from the Chilean
Economic Development Agency
(CORFO). The center will be able to
train up to 650 workers in miningrelated trades simultaneously.
“We will train them in the north to
stay in the north, it’s the only way,”
says Villegas.
Even the Chilean copper mining
company Collahuasi, headquartered
in the city of Iquique, is worried.
Collahuasi is closely integrated
with the local community through
sustainable development and training
programs, but there are not enough
candidates to meet the demand.
“The
main
challenge
of
decentralization is to focus on
issues important to families such
as education and health which
can attract people from Santiago,”
says Collahuasi spokeswoman
Bernardita Fernández.
This problem is not unique to the
mining industry.
Finding enough skilled labor
in regions with a competitive
advantage in aquaculture is also a
“serious challenge,” says Ricardo
García, president of Camanchaca,
one of Chile’s largest fisheries and
aquaculture firms.
Poor infrastructure and the lack
of basic services in these regions
- Atacama, Los Lagos and Aysén mean that workers refuse to live there.
“This creates a vicious circle where
people won't go or they leave, which
makes it even more difficult for these
“Centralization makes
regional governments
inefficient.”
Patricio Navia,
New York University
regions to develop,” says García.
Camanchaca is working with local
colleges, institutes and universities
to promote education related to
aquaculture, but the risk is that
graduates will leave to seek a better
life elsewhere.
Even Magallanes Region, which
attracts 70% of Chile’s tourism
with its picturesque landscapes, is
struggling to attract workers. While
the quality of life is better than in other
regions, transport and heating costs
are higher due to the poor weather.
Canadian
methanol
producer
Methanex, which has created over
2,000 jobs directly and indirectly
in the region, has a policy of hiring
locally, but finding qualified staff in the
oil and gas industry is difficult, says
Paul Schiodtz, senior vice-president
for Latin America at Methanex.
Regional development is key to the
sustainability of the business, he says,
which is why Methanex has focused
on transferring best practices,
especially in terms of safety and the
environment, as well as supporting
university programs aimed at meeting
the needs of local industry.
“The saying that it is not possible
to have a successful business in
poor communities is very true,”
“People won’t sacrifice
their standard of living
to move north.”
Juan Carlos Villegas,
Finning
says Schiodtz.
Integrating the local community
into the production value chain
benefits both the company and the
inhabitants of the community, but
public policies are needed that adapt
to the reality of each region, he says.
Given the country’s regional
diversity, this is an important
challenge.
“Chile’s
economic
development depends on its
sensitivity to regional demands,”
says Francisco Sabatini.
Increasing the share of public
spending administered by the
regions and strengthening regional
governments are important steps, but
decentralization is a gradual process.
Sending in more police and
offering ad hoc packages of
benefits may douse the flames of
social unrest in regions like Aysén
in the short term, but this is merely
a band-aid solution.
A longer term solution requires
policies that improve the quality of
life in regions and empower them
to play a greater role in their own
development. Only then will Chile be
able to fully tap its economic potential
from north to south. bUSiness chile
Julian Dowling is Editor of bUSiness CHILE
business Chile
April 2012
23
Spotlight
Raising Hopes for
US Business
The US State Department invited private sector representatives from
around the world to a meeting in Washington, DC in February, but will
it act on their recommendations?
by Julian Dowling
W
hen US Secretary of
State Hillary Clinton
calls, you drop whatever
you are doing and come
running. That is what
top executives from
US companies and
business organizations
in over 100 countries did for the firstever Global Business Conference
hosted by the US State Department
in Washington, DC on February 21-22.
Secretary Clinton delivered the
keynote address at the conference
which was attended by representatives
from nearly all of the world’s 115
American Chambers of Commerce
(AmChams), including AmCham Chile.
The purpose of the meeting was to
determine how the State Department
can help promote US business
abroad, increase US exports, attract
new investment to the United States,
and create jobs. This is part of
Secretary Clinton’s broader initiative
launched last year to strengthen the
Global Business Conference, Washington, DC
24
April 2012
business Chile
relationship between diplomacy and
economics – or “economic statecraft”
as she puts it.
“For the first time ever, the US
government called together the private
sector to ask: how can we help you
better?” said Javier Irarrázaval, AmCham’s
president and managing director of Latin
America for the Walt Disney Company,
who attended the conference.
The agenda included remarks
from US Vice President Joe Biden,
Commerce Secretary John Bryson,
US Trade Representative Ron Kirk,
and US Chamber of Commerce
President Tom Donohue.
Following the first day’s plenary
sessions on best practices for
collaboration and what the government
can do for business, the second day
consisted of regional breakout sessions
hosted, in the case of the Western
Hemisphere, by Acting Assistant
Secretary Roberta Jacobson.
Two issues emerged from these
sessions as key concerns in the
region: visa programs and intellectual
property protection.
Everyone knows getting a visa to
visit the United States since 9/11 can
be a headache. The US government
has made some recent improvements
in the application process, making
it cheaper, faster and friendlier, but
there is room to improve as Irarrázaval
knows from personal experience.
In March he took his family to Miami
for a cruise but admits he could not
complete the visa application process
online without help. “I just couldn’t do
it, it’s a nightmare.”
Chile’s visa application rejection rate
needs to be reduced from 5% to less
than 3% in order to enter the US visa
waiver program, but in the meantime
the US government could help by
making the application process more
user-friendly, said Irarrázaval.
The problem is that the hassle
involved in getting a visa is affecting
business.
For
example,
many
businesspeople now prefer to avoid
stopovers in the United States en route
to Europe, Asia or other destinations.
“This also affects tourism from
Chile to the U.S. and vice versa due
U.S. Secretary of State, Hillary Clinton
Spotlight
to the reciprocity charge,” noted Irarrázaval. Santiago’s
international airport now accepts credit card payment
for the US$140 per person entry fee (it used to be cash
only) but the cost, especially for large families, can be
prohibitively expensive.
Another issue raised at the meeting was intellectual
property: “there were loud voices from the pharmaceutical
and entertainment businesses,” said Irarrázaval.
The problem is that Chile is very late implementing
some aspects of the Free Trade Agreement (signed
in 2003) related to intellectual property. It has made
moves to close these gaps, for example with a new bill
currently before Congress to strengthen the protection of
pharmaceutical patents, but more could be done to crack
down on piracy.
“The US position is that Chile has fallen way behind its
commitments… today the United States will not sign new
trade agreements with countries like Colombia, Panama
or South Korea unless they have already implemented its
requirements,” said Irarrázaval.
The risk is that the US government may take “serious
action” against Chile if it does not comply with the terms
of the agreement, he warned.
“I would expect the US government to act more
aggressively around the world, including in Chile,” he said.
In addition to protecting the rights of US companies
overseas, the conference also focused on how business
associations can work more closely with the State Department
to increase the competitiveness of US exporters.
Following the meeting, the Association of American
Chambers of Commerce in Latin America (AACCLA),
representing the 23 AmChams in the region, sent a letter
to Secretary Clinton listing its recommendations. These
include closer collaboration between AmChams and US
consulates to facilitate business travel to the United States.
“We believe that the US relationship with the Americas,
where the United States commands a vital share of total
trade and where nearly half of all US exports are currently
destined, is a special and unique case, and that our region
can and should be the test case that illustrates the potency
of your economic statecraft vision,” said the letter.
While Irarrázaval said the conference was a positive
first step, he emphasized that AmCham officials and
executives will be reluctant to spend the time and money
involved in attending a follow-up conference unless they
see concrete steps have been taken.
“If you open the door for companies and raise
expectations, you have to do something,” he said.
And, with US elections fast approaching in November,
Secretary Clinton has limited time to show that she got
the message. bUSiness chile
Julian Dowling is Editor of bUSiness CHILE
AMCHAM News
AmCham Lands at FIDAE 2012
AmCham participated in Latin America’s largest
annual aviation event, the International Air and Space
Fair (FIDAE), held in Santiago on March 27-April 1.
Executive Director Rodrigo Ballivián met with Defense
Minister Andrés Allamand, US Ambassador Alejandro
Wolff and the US Embassy’s Senior Commercial Officer
Mitch Larsen at the US Embassy’s stand.
Ballivián welcomed the US companies present at the
fair and emphasized the Chamber’s mission to promote
business between the two countries. He noted the
nearly threefold increase in bilateral trade since the
signing of the Free Trade Agreement (in 2003) and
highlighted agreements signed between Chile and the
states of California and Massachusetts to facilitate the
exchange of technology and best practices.
Rodrigo Ballivián, AmCham; Mitch Larsen and Ana María Ferrer, US
Embassy; Andrés Allamand, Minister of Defense; Paulina Dellafiori,
AmCham; Jorge Rojas, Commander-in-Chief of the Chilean Air Force,
and US Ambassador Alejandro Wolff.
Columbia University Opens Global
Center in Chile
On March 19, in a ceremony
at the Gabriela Mistral Cultural
Center in Santiago, Columbia
University President Lee C.
Bollinger officially opened the
university’s new Global Center
in Chile. The ceremony was
attended by Columbia alumni and
presidents of Chilean universities
among other guests.
“The Santiago center now takes
its place alongside Columbia
Global Centers in East and South
Asia, Europe, and the Middle
East, each one offering fresh
opportunities for students and
faculty at our New York campuses
to engage an international
network of scholars, researchers
and citizens,” said Bollinger.
Following the ceremony, a
roundtable discussion was held
on the topic, Inequality: A Global
Perspective, moderated by the
director of the Santiago center,
Karen Poniachik. In addition to
Santiago, regional centers have
been opened or announced
in Amman, Beijing, Istanbul,
Mumbai, Nairobi and Paris.
Rodrigo del Campo, Alto Impacto,
and Jaime Bazán, AmCham
Alto Impacto
Offers Benefits for
Members
Chilean human resources
consultancy Alto Impacto has
signed an agreement with
AmCham to offer employees of
member companies discounted
prices on events and workshops.
For more information contact
Julieta Collino, tel. 434-5369.
Lee C. Bollinger, Columbia University, and Karen Poniachik, Columbia Global
Center Chile
28
April 2012
business Chile
AmCham
Meeting with
US Ambassador
AmCham President Javier
Irarrázaval and Executive
Director Rodrigo Ballivián
met with US Ambassador
Alejandro Wolff at the US
Embassy in early March to
discuss progress in key areas
of cooperation.
Topics included the Global
Business Conference hosted
by the US State Department in
Washington, DC in February,
which was attended by
Irarrázaval, as well as a
proposed
amendment
to
Chile’s Industrial Property Law
that would better protect US
pharmaceutical patents.
US Ambassador Alejandro Wolff; Javier Irarrázaval, AmCham, and Ambassador Felipe Bulnes
Ambassador Bulnes at AmCham Lunch
On March 8, Chile’s new ambassador to the United States, Felipe
Bulnes, was invited to lunch at AmCham with US Ambassador
Alejandro Wolff. Ambassador Bulnes took over from Arturo
Fermandois as head of the Chilean Embassy in Washington, DC,
on April 1.
The lunch was attended by AmCham President Javier Irarrázaval
and Executive Director Rodrigo Ballivián along with some of the
Chamber’s directors.
Ambassador Bulnes discussed issues important to the bilateral
relationship including the implementation of the agreements signed
by Chile with the states of California and Massachusetts.
Smithsonian Gives Preview
of Giant Telescope
In March, Dr. Eva Pell and Dr. Charles Alcock of
the Smithsonian gave a presentation at AmCham
on the Giant Magellan Telescope (GMT) being
installed in the Las Campanas Observatory in
Chile’s Coquimbo Region.
The telescope is comprised of seven mirrors,
each 8.4 meters in diameter, which will work
together like a single mirror with the power of a
telescope 25 meters in diameter.
Dr. Alcock, director of the Smithsonian
Astrophysical Observatory, explained that Chile
has the ideal conditions for large telescopes in
the north with clear, dark skies due to the low
population density and dry air in the Atacama
Desert. Moreover, he said the legal framework
is very stable with clear laws regulating the
construction of observatories which are able to
recruit local professionals.
Rodrigo Ballivián, AmCham; Dr. Eva Pell and Dr. Charles Alcock, Smithsonian
business Chile
April 2012
29
AMCHAM members News
Arauco, Unilin Form Brazil Flooring
Joint Venture
Chilean forestry company Arauco
has signed an agreement with the
Belgian firm Unilin Flooring, one of the
largest producers of laminate flooring
in Europe and North America, to
jointly manufacture flooring products
in Brazil.
The alliance, which includes
Arauco’s plywood production plant
in Paraná state and its existing sales
organization in Brazil, will market
flooring products under the brands
Quick-Step and Floorest. Both
companies will hold a 50% stake
with Arauco supplying High-Density
Fibreboard (HDF) and Unilin providing
technological expertise.
Gonzalo Zegers, manager of
Arauco Panels, formalized the
agreement with Unilin Flooring while
Arauco Brazil’s manager, Carlos
Bianchi, said the deal will "generate
a business focused on design,
technology, quality and service".
Gonzalo Zegers, Arauco Panels
IBM Chile Upgrades
Kaufmann’s Computers
Juan Carlos Corvalán, Sodimac
Sodimac Receives Latin
America CSR Award
Home improvement retailer Sodimac has received the
Latin America Corporate Social Responsibility Award
from the Mexican Center for Philanthropy (CEMEFI) and
Mexico’s Alliance for Corporate Social Responsibility
(AliaRSE) for the third consecutive year.
The award was presented during the 5th annual Latin
American Meeting of Socially Responsible Businesses
held on March 12-14 in Mexico City with the participation
of over 1,000 companies.
"This award encourages us to continue working hard
every day to make our company more responsible and
sustainable in all of the countries in which we operate,”
said Sodimac’s manager of social responsibility, Juan
Carlos Corvalán.
30
April 2012
business Chile
IBM Chile has signed a
three-year agreement to supply
1,600 Lenovo-brand laptops
and desktop computers
to Mercedes Benz-dealer
Kaufmann’s
dealerships
throughout
the
country.
The agreement includes
maintenance by IBM personnel.
Rosa Maribel de Freitas,
marketing manager for IBM
Chile, noted that IBM always
seeks to deliver solutions
that help customers to
focus on their core business
with the confidence that
technology is their ally.
"Most of the companies
are not experts in technology
because it is not their main
area. Our customers want us
to be an enabler to help them
be more efficient in what they
know best,” she said.
Bernardo Stern, Kaufmann; Rosa Maribel de Freitas, IBM Chile; Camilo
Clavijo, IBM Chile, and Juan Tapia, Kaufmann
HiLinks Brings The Surround Executive Appointments
Group to Chile
Alberto Bezanilla has been
Chilean strategic communications
firm HiLinks has announced the
launch in Chile of the international
public relations network The
Surround Group. Created by US
PR firm Bender/Helper Impact and
European PR agency Indigo Pearl,
the network is focused on adapting
international marketing and public
relations campaigns to different
cultures, lifestyles, economic realities
and business operations.
Alberto Bezanilla,
CEO of GTD
Teleductos
Paulina Salman and Felipe Pozo, HiLinks
Mauricio Torres,
CEO of IBM Chile
Jaime Bazán, AmCham; Sara Ramírez, Manuel Gutiérrez, Luz
María Ramírez, Rodrigo Martínez and Andrés Cancino, Neobis
Neobis Joins Forces with Asentinel
On February 14, Chilean telecommunications firm Neobis
signed an agreement to be the exclusive representative of US
telecom software company Asentinel in Latin America.
Asentinel holds the only US patent for comprehensive Telecom
Expense Management, which is a special type of software
that allows customers to manage and optimize their
telecom expenses.
In 2010, when Neobis began exploring the US market,
AmCham helped Neobis contact business chambers and
government entities in Florida and Georgia, which eventually led
to the Asentinel deal.
Pablo Calcagno,
manager of Mekano’s
Analytics Division
named the new CEO of
Chilean telecom company
GTD Teleductos, taking over
management responsibilities
from GTD Group’s president,
Juan Manuel Casanueva.
Bezanilla is a civil industrial
engineer from Chile’s Catholic
University and he previously
worked at Unilever, JP Morgan,
IM Trust and Banchile.
Mauricio Torres is the
new CEO of IBM Chile.
The executive is a systems
engineer from the Metropolitan
University of Venezuela and has
previously served as president
and general manager for
IBM in Venezuela. Torres has
extensive experience in areas
such as sales, marketing and
finance.
Pablo Calcagno is the new
manager of the Analytics Division
at Mekano. He is a commercial
engineer from Chile’s Universidad
del Desarrollo with over 15 years
of experience in multinational
technology companies including
SAP, UNISYS, BAAN and
Universal Computer Systems.
business Chile
April 2012
31
AMCHAM People
Breakfast with Google’s Fernando Lopez
Fernando Lopez, Google’s business
acquisition manager for Latin America,
was the guest speaker at AmCham’s first
breakfast of the year held at Santiago’s
Radisson Hotel on March 16.
32
1
2
3
4
5
6
April 2012
business Chile
7
8
Fernando Arab, Morales & Besa, and Fernando Pau, Boyden 2 Kenneth Daniels and Ricardo Betenjani, Widefense
3 Michael Grasty, Grasty Quintana Majlis & Cía; Fernando Lopez, Google, and Rodrigo Ballivián, AmCham 4
Pablo Cruz,
Relsa; Sandra Guazzotti, Oracle Chile, and Manuel Gutiérrez, Neobis Corp. 5 Eliel Hasson, Universidad Mayor; Paulina
Dellafiori, AmCham; Alejandro Cabrera and Alejandro Valenzuela, Clínica Veintec 6 Meghan Sherlock, Enrique Vargas del
Campo and Ileana Cheszes, Google 7 Jaime Bazán, AmCham; Phaedra Troy and Greg Barton, Business News Americas
8 Pablo García, Mercer Consulting Chile, and Carlos Miranda, In Motion
1
.
Economic Snapshot
Oil: Chile’s Achilles Heel?
By Brian P. Chase
Here we are again in Chile, cringing at the latest spike
in the oil price, worrying about its impact on inflation,
monetary policy, confidence and economic growth.
It seems 2008 is still fresh in our minds, not solely
for Lehman Brothers and the ensuing economic and
financial crisis, but also for the extraordinary impact
that higher oil prices had not only on inflation but on
broader economic activity.
In 2008, Chile experienced annual inflation of 7%,
peaking at 10% in October, just prior to the global
economic meltdown. Oil explained more than a third
of this. Efforts to hike rates by the Central Bank (400
basis points since mid-2006) weren't enough to curb
inflationary pressures and Chile faced a stagflation
scenario. From an inflation standpoint, Chile was
essentially saved by crisis conditions, which curbed
inflation, while the economy was subsequently able to
recover on heavy counter cyclical stimulus and related
tailwinds (President Piñera’s agenda and earthquake
reconstruction).
It should be no secret that oil has the single
largest impact on the economy of any item in Chile's
CPI basket. Chile imports more than 90% of its fuel
needs, but more importantly, policy decisions related
to energy, electricity and transport have increased the
economy’s overall exposure to oil. A stabilization fund
helps smooth the curves, but pricing impacts are felt
quickly. Although oil and related fuels directly account
for less than 5% of the CPI basket, the figure rises to
as much as 30% when including indirect impacts on
other elements such as transport and electricity prices.
Furthermore, secondary effects ultimately start to take
hold, creating a vicious cycle given that Chile’s economy
is highly indexed to inflation (prices for many goods and
services are expressed in the inflation indexed Unidad
Fomento, or UF). Some would also argue that high oil
prices also affect food prices via biofuel substitution
(food represents 18% of Chile’s CPI basket), as was the
case in 2008.
Curiously, in this latest spike, oil prices have yet to
cause a major increase in inflation (12-month CPI holding
just above 4% for the first three months of the year),
largely due to offsetting factors, such as lower prices
for natural gas and holiday packages. An impending
25% cut in electricity prices should help the April figure
(however, an increase of 17% in May will mostly offset
this). Meanwhile, although the peso is highly correlated
34
April 2012
business Chile
Brian P. Chase
Portfolio Manager,
Head of Andean
Equities, at Itau Asset
Management
to the price ratio of copper to oil, high copper prices (along
with a weak dollar) have kept the peso strong. This has
meant cheaper oil in peso terms (WTI up 6% year-to-date
but flat in pesos). As a result, the economy continues to
chug along with the Monthly Indicator of Economic Activity
(IMACEC), a GDP proxy, up 5.5% in January compared
to the same month a year earlier, while the Central Bank
remains on hold.
The market has only recently started to reflect oil price
risk with consensus 2012 fiscal year inflation expectations
climbing to 3.5% in March, up from 3.1% a month earlier.
The risks continue to be skewed to the upside. Oil prices are
still facing pressure from geopolitical noise, most notably
related to Iran where further sanctions look doubtful to
deter the country’s nuclear ambitions. In the meantime,
copper prices have held up but are facing risks related to
China demand as the economy slows. Meanwhile, the US
economy has improved, helping the US dollar and curbing
the peso’s rally in recent weeks.
In the event that inflation continues to accelerate, it
will likely prompt the Central Bank to hike rates, which
ultimately has implications for confidence levels that are
already starting to decline. Inflation has a particularly harsh
impact on domestic consumption, which has recently been
the key driver of economic growth, thus increasing the risk
to consensus GDP growth forecasts (which have crept up
to 4.4% from a 4.0% low in January).
On the bright side, as Chile experiences ever more
frequent oil related inflation spikes, it will induce more
proactive measures by the government to reduce overall
exposure. Chile’s Achilles heel may still need major surgery,
but taping it up would be a good start. bUSiness chile
Brian P. Chase is Portfolio Manager, Head of Andean Equities, at Itau Asset
Management
BREAKFAST
Fernando Lopez, Business Acquisition Manager
for Latin America, Google
Winning the ZMOT
By Gideon Long
I
magine you’re in a supermarket.
You’re browsing the shelves for a
product – let’s say breakfast cereal.
You compare prices. You might be
drawn to one brand over another
because of its name, reputation or
packaging. You choose your cereal, drop
it into your shopping cart and move on.
According to market research, this
process takes around seven seconds
or less, but it’s so important to the retail
industry that marketers have given it a
grand-sounding name: the First Moment
of Truth (FMOT). The Second Moment
of Truth (SMOT), they say, is when you
get home, try your cereal and decide
whether you want to buy it again.
These two “moments” have dominated
recent marketing strategy. Capturing
them has been the key to capturing
consumers. But retail habits are
changing, and with the growth of online
shopping, a third moment of truth has
emerged. Google calls it ZMOT (Zero
Moment of Truth) and at an AmCham
breakfast at Santiago’s Radisson
Hotel on March 16, Google’s business
acquisition manager for Latin America,
Fernando Lopez, explained what it is.
“ZMOT is the moment when you open
your laptop or switch on your phone, or
any device that allows Internet access,
and you start to inform yourself about
something that you might buy.”
Lopez said 62% of consumers in Latin
America now consult online before
shopping, using search engines like
Google. Around a third of them provide
feedback about their purchases via
comments on Internet forums or social
network sites like Facebook. And 83%
of consumers say they take those
comments seriously when making their
own purchases. So, “winning the ZMOT”
(to use Google’s phrase) is crucial to
successful marketing.
Lopez cited the popular travel website
TripAdvisor as an example of how
consumer feedback is increasingly
important to other potential consumers.
In the past, people read holiday
brochures before booking their
holidays. Now, they heed the advice
of other holidaymakers. One person’s
experience of a beach resort in Brazil or
a hotel on Easter Island rapidly becomes
the next person’s ZMOT.
So, what can companies learn from
this? Google’s Managing Director for
US Sales and Service, Jim Lecinski,
has written an eBook about ZMOT
(Downloadable for free in English and
Spanish at www.zeromomentoftruth.
com) in which he gives the following
advice:
1. Put Someone in Charge of ZMOT
2. Find Your Zero Moments
3. Answer the Questions People Are Asking
4. Optimize for ZMOT
5. Be Fast
6. Don’t Forget Video
7. Jump In!
His book gives practical tips on
how companies can best serve their
customers and therefore keep them.
He says, for example, that they should
pay attention to the questions people
ask on the Internet and answer them
directly, rather than simply bombarding
them with special offers. And he says
companies should make more use of
video to reach their customers, pointing
out that the search box on YouTube is
the second most used in the world (after
Google’s own).
Lopez said companies in Chile need
to take ZMOT more seriously. “Think
about your companies and the areas
they invest in,” he said. “Most companies
invest in R&D, they dedicate resources to
management and products, they invest
in communications and media and they
probably invest in marketing. But who
is responsible within your companies
for investment in ZMOT? Who is
actively working to understand this new
paradigm? It’s time to think about it.”
Consumers will increasingly use
portable Internet devices to shop in the
future, he predicted. In Chile, the number
of broadband Internet users is expected
to rise to 10 million by next year from
8 million in 2010, while the number of
cellphones should climb from 19 million
to 23 million over the same period. But
the big increase will be in the number of
consumers with access to 3G technology
– expected to reach 15.6 million next year
from just 4.5 million in 2010.
A smartphone is the new tool of choice
for the Chilean shopper, and companies
should react to that. “If not, those
customers might well choose to shop
elsewhere,” Lopez warned. bUSiness chile
Gideon Long is a freelance journalist based in
Santiago
business Chile
April 2012
35
InteRview
Rodrigo Ballivián, Executive Director of AmCham Chile
Running to
AmCham 3.0
R
By Julian Dowling
odrigo Ballivián, AmCham’s new executive
director, knows what it takes to go the distance.
An enthusiastic runner, he has completed four
marathons in the last decade: New York, Chicago,
Berlin and London. While in training for his fifth in
Boston on April 16, he was running 10 kilometers
every day before work and 20km on weekends.
“Business is like a marathon, it’s half training and half
mental,” says the Chilean executive.
He admits it has been a steep climb since taking over
from Jaime Bazán, the Chamber’s general manager for
the last 16 years, but he is taking it all in his stride. With
30 years of management experience in multinational
companies - his previous position was managing director
for Latin America at the New York-based lottery technology
provider, Scientific Games Corporation - Ballivián is no
stranger to doing business with the United States.
He also knows the challenges facing Chilean exporters
having served as president of the National Association of
Exporters from 2002 to 2004. A graduate of Adolfo Ibañez
University with postgraduate studies in international
business at the University of Grenoble in France, Ballivián
recently sat down with bUSiness CHILE in his new corner
office on the second floor of Santiago’s Marriott Hotel.
Why did you decide to join the Chamber?
AmCham is the leading international chamber of
commerce in Chile. It is the most prestigious and
influential chamber and it has the most members - around
550 represented by their top executives, mostly CEOs.
Chile’s bilateral trade with the United States is also the
highest of all countries including China. So, I could not
imagine a better environment to work and add value from
my professional experience.
How would you describe Chile’s commercial
relationship with the US?
It’s an excellent relationship that is growing every day.
We are very optimistic because the indicators show the
US economy is recovering strongly, unemployment is
falling and stock markets are rising. Add to this the good
36
April 2012
business Chile
performance of the Chilean economy, despite the external
crisis, and we are in the best possible scenario.
How can AmCham help to strengthen this
relationship?
In this new scenario facing the world, economic, social
and cultural changes are happening much faster than they
did five years ago. So, we need to jump from AmCham
2.0, which is what we have today, to AmCham 3.0 in
order to provide a better service to existing members and
attract new members. We need to increase the range of
services we offer and increase the quantity and quality of
our members. This is in line with our mission to increase
business between Chile and the United States including
bilateral trade and investment. It is important to note
that this is a win-win mission, we are at the service of
Chilean businesses but we also assist US businesses.
And this mission fits perfectly with the attitude of the US
government which is trying to create jobs by increasing
international trade.
What new services could AmCham offer its
members?
Our objective is to develop strategies and activities that
allow us to anticipate the needs of our members. We can’t
wait for them to tell us what to do; AmCham should lead
initiatives to anticipate market trends and demands. This
means developing new research and communicational
tools.
You are currently on the board of the National
Council for Clean Production. Will this be a priority
area for the Chamber?
One of AmCham’s main focuses is on Corporate Social
Responsibility and sustainability, which is part of this
strategy, includes clean production.
What obstacles do Chilean exporters currently face
in the US market?
The main problem is the lack of knowledge about this
market. There is also a lack of awareness in the United
States about how to do business in Chile and the
advantages we offer. Therefore, one of the ways to
increase trade is to facilitate access to information.
Of course, trade with the United States does
not mean all 50 states together and each state
represents different opportunities and challenges.
In this regard, we plan to build on the existing
agreements with California and Massachusetts,
while Georgia could also be added to this list in the
near future.
Looking into a crystal ball, what would you
like to have achieved in AmCham in the next 5
or 10 years?
To have created a methodology that allows
AmCham to continue being the leading chamber of
commerce in Chile in terms of quality and services,
and to serve as a role model both as a chamber
and as a services company. The key is developing a
model that keeps AmCham on the edge of the wave
in terms of our members’ needs.
And how will you do this?
We need to be sensitive to market trends in Chile
and the United States, we need to empower our
staff and choose the best people, and we need
to produce better research and market studies.
We have to communicate with the market through
traditional means - print and audiovisual media but also using Internet communications technology.
Social networks will be a very important tool in this
strategy.
Finally, on a personal note, why do you run
marathons?
To show myself that I have the will to finish
something I’ve started. bUSiness chile
Julian Dowling, is the Editor of bUSiness CHILE
business Chile
April 2012
37
Life in the Slow Lane
Why Doesn’t
Everybody Love Me?
By Santiago Eneldo
I
It is nice to be liked and wonderful to be loved and as a
politician it is always pleasant to be one or the other.
President Piñera has just passed (on March 11) the
halfway mark of his four-year presidency and President
Obama is warming up to take on the Republican nominee
– as yet undecided.
The rhetoric in both countries would have us believe we
are being governed by incompetent halfwits whose sole purpose
is to survive their presidential term, or (in Mr. Obama’s case) win
reelection, and ultimately secure a noble position in history.
Campaigning has already started in Chile and some 10
individuals within the parties comprising the opposition
coalition are jostling for press time and upward movement in
the polls.
In the U.S.A., the Republican candidates seem to be doing
such a wonderful job of character assassination on their rivals
that there will be little left for Obama to attack when the real
campaign, leading up to the November election, gets underway.
What seems to be common in both countries is the lack
of grassroots support for both incumbent presidents. Recent
polls suggest that (almost) nobody loves Mr. Piñera – despite
the continued strength of the Chilean economy and lower
jobless rate – but then nobody loves any of the “traditional”
leaders of the opposition either!
At the same time, there appears to be a lack of loving support
for Mr. Obama but, then again, not one of the Republican
aspirants has generated much affection; it has been more a
question of voting for the lesser of two, three or four evils.
So where does this leave us? Mr. Piñera has just under two
years of his four-year mandate to implement, successfully, all
the promises made during his campaign; it is actually less since
he will effectively lose power after the presidential election in
November 2013.
At the time of writing, Chile is experiencing an unprecedented
level of social unrest which is likely to continue throughout
2012. Meanwhile, Mr. Obama faces very tough choices on Iraq
and Afghanistan, as well as the vitally important need to put
fire back into the economy before voters go to the polls on
November 6.
So, why are our current leaders (Piñera and Obama) and
almost all of those offering themselves for public dissection so
unloved? Very simple; voters have learned not to be suckered
by smooth-talking politicians who promise everything. Instead,
they will measure candidates or presidents against a simple
graph of what they offer versus what they deliver and “I really
38
April 2012
business Chile
don’t want to listen to your excuses”!
Perhaps Piñera offered to do too much
during his four-year tenure and maybe Obama was not,
and has not been, specific enough about his promises and
accomplishments. Regardless, anyone who expects to win the
top job in either country will get there because people believe
he or she will deliver what they promise. And if you win, keep
the boxing gloves on after the electoral fight because there will
be many a battle to come.
Yes, times are tough and economies are under threat.
Globalization is all very well, providing the downside (job
losses, higher inflation, market uncertainties, etc.) doesn’t
affect ME.
But those who, for whatever motive, aspire to the highest office
in the land do so (I hope) knowing they must deal with extremely
complex issues and not just to be praised for rescuing miners, or
for reaching an agreement on the nation’s indebtedness.
If you want to be loved, become a great comedian or
philanthropist – perhaps even a pediatrician, author, singer or
sports personality. In the words of the great Bard of Avon, the
game of politics is more a “Comedy of Errors” and sometimes,
as Julius Caesar would remind us, your own loyal supporters will
cut you down if the will of the Senate is not being properly served.
How high can the mighty fall? Well, it depends on the
height of the pedestal they have built for themselves. There is
no longer room for love in politics or government, just a solid
performance. Perhaps our leaders should learn to be happy
with “respect and acceptance” and, finally, a sincere thank-you
for a job well done.
I remain naively optimistic about the future and humanity’s
ability to pick a winner…
Santiago Eneldo
(Abuse and useful political commentary to:
[email protected])
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