business chile - amcham chile · foreign investment and trade are at record levels including ......

The voice of The chilean-american chamber of commerce n°285, December 2012

business chile

Trade TesTimonialTurning fish oil into Gold

special reporTsantiago's real estate boom

BankrupTcy reformresolving insolvency in chile

A Better State for Chile

December 2012 3business chile

Contents

Turning fish oil into Gold chilean company Golden omega has built an us$80 million plant in arica to produce fish oil concentrates for use in omega 3 dietary supplements.

TRADE TESTIMONIAL

12a better state for chilechile needs more efficient public services, more flexible institutions and a more decentralized state to stop its competitiveness from slipping.

COvER STORy

6

8 SECONDARy STORy

bankruptcy reform: resolving insolvencyinsolvency in chile is considered a failure or worse, but a bill before congress that would modernize bankruptcy proceedings aims to change this attitude.

20santiago’s real estate boomprices for new homes and office space in santiago are soaring, but future demand could be limited by stricter building restrictions and a shortage of land.

SpECIAL REpORT

EDITORIAL BOARD 2012CHAIR, 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.MEMBERSRodrigo Ballivián, AmCham Chile; Ari Bermann, 3M Chile; Pelayo Bezanilla, Coca-Cola de Chile; Ruth Bradley, Freelance Journalist; John Byrne, Boyden Consultores Chile; John P. Dill, Project Management; Francisco Garcés, Banco de Chile; Ricardo Inostroza, AES Gener; Javier Irarrázaval, The Walt Disney Company Chile; Olga Kliwadenko, K&D Comunicaciones; Gideon Long, BBC/The Economist; Vincent McCord, Asesorías e Inversiones CarCon; James Newbold, Tanager Investment; Roberto Ossandón, Ossandón Abogados; Paulina Dellafiori, AmCham Chile.

PRODucTIOnK & D Comunicaciones Ltda. Olga Kliwadenko, General Manager, 11 de Septiembre 1945 - Of. 516, Providencia. Phone: 376 9877, Cell: (09) 6601-5505; e-mail: [email protected] www.kyd.cl

Special RepoRt

Santiago’s Real estate BoomHome prices in Santiago have risen over 20% since 2009 and developers are running out of land to meet the demand for new apartments and office space, but banks insist there is no evidence of a housing bubble.

Modern etiquetteSantiago eneldo says people who compulsively check their smartphones, even during dinner, need a lesson in manners.

© 2012 AMchAM chILEReproduction 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. They should 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: [email protected]; Phone:2909741. Fax 2120515 Av. Presidente Kennedy 5735, Torre Poniente, Of.201, Las Condes, Santiago de Chile; E-mail: [email protected]; www.amchamchile.cl; www.businesschile.cl

life in tHe Slow lane

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The voice of The chilean-american chamber of commerce n°285, December 2012

business chile

Trade TesTimonialTurning fish oil into Gold

special reporTsantiago's real estate boom

BankrupTcy reformresolving insolvency in chile

A Better State for Chile

A Better State for ChileModernization and e-government have improved the efficiency and transparency of Chile’s public services, but there is still work to do.

BREAkfAST42chile’s economy: Playing the long Gameaccording to rodrigo Vergara, the president of chile’s central Bank, chile must boost its productivity and control public spending to be competitive.

46

INTERvIEw44Port of los angeles: Gateway to the u.s. and asiaThe port of los angeles offers chilean exporters access to a huge market in california and transport connections to asia, says deputy director kathryn mcdermott.

40Time for macroprudential measures?chilean consumers and businesses have been on a debt binge thanks to favorable market conditions, but the authorities are considering measures to curtail loan growth.

ECONOMIC SNApShOT

30cleaning up los angelesantonio Villaraigosa, the mayor of los angeles, california, told participants at an amcham seminar how his city has changed its image as the country’s smog capital.

SpOTLIghT

December 20124 business chile

AmChAm GlobAl SponSorS 2012


as 2012 comes to a close, we look back on another successful year for chile with projected growth of just over 5%, according to economists surveyed recently by the central Bank, and with near full employment — a notable achievement given the complexity of current global economic challenges.

foreign investment and trade are at record levels including an ever richer and more dynamic relationship between chile and the united states. amcham celebrates this mutually beneficial partnership that, in trade alone, has shown growth of over 300% since the implementation of the free Trade agreement in 2004.

as we look forward to 2013, declared by the government to be chile’s year of innovation, we recognize that there are still many challenges and opportunities for business between the two countries. our mission in amcham is to identify, support and promote these opportunities to their fullest.

in december, amcham’s board of directors held its annual strategic retreat to discuss ways to effectively take advantage of these opportunities in the coming year. To achieve this aim, the chamber has put in place some key structures to promote innovation while channeling trade and investment potential.

This was the first full year of operation of the us-chile energy Business council, created by amcham in 2011, which has worked to organize and focus efforts to develop a stronger relationship between the two countries in this area. in november, the chamber held a seminar to discuss opportunities in clean energy development that coincided with the visit to chile of the mayor of los angeles, antonio Villaraigosa. The participants were able to learn from the experience of los angeles in this area, as discussed in this month’s spotlight.

amcham has also participated actively as a member of the chile-massachusetts and chile-california councils. in June, the chamber organized a mission to Boston, massachusetts, to bring chileans involved in biotechnology to the Bio international convention — one of the world’s largest gatherings in this field — with the goal of highlighting chile’s expertise and fomenting new business opportunities. amcham also looks forward to

promoting several new initiatives in this area in 2013.for amcham’s members, innovation — in other words,

the process of translating an idea or invention into a good or service that creates value — is a key focus. This has been clearly demonstrated in the clean energy field and by efforts to add value to chile’s natural resources such as Golden omega’s project to produce omega 3 concentrates from fish (see this month’s Trade Testimonial).

amcham is also aware of the importance of innovation that is both environmentally and socially responsible. in november, the chamber supported the common pitch event — an entrepreneurship competition held for the first time this year in chile. former us vice-president and nobel prize winner, al Gore, spoke at the event about the importance of environmentally sustainable innovation.

But innovation is not limited to the private sector. as discussed in this month’s cover story, “a Better state for chile”, efficient public management is key for chile to improve its competitiveness. in recent years chile has made significant improvements in this area that have reduced transaction costs for businesses, but important challenges remain in other areas of public governance including decentralization and institutional reform.

in recent years, chile has made it much quicker and cheaper for entrepreneurs to start a new business but it also needs to make it easier for them to fail and get back on their feet. This is why chile’s plans to modernize its bankruptcy law, discussed in this month’s secondary story, are so important for future innovation.

ultimately, innovation requires a dynamic private sector but also a more efficient state. in both areas chile is making progress and all indicators point to another year of successful innovation in 2013. amcham looks forward to supporting its members in this challenge, while helping to develop more and better trade and investment opportunities between chile and the united states.

Adding Value: Chile’s Year of Innovation

Editorial

boArD oF DIrECTorS eXecuTive commiTTee PreSidentJavier irarrázaval The Walt Disney company chile

ViCePreSident; ChAir LABor And humAn CAPitAL Committeecarolina valdivieso, Kimberly clark chile

secreTary of The boarD; chair leGal commiTTeemichael Grasty, Grasty, Quintana, majlis & cia.

Treasurerfelipe cerón, aes Gener

PasT PresiDenTricardo García, compañía Pesquera camanchaca

eXecuTive DirecTorrodrigo ballivián, amcham

DirecTors

Pablo achurra, aramark sud américachair TraDe anD inTernaTional business

fernando concha, citigroup chair finance anD caPiTal marKeTs commiTTee

Gonzalo iglesias, coca-cola de chile sa.chair corPoraTe affairs anD susTainbiliTy commiTTee

luiz marcelo marrey moncau, microsoft chile

enrique ostalé, Walmart chile

Karen Poniachik, british american Tobacco chilevice chair eDiTorial commiTTee

luis siles, ibm de chile s.a.c

aDvisory council

Kathleen barclay, socia, asesorías Kcb ltda. chair eDiTorial commiTTee

maría Paz epelman, vTr

alfredo ergas, enersisvice chair finance anD aDr commiTTee

arturo fermandois, fermandois evans y cía.

AmCham mision Statement“Promote free trade and business between Chile and the United States"


turning Fish oil into Gold

hile and peru are the world's major exporters of fish oil. in fact, many of the omega 3 dietary supplements sold over the counter in the united

states and europe are made from fish oil produced in these two countries. But most of the profits are captured by foreign companies like norway’s epaX and canada’s ocean nutrition, which import chilean or peruvian fish oil and purify it to obtain omega 3 concentrates.

The process of refining fish oil is complex and costly, but in april this

year, Golden omega - a chilean joint venture formed in 2008 by fishing companies orizon and corpesca (both part of the holding company empresas copec with 35% each) and chemical firm Härting, which owns 30% - completed construction of its us$80 million plant near the northern city of arica.

The state-of-the-art facility processes fish oil, mainly from anchovies, to produce omega 3 concentrates for export to the united states and other markets. The company aims to export 1,500 tons in 2013, says claudio aracena, commercial director at both Golden omega and orizon, eventually reaching capacity of 2,000 tons, with total annual revenues estimated at around us$50 million.

in the future the plant could also process jack mackerel, says aracena, but the underrated anchovy - mainly used in chile to make fishmeal and fish oil for animal feed – is abundant in northern chile and full of epa and dHa, the two fatty acids responsible for omega 3’s numerous health benefits.

in fact, Golden omega’s concentrates contain up to 60% of epa and dHa, with extremely low levels of contaminants and heavy metals, which makes them better

quality than competing products, says aracena.

a big advantage, he points out, is that the anchovies are caught just a few miles from the coast. fishing vessels operated by orizon and corpesca, the two main shareholders of Golden omega, catch the fish, which is then processed in the companies’ facilities to produce fishmeal and fish oil.

“This is the first vertically integrated plant to produce omega 3 fish oil concentrates in the world,” says aracena. “We use our own raw material, which allows us to add value to the oil and produce a higher quality product.”

in chile, the market for omega 3, which can be found in pharmacies alongside containers of multivitamins, is relatively tiny, but global demand is soaring – the world market is projected to be worth nearly us$2 billion in 2012. in the united states in particular, consumers are rushing to buy omega 3 supplements sold by brands such as nordic naturals, carlson and Barlean’s, because of its widely touted health benefits.

These include the prevention of cardiovascular problems and anti-depression properties as well as improved brain function and eyesight. While the same benefits can be

The chilean company Golden omega is adding value to fish by

producing omega 3 concentrates for use in dietary supplements in

the united states and other markets.

cBy Julian Dowling

TrADE TESTImonIAl

claudio aracena, Golden omega


obtained by eating fatty types of fish like salmon, explains aracena, many consumers find it more convenient to take a supplement.

To be closer to its clients in the united states, Golden omega has opened an office in aliso Viejo, california, and the first seven containers, each with 80 barrels containing 190 kilos of fish oil concentrates, have already arrived at the port of los angeles.

Golden omega sells the product to us manufacturers that package it in capsules or bottles under different brands. Thanks to the chile-us free Trade agreement, Golden omega’s products enter the market duty free, which gives it a competitive advantage.

“if all goes to plan, we expect to sell 40% of our production in the u.s., and the rest in europe, australia, new Zealand and asia,” says aracena.

The company is also studying possibilities to develop long-term partnerships with some of the well-known brands in the market. although Golden omega’s us clients do not yet associate ‘made in chile’ with superior quality, this is slowly

changing as they become better informed. “as in any business, the personal touch is important and we need to be close to our clients to explain the benefits of our product,” says aracena.

and the strategy appears to be working. Back in chile the company is building a second plant in arica, due to start up in the second half of next year, which will produce oil with epa/dHa content up to 85%. “This will be a product with much higher value using patented technology developed by Härting in chile.”

aracena admits that finding qualified people in arica was initially a challenge since chile lacks experience in this area, but the company has trained workers internally and now employs 100 people at its plant, which operates 24 hours a day, seven days a week.

as production ramps up, Golden omega is also eyeing the global pharmaceutical industry. next year, it plans to begin selling its products to pharmaceutical companies after obtaining approval from the us food and drug administration (fda).

in addition, thanks to an alliance with Harvard university, the company is studying other potential health benefits of omega 3 fish oils. in 2010, Golden omega and Harvard created a subsidiary with other investors called Bioambar to study the anti-cancer properties of epa and dHa. although details are sketchy at this stage, with clinical trials still pending, aracena hints that these could significantly reduce the risk of developing cancer.

in the long run, of course, Golden omega’s business depends on the sustainability of chile’s fisheries resources and, in this, the new fishing law will be essential. But the key to the company’s success, explains aracena, is innovation. not only has Golden omega identified a growing niche for omega 3 in the united states, but it has also shown that adding value to fish products could be good for the long-term health of chile’s large fishing industry.

Julian Dowling is Editor of bUSiness CHILE

cHilebUSiness


hile is justifiably proud of its business climate. characterized by its straightforwardness, it earned chile 37th position out of 185 countries in the

World Bank’s doing Business 2013 ranking, the highest for a latin american country.

But chile has a problem, one that has traditionally been shrouded in shame. starting a business is easy - almost as fast a process as in the united states, according to the World Bank - but closing a business that has run into financial difficulties is another story.

on the doing Business ranking’s “resolving insolvency” indicator, chile managed only 98th position. Bankruptcy is, in other words, a process that is not only painful but also long, costly and with a recovery rate for creditors that the World Bank estimates at only 30% as compared to over 80% in the united states.

most other latin american countries are pretty much in the same boat. Brazil, in 143rd position, and peru, at 106th, performed even worse than chile and argentina, at 94th, only slightly better.

But not colombia. following a reform of its bankruptcy legislation in 2006, it has climbed to 21st place on this indicator, the highest position in latin america, setting an example that chile is now seeking to emulate.

a bill, presented to congress earlier this year, aims not only to modernize bankruptcy proceedings in chile, but also to change a deeply ingrained attitude that equates insolvency with failure or worse.

cBy ruth bradley

SEConDAry STory

Bankruptcy reform:resolving insolvency

Josefina montenegrosuperintendent for Bankruptcies

“The bill before congress reflects the spirit of us bankruptcy legislation.”

unlike, say, the united states with its Bankruptcy code, chile doesn’t have a bankruptcy law as such, points out the government’s superintendent for Bankruptcies, Josefina montenegro. moreover,

chile’s norms, contained in Book iV of its commercial code, date back to 1982 - when the country’s needs, in the midst of a banking crisis, were very different from those of today - and have changed little since then.

reform of these outdated norms has long been mooted but it wasn’t until earlier this year that the government of president sebastián piñera took the bull by the horns. in may, as part of a broader program of measures designed to boost chile’s international competitiveness, it presented a bill - the proposed law on the reorganization and liquidation of companies and individuals - that would, it claims, represent a radical overhaul of the country’s bankruptcy system.

Based closely on the colombian reform, it seeks to increase the efficiency with which an insolvent company can be wound up, increasing creditors’ recovery rate and freeing the owner more quickly for new undertakings. in addition, points out montenegro, it would also facilitate the reorganization of troubled but viable companies and, for individuals in financial difficulties - currently subject to the same cumbersome procedures as companies - offer a new and much simpler administrative solution.


Bankruptcy reform:resolving insolvency

faster and cheaper

regardless of whether a company needs to reorganize or be wound up, speed is of the essence. yet this is precisely what chile’s current legislation does not seem to offer. according to the World Bank, an average 3.2 years elapse between a company’s default and at least some payment being received by its creditors as compared to 1.3 years in colombia and 1.5 years in the united states.

Those figures are, however, misleading, suggests Juan esteban puga, a bankruptcy lawyer who served on an advisory council on bankruptcy reform, convened by the previous government. The assets of most bankrupt companies are sold and the proceeds distributed to its creditors within a year, he maintains. What takes longer, he says, and probably explains the World Bank figure, are usually only loose ends such as the bankruptcy trustee’s presentation of its formal accounts or minor legal details.

puga also warns against the dangers of trying to accelerate the process too much. True, leaving a company’s assets idle can diminish their value but so too can trying to sell them too

quickly, he notes. But, at least at the start of the

process, prompt action is crucial and the present system is too slow off the mark, insists superintendent montenegro. Without legally-established deadlines or specialized courts, simply getting a declaration of bankruptcy can run into months, she points out.

The bill would address this not only by establishing clear deadlines but also by earmarking particular courts, whose judges would receive special training, to see bankruptcy cases. That would also have the advantage of reducing the differences that can currently occur in rulings, depending on the court before which a case happens to fall.

But, as well as lengthy, bankruptcy is also a costly procedure. simply putting all the required notices in the Diario Oficial - chile’s legal gazette - can cost up to 500,000 pesos (just over us$1,000), says montenegro, an expense that, under the proposed new law, would be eliminated through the creation of a free, electronic notification system.

Given the context of the banking crisis in which it was written, the existing law was designed principally

for winding up companies and the new bill aims to change that, giving priority to their reorganization as a first option. reorganization is envisaged in the present system in the form of court-supervised convenios (agreements) but they are rarely used.

That is mainly because there are few incentives for debtors to enter into a convenio as long as they believe they still have a chance of staying afloat and then, typically, it is too late. The bill seeks to remedy this by, for example, providing the debtor with a 30-day protection period. in addition, it would divide bankruptcy trustees into two groups - veedores or supervisors who would specialize in guiding companies through reorganization processes and liquidators who would do the winding up.

right incentives?

The key challenge will, however, be to get companies to use the new system. a study by the previous government’s advisory council suggests that only around 7% of insolvent companies actually go through formal bankruptcy proceedings while some 54% simply shut up shop and the remaining 39% reach some sort of informal


SEConDAry STory

reorganization arrangement with their creditors.

and, according to puga, that doesn’t seem to have changed much in colombia after its reform. The results for companies using the system may be better but many still appear not to be using it, he says.

and there is a lot stacked against chile’s proposed new system. To start with, a deeply embedded attitude towards bankruptcy as shameful and a fear of the possible penal consequences of getting entangled with the formal system.

in practical terms, the proposed new system wouldn’t be much help to early-stage entrepreneurs, says cristián lópez, executive director of the chilean association of entrepreneurs (asecH). most of their initial financing comes from the so-called three fs - family, friends and fools - and so, almost by definition, they fall outside the scope of formal bankruptcy proceedings but, he adds, anything that helps to reduce the stigma of failure would be extremely welcome.

in an effort in that direction, the bill would change some of the language of bankruptcy. instead of quiebra - which roughly translates as “breakage” - it would use liquidación.

and the debtor would no longer be referred to as fallido or “failed one”.

it would also define more clearly the criminal offences that the owner of a company in difficulties can commit and reduce the risk of doing so inadvertently, points out daniel montalva, a lawyer at the libertad y desarrollo think tank and a legislative policy advisor. and, in a further effort to change attitudes, the superintendency of Bankruptcies would no longer be part of the Justice ministry, but be moved to economy.

There is, however, some concern that entry barriers to the system, designed to guard against its abuse by debtors interested simply in the 30-day protection period, may be too high, at least in the bill’s present form. unlike chapter 11 of the us Bankruptcy code, with its simple filing to a judge, debtors in chile would have to go armed with studies from accountants, lawyers and so on, points out montalva.

concern about the deterrent effect of that requirement is echoed by puga. “is someone who’s desperate going to assemble all that paperwork?” he wonders. “and, in any case, the longer you take to become insolvent, the less you’re worth.”

Then there’s the issue of related

creditors, he adds. in a desperate bid to stay afloat, companies’ owners often lend them money when no-one else will, but they count as related creditors who, under the proposed new system, would go to the back of the line, implying an unappetizing prospect of not only losing their livelihood and capital but also of low and, perhaps, inexistent recovery of these loans.

The key question this raises, suggests montalva, is whether the new system as currently proposed would merely be more efficient for people who would have opted for formal proceedings anyway or whether it will also encourage more people to do so. and, he adds, it’s impossible to be sure of that until the system starts operation.

The government hopes, with some reason, that the bill will complete its passage through congress next year but, in an election year, it’s difficult to be certain. and, if that is not the case, it will fall to another government to decide whether chile gets a new bankruptcy system and the shape it takes. cHilebUSiness

Ruth Bradley is a freelance journalist based in Santiago and a former editor of bUSiness CHILE.

Daniel montalvalibertad y desarrollo

“The bill ought to be approved by the end of 2013 at the latest.”

cristián lopézchilean association of entrepreneurs (asecH)

“failure is part of entrepreneurship but, in chile, it’s seen as shameful.”

Juan esteban Pugapuga ortiz abogados

“The key problem of chile’s bankruptcy system is its low usage.”


hile is a much-changed country from 20 years ago. not only has the economy grown in leaps and bounds as the country has become

integrated with global markets, but its public institutions have become more efficient, more transparent and better managed.

This has been reflected in chile’s competitiveness ranking — it placed 33rd out of 144 countries in the World economic forum’s 2012-2013 Global competitiveness index, making it the highest ranked country in latin america.

But there is still work to do. despite progress made in recent decades, including a more professionalized civil service and the incorporation of e-government into areas such as tax collection and public services, chile’s institutions are failing to meet the needs of its citizens.

The problem is not just social unrest when expectations are not met — expressed, recently, in the form of student protests and environmental opposition to new energy projects — but the very real

COVER STory

A Better State

for Chilechile has made significant progress in modernizing its public

management, including reducing transaction costs for businesses and

entrepreneurs, which is reflected in chile’s global competitiveness

ranking. but to reach its goal of becoming a developed country, chile

faces important challenges in improving public governance.By Julian Dowling

c

risk to chile’s competitiveness.“The problem is not the size but

rather the quality of the state,” said president sebastián piñera in his may 21 speech last year. “chile’s state was designed in the 19th century and patched up in the 20th century."

But the government has not been complacent. in fact, president

piñera has taken the bull by the horns, making modernization of the state one of the seven pillars of his platform to make chile a developed country by the end of the decade.

The government’s modernization agenda is based on the 750-page report A Better State for Chile, published by the consortium for state reform, a group of chilean think tanks and universities formed by the previous government in 2008, with support from the inter-american development Bank (idB).

according to the report, if chile’s institutions performed at the average level of institutions of the oecd, it would already be a developed country with Gross domestic product (Gdp) per capita of at least us$20,000.

“Better management by the state has a direct impact on equality, on overcoming poverty and on social welfare. state reform is urgently needed for our goal of greater development,” wrote claudio seebach, who edited the report and is now head of the interministerial coordination division at the ministry of policy coordination.

To coordinate the government’s broad agenda for modernization, covering multiple initiatives in different ministries and institutions, a new modernization and e-Government unit was created as part of the

ministry of policy coordination. The unit’s main objective, explains rafael ariztía who heads the unit, is to make public services more accessible to chileans.

“modernization of the state is not unique to this government, it is an on-going process,” he says. “But president piñera has prioritized this aspect.”

The unit has divided its initiatives into three main areas: transparency, accessibility, and efficiency. a report published in september lists the advances to date in each of these areas and ariztía points out that, as part of the emphasis on transparency, the results are available online to the public.

chile at your service

according to ariztía, the area where the government has made

September 201214 business chile

COVER STory

mario marcel, oecd

“chile has no room for complacency and should work hard and fast in strengthening its standards of public governance.”

the most progress is in accessibility – chileans can now do many transactions online without leaving their home or place of work, thereby reducing the time and cost involved.

The focus of these efforts is ChileAtiende, a one-stop electronic portal operating since January 2012, which allows chileans to do more than 2,000 transactions online, from getting a birth certificate to paying a traffic fine. There are also 149 offices throughout the country and a call center.

“This is a horizontal platform that allows public agencies that used to provide only one service to now provide many different services, it’s much more efficient,” explains ariztía.

another program – Chile sin papeleo (chile without paper) – aims to increase the proportion of transactions handled online from 25% currently to 60% by the end of 2013. of course, chile is not the first country to go paperless. service canada was used as a model for chileatiende, as well as south korea and singapore, says ariztía.

But, unlike in chile, singapore started with digital services and then realized the need to provide personalized attention as well. “We are the opposite, we are starting with public offices and encouraging people to migrate online,” says ariztía.

But chile has made good progress. according to the united

rafael ariztía, modernization and e-Government unit, ministry of policy coordination

“This government has focused on making the state more accessible to citizens and, in this regard, it has made important advances.”

nations 2012 e-Government survey, chile ranked 39th in the world, making it the third best provider in the americas — behind the united states and canada — and topping the list of governments in latin american.

“We couldn’t develop chileatiende without e-government,” points out ariztía. “But there are other countries advancing quicker than us.” one of those is colombia. although chile moved ahead in the 2012 un ranking (colombia was 43rd), colombia has made bigger strides than chile in recent years.

for both countries, e-government is an engine of development by delivering public services that are responsive and socially inclusive, but can also improve the efficiency of back-office processes by allowing public institutions to share information and avoid duplicate transactions.

in this regard, ariztía’s unit is implementing a platform for the interoperability of services and transactions (pisee in spanish), which interconnects institutions electronically. Today, there are more than 40 institutions participating in the platform, performing more than 2 million transactions a month.

“The aim of interoperability is to make the state invisible to the public,” says ariztía. chile still needs centralized servers to manage data more efficiently, but ariztía stresses the importance of not focusing too much on the technology.

“e-Government is a tool, it’s not an objective in itself,” he said. in other words, how institutions share the information is less important than the quality of the service provided.

innovation and entrepreneurship

Businesses do not develop in a vacuum and the cost of complying

Allot 21,5x28.indd 1 05-10-12 11:19


COVER STory

with regulations and fulfilling administrative requirements is a key indicator of a country’s competitiveness.

in this regard, chile has made a dramatic improvement in recent years. This is especially notable in the ease of starting a new business, with chile rising from 69th in the 2010 World Bank doing Business ranking, to 27th in the 2012 ranking.

That’s mainly the result of the economy ministry’s efforts to reduce to seven days from 27 days the time to start a business, with a proposed bill that would cut this further to one day at zero cost.

a bill to facilitate winding up a business is also before congress, and the ministry’s innovation agenda, impulso competitivo, includes a list of other measures to

promote entrepreneurship.But the government could do

more to improve competitiveness, particularly in terms of modernizing chile’s antiquated notary system, says Álvaro Bellolio, coordinator of the public policy program at think tank libertad y desarrollo.

for example, all official documents in chile require a signature from a notary who charges for the service, but a bill currently before congress would introduce a digital signature (firma electrónica) to notarize documents, which would eliminate this time-consuming step.

“This would speed up bureaucratic processes significantly,” says Bellolio. But the bill has stalled due to lobbying by private interest groups, including by chile’s association of notaries and real estate lawyers.

“There is a political consensus between left and right, but there are powerful interest groups on both sides that block certain reforms,” says Jorge rodríguez, a public policy analyst at the santiago think tank cieplan.

Business travel is another area where chile needs to improve. a proposed immigration reform would introduce multiple-entry visas for business, similar to those that available in the united states, as well as temporary work visas.

“if chile wants to be a developed country and attract workers, especially for the labor-intensive mining and construction industries, it has to improve its immigration law,” argues Bellolio.

a more efficient state

considering that the state represents around 25% of chile’s Gdp in terms of annual public spending, according to the organisation for economic cooperation and development (oecd), its efficiency — or lack thereof — has an important economic impact.

in the last decade, chile’s senior civil service system, known as the Alta Dirección Pública, has replaced thousands of political appointees through merit-based selection. But there is room to improve the productivity of the state.

Building on the public management improvement program (pmG) launched in 1998 to improve the performance of civil servants, the government has launched its own version called ChileGestiona.

By improving coordination between deputy ministers (Subsecretarios) and the heads of the institutions under their control, the program has achieved a 19% reduction in overtime paid to civil servants since 2009 and reduced

Álvaro bellolio, libertad y desarrollo

“chile has made progress towards a state for the 21st century, but there are still pending issues such as the digital signature.”

Jorge rodríguez, cieplan

“There have been important advances in public management in the last few years but also in recent decades, so i don’t see a major change under this government.”

time for sick leave by 18%. “Historically, deputy ministers have

had little time for the management of the institutions they oversee, but they need to coordinate better with the heads of the different services,” said rafael ariztía.

another program, ChilePaga, has nearly halved the time it takes the state to pay its suppliers to an average 21 days from 38 days in 2010, which has provided a financial lifeline to small businesses.

The government has also improved the efficiency of the environmental evaluation service (Servicio de Evaluación Ambiental, SEA), although the creation of environmental tribunals scheduled for 2012 has been delayed.

But behind the marketing and promotion, many of these initiatives are based on existing programs that have simply been repackaged and rebranded, says

cieplan’s rodríguez.“There have been important

advances in the last few years, but also in recent decades, so i don’t see a mega reform in terms of the state,” he says. “These are necessary adjustments but not a revolution.”

ChileAtiende and ChileGestiona, for example, are both based on programs developed under previous governments, points out rodríguez. “These efforts are like additional floors in the same building,” he says.

Decentralization and governance

according to a list of public governance indicators published by the oecd, chile leads in many public finance indicators but lags in a number of more structural dimensions of governance.

“There are entire areas that chile

hardly recognizes in its agenda,” says chilean economist mario marcel, deputy director of the public Governance and Territorial development unit at the oecd. “The current government is taking some steps to address these issues, but there is a lot more to do.”

for example, most oecd countries have a central authority — such as mexico’s federal commission on regulatory improvement (cofemer) — in charge of coordinating regulatory reform and evaluating the benefits and costs. in chile, however, regulations are issued by different regulatory bodies, which sometimes overlap or fail to adapt to the capacities of small businesses and citizens to understand and comply with them, says marcel.

another stumbling block is chile’s highly centralized system of government. in fact, chile remains

the most centralized of oecd countries since most decisions are still taken in santiago and the transfer of decision-making power to regional authorities has been slow.

“in the past, mechanisms were created to involve regional authorities in resource allocation decisions, but after a few years you realize that these were just compromises that fail to devolve real authority to subnational governments,” says marcel.

over at cieplan, rodríguez agrees that greater decentralization would facilitate more equitable development, but he is not optimistic. “politicians on both sides say they want this but in practice they are afraid of ceding power to regional governors,” he says.

as the oecd’s marcel points out, decentralization involves taking risks and that requires

strong political will. “all substantial decentralization processes – from spain to colombia – started with a political decision, followed by the required technical and administrative support,” he says.

for chile, the decision is crucial because decentralization is not just a driver of more equitable development – it’s also the key to the country’s competiveness.

“other emerging countries are making great progress in simplifying procedures, cutting red tape, becoming more transparent, listening to citizens and, of course, decentralizing,” says marcel.

in other words, if chile is not careful, its competitors could race ahead. This includes not only distant countries in south east asia, but also peru, colombia, panama, Brazil, as well as eastern european countries.

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as rafael ariztía points out, the state does not make the economy grow, rather its job is to facilitate growth by removing obstacles for entrepreneurs and providing regulatory stability. in this regard, chile is continuing to improve.

However, it also needs more flexible institutions and greater decentralization. This requires a political consensus that may be difficult to achieve in the current political environment, especially with an election year in 2013.

But chile cannot afford to wait. To maintain competitiveness and ensure that all chileans share in the benefits of development, chile needs — and deserves — a better state. as president piñera said, it’s not a question of size but of quality. cHilebUSiness



ousing bubbles are dangerous — when they burst, they can drag the rest of the economy down with them. The 2008 financial crisis in

the united states, for example, was trigged by a mortgage disaster that have left communities blighted with abandoned homes, lenders sunk under bad debt, and made hundreds of thousands homeless. so, signs in chile of a possible bubble, including a recent spike in prices and demand for new homes, are cause for concern.

But is chile really facing a bubble?

The word first grabbed the public's attention in June when the president of chile’s central Bank, rodrigo Vergara, used the term. speaking about home prices that had grown by more than 20% since 2009 in some parts of santiago, after barely rising at all in the previous decade, he hinted that the bank was keeping an eye on the real estate sector.

"We're not talking about a bubble, but simply developments that need to be monitored," said Vergara.

since June, however, prices have continued to rise. developers sold a record number of new houses and

apartments in greater santiago in the third quarter of 2012, at 11,145 units, up 3.2% from the second quarter, says collect Gfk, a private research company that collects real estate data. The boom is even more apparent on the financial side, with sales of 35.6 million inflation-indexed units (uf), or about us$1.7 billion, in the third quarter — an 11% increase from the previous quarter. year-on-year sales leapt 22% in the period January to september, according to figures from collect Gfk.

moreover, the stock of existing new homes in santiago is

SpECial rEporT

With demand for new homes and office space in santiago soaring to record levels, the city is in the midst of a real estate boom. This has led to worries of a possible housing bubble, but the supply of new homes is limited by rising construction costs and industry experts suggest there is room for prices to rise further. By steven bodzin

Santiago’s real estate Boom

H

disappearing, forcing ever-more buyers to purchase en verde, meaning buildings that are under construction, or even en blanco — those that are still only blueprints. a staggering 21.7% of new homes sold in the third quarter will not be completed for at least another 18 months, according to collect Gfk.

most new apartments sold in the period from July to september are concentrated in the municipalities of santiago, nuñoa and las condes, while the areas of colina, puente alto and san Bernardo, on the outskirts of santiago, led the ranking in sales of new houses.

"We're having a very good year," said Vicente domínguez, executive director of the chilean real estate developers' association (adi). "The best we can hope for in 2013 is that we maintain this level."

chile’s real estate market is unlikely

to do down with a bang reminiscent of miami or costa del sol, but the industry faces a different problem: it is being squeezed by cost pressures that are driving up prices and shrinking the market.

as the stock of new homes dwindles, developers that have seen sales soar in 2012 will be lucky to maintain those numbers next year, and in the longer term, the industry is almost certain to lose dynamism, says Javier Varleta, who manages real estate research at collect Gfk.

safe as houses?

since chile’s massive earthquake of february 2010, which spared most of santiago’s high-rises from major damage, real estate prices have climbed steeply.

The average price per square meter for new apartments has risen

Boyden 18,5x12.indd 1 04-10-12 17:40


SpECial rEporT

nearly 30% to about 45uf (just over us$2,100), while new houses cost an average 15% more at 35uf per square meter, according to data from collect Gfk.

part of the demand growth can be explained by changes in the chilean family. kids are leaving home younger and want their own homes, Varleta said. rising incomes are also a factor, as people want homes with more features, like automatic garage doors and sprinklers. Tighter standards for seismic safety, acoustic isolation and thermal comfort also drive up prices, said domínguez.

But the main driver behind the surge in demand, particularly for new apartments in santiago, is speculation. since the 2008 financial crisis, real estate has become an increasingly popular investment option in many emerging markets, not just in chile, as stocks and bonds have lost their image of reliable returns.

"With so much turbulence in the financial markets, people have tended to pull back a little and take positions in developments with move-in dates 12, 18, even 24 months in the future, betting on selling them for a better price," said augusto rodríguez, manager of real estate at the investment firm celfin capital.

individual investors are looking for well-located one or two-bedroom apartments in santiago to rent out or sell at a profit, he said. indeed, the shift away from seeing real estate strictly as a place to live or work and towards its new status as a financial investment may pose price risks.

"We've seen this as an eventual risk factor that could inflate the prices of some products," said rodríguez.

Bubbles, after all, happen when speculators move into particular assets and drive up prices quickly without fundamental demand growth. But the mere worries about a bubble may keep one from forming, industry experts say.

since the financial crisis of 2008, mortgage lenders in the united states and europe have tightened their lending criteria. in chile too banks have reduced the amount they are willing to lend and have increased loan qualification requirements.

This increased caution is reflected in the decline of mortgage defaults — the portion of overdue mortgage loans in chile’s banking system shrank to 1.26% in october from 1.56% in January this year and 2% in January 2011, according to figures from the superintendency of Banks and financial institutions

(sBif). "Today, the banks are much

more restrictive than they were in the u.s. or spain," Varleta said. "They don't lend to just anyone."

Builders have also sought to root out one of the elements of the us bubble: the phenomenon of “flipping” unbuilt homes by placing a deposit and reselling the unit before opening day. new restrictions have made this practice all but impossible in santiago, said domínguez.

for example, if someone places a deposit on a half-built property — effectively an option to buy at a set price — they can only sell their rights to a third party if they split the profits with the developer or pay a fine, he said.

office for rent

it’s not just individuals who are buying up properties in santiago with the hope of making a profit. institutional investors are also buying office buildings and vacant land — though this is harder to track, as there is less data on buyers who don't need bank loans.

"There's been a lot of turnover in some sectors, like office real estate," said alejandro puente, manager of research at BBVa.

foreign investment funds are buying entire buildings to rent out, he said. for example, socovesa, chile's largest real estate developer, has sold office tower projects in santiago’s providencia neighborhood to metlife and credit suisse this year.

part of the reason for the demand is that, while santiago office rents are rising, the vacancy rate remains "very low by international standards" at around 1%, said puente, adding that yields on office properties are currently around 8%.

such eager investors and rising prices are what give rise to worries

SaleS of new apaRtMentS in tHe GReateR SantiaGo aRea (BY StaGe of conStRUction)

Source: cchc with information from collect GfK

finished

2009 2010 2011 2012i ii iii iV

instaling fittings Main construction foundations excavations not Started

i ii iii iV i ii iii iV i ii iii

56% 66% 67% 73% 73% 79% 75% 74% 62% 64% 59% 52% 41% 32% 25%

26%

24% 27%23%

16%16%

15% 19%25% 23%

18%19%

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34%

12%8% 5%

7% 4%4%

7% 7% 7%7%

8% 8%5% 5%

10% 17% 18%26% 29%

6%6%

5% 5%10%

SpECial rEporTabout a bubble. But analysts and builders argue that the market’s fundamentals explain the growth in prices.

chile is attractive to international investors because of its stable legal framework and low risk, said puente, noting that unlike many emerging markets, where there are significant political and legal risks, the main risks in chile are in the broader world economy.

and, as much as prices have risen, santiago still has room to climb before prices approach those of its peers in the region, puente said.

"it’s hard to think that this is a bubble if you look at how chile compares to other countries, even here in the region," he said. "in Brazil, mexico, Venezuela, both homes and offices are much more expensive. prices in santiago are closer to those in Bogotá or lima, and with lower vacancy rates.”

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augusto rodríguez,celfin capital

"investors are looking for well-located apartments that are just one or two bedrooms."

augusto rodríguez,celfin capital

SpECial rEporTcost pressures

While demand continues to grow, the supply side of the equation is also pushing prices higher. climbing development costs mean the industry may face a greater risk of a pinch in supply than a crash in demand.

labor costs are up about 10% this year, said cristián Hartwig, president of socovesa.

one reason is that the industry is competing with labor-hungry mines, which require people with similar skills, he said. moreover, a sales tax exemption for construction materials ended last year, pushing up the price of materials, he added.

and one possibly permanent change — at least in the trendiest areas of santiago — is that land has grown steadily more expensive. "We're exhausting some districts," Hartwig said.

That's partly because the most apt areas for denser construction are

Javier varleta, collect Gfk

“booms are never long-term but it looks like 2013 will be a very good year.”

cristián hartwig,socovesa

"The construction business depends primarily on the growth of the chilean economy."


to grow about 5% next year, decelerating from growth this year. "The construction business depends primarily on one variable," he said. "The growth of the chilean economy."

ultimately, the country’s real estate market depends on macroeconomic factors such as copper sales and the strength of the global economy. if the economy as a whole stumbles, demand for housing could be affected since real estate prices tend to rise and fall in line with Gross domestic product.

at collect Gfk, Varleta said he expects 2013 to be a good year, at least for the first few months. "Booms are never long-term," he said. "But the chilean market will keep growing."

already built-up. it's also because municipal governments are growing more restrictive, said domínguez.

"municipalities have reacted in recent years by restricting the possibility of growth in height and density," he said.

With limited supply and strong demand, prices rise. one effect has been the depletion of finished units from the new-home market. in the third quarter of 2010, 75% of new apartment sales were of completed units, according to collect Gfk figures. Two years later, that was reversed. Three quarters of sales were of unfinished — or even not started — units.

in some industries, a period of tight supply would be an opportunity for outside companies to enter the market. But Hartwig says he hasn't seen foreign developers succeed in chile. "chile is a very competitive market. it takes expertise, knowledge of the market. That doesn't come easily."

room with a view

looking forward, the prognosis is mixed. it's unlikely that the coming years will see so many new units enter the market, domínguez said. "fewer residential projects were started in the third quarter than

steven bodzin is a freelance journalist based in santiago

SpECial rEporT

in the second quarter. There's a slowdown there because people are taking precautions," he said.

Hartwig said he expects construction

cHilebUSiness

vicente Domínguez,chilean association of real estate developers (adi)

“municipalities have reacted in recent years by restricting the possibility of growth in height and density.”

alejandro Puente,BBVa

“if you compare prices in chile to other countries in the region, it’s hard to see how this is a bubble.”

SaleS of new HoMeS in tHe GReateR SantiaGo aRea (UnitS peR QUaRteR)

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Source: cchc2007 2008 2009 2010 2011 2012

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Nuestro mejor regalo es saber que protegemos a losque más amas.

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MET Aviso Pagina Completa Navidad.pdf 1 07-12-12 15:29


os angeles used to be the smog capital of america, but when antonio Villaraigosa, a third generation american of mexican descent, was

elected mayor in 2005 he set out to clean up the city.

The challenge was enormous, he told participants at a seminar organized by amcham’s us-chile Business council on energy in november. But by “thinking big” and setting ambitious goals to curb emissions, the air in los angeles is cleaner and the city is now a center of clean energy development.

as part of the Green la plan to fight global warming, the city aims to obtain at least 35% of its energy from renewable sources by 2020. it already gets 20% from a combination of wind, solar and hydroelectricity, up from 4% in 2005, which is enough to power 320,000 homes and reduce annual carbon emissions by 2.57 million metric tons – the equivalent of taking more than 500,000 cars off the roads.

like northern chile, los angeles is almost always sunny and, this year, it became the first u.s. city to

introduce a pilot project with a solar feed-in tariff. This allows consumers to sell energy generated by solar panels to the grid.

“now we are taking advantage of one of our cheapest, most sustainable and abundant natural resources – the sun,” said Villaraigosa.

los angeles still faces challenges, particularly in terms of curbing emissions from its huge port and international airport, but it has set an example for other cities to follow, said Villaraigosa. “cities like los angeles should be at the vanguard of a sustainable energy future,” he said.

at the global level, and for chile in particular, there are few issues as important as energy security and climate change. But where national governments can be slow to act or, as in the case of the united states, have not committed to kyoto protocol emissions reductions targets, cities can take the lead, pointed out Villaraigosa.

“cities are an important part of the problem, but they are also part of the solution,” he said.

los angeles is committed to reducing its emissions to 35% below 1990 levels by 2030, but the road has not been easy. Villaraigosa has faced stiff opposition, particularly

SpoTlIGhT

on a recent visit to chile, the mayor of los angeles told an amcham members how the city has established ambitious goals and worked with local businesses to improve air quality and reduce traffic congestion.

lBy Julian Dowling

Cleaning up Los Angeles: A Lesson for Santiago

antonio Villaraigosa, mayor of los angeles

in energy and environmental design (leed) standards in new buildings.

Then there is l.a.’s notorious traffic. like santiago, it is known for its endless traffic jams. But, in 2008, voters in l.a. county approved the so-called 'measure r' that proposed a half-cent sales tax increase for 30 years in order to pay for transportation projects. Thanks to this measure, the city is building four more metro lines and has reduced fuel consumption, said Villaraigosa.

other measures include synchronizing and converting 100% of the city’s traffic lights and streetlights to led lighting by mid-2013. it is also retrofitting public

buildings to make them greener and more energy efficient.

finally, Villaraigosa said the key is to enlist the support of the private sector. “if you don’t set high standards, you will never be able to reach them,” he said. However, new standards must also help to create new jobs and opportunities in the clean energy field.

The economy of los angeles is nearly four times as big as chile’s, and santiago is clearly far behind in clean energy terms, but Villaraigosa emphasized that chile’s experience is valuable. “We’re not just here to share what we know, we’re also here to learn,” he concluded.

from the coal industry. However, by promoting his clean energy plan as an opportunity for businesses to “create opportunities and jobs in the clean energy sector”, he has achieved what he calls a “win-win” solution.

meeting the mayor’s goals has required coordination between public utilities, the port and airport, he explains. “These are the pillars of our economy and making them cleaner and more ecological has allowed us to take a huge step forwards,” he said.

The port of los angeles moves 44% of all cargo that enters the u.s., some 150 million tons in the last fiscal year alone, mostly from asia, but also from chile (see interview with kathryn mcdermott, p.44). it is a major driver of the local economy, but it is also major contributor to the city’s pollution problem.

in 2005, Villaraigosa sat down with port operators, shipping companies and unions to come up with a plan to clean up the port, including taking old diesel-burning trucks out of circulation and replacing them with cleaner vehicles. as a result, emissions from trucks in the port have been slashed by 80%.

“The clean Truck program is a clear example that economic development and environmental protection are not mutually exclusive,” he said. “in fact, they go together.”

at the busy laX airport, the city has also made improvements to reduce the carbon footprint and establish strict building norms. Thanks to these efforts, the airport is one of the leaders in incorporating leadership

cHilebUSiness


• population: 3.8 million (2011 estimate)• median household income, 2007-2011: us$50,028 (vs. us$52.76 in u.s.)• co2 emissions per person, 2010: 9.96 metric tons (vs. 22.10 metric tons in u.s.)• average rate for electricity, oct. 2012: 21.1 cents per kWh

(vs. 12.8 cents in u.s.)• average gasoline price, oct. 2012: us$4.50 a gallon (vs. us$3.83 in u.s.)

sources: us census Bureau, us Bureau of labor statistics, epa

los angeles, california at a Glance


SpoTlIGhT

on november 27, amcham organized a seminar at the Hyatt Hotel titled “overcoming obstacles to clean, available and affordable energy”. The chamber’s president, Javier irarrázaval, introduced the visiting mayor of los angeles, antonio Villaraigosa, who spoke about his city’s efforts to curb carbon emissions and increase energy efficiency. The seminar included a panel discussion with representatives of the generation, transmission and distribution industries in chile.

AmCham Energy Seminar

1

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víctor ballivián, international electrotechnical commission (iec); rodrigo ballivián, amcham; antonio villaraigosa, mayor of los angeles, and Javier irarrázaval, amcham David carson, intelligent eco solutions; Katie hellard, us embassy; sam andrus, amcham, and Pablo valdés, us embassy rodrigo bastidas, Kallman Worldwide chile; alfredo mena, alimentos el salvador; Javier irarrázaval and michael Grasty, amcham, and enrique rosende, Kallman andrés alonso, codelco; José ignacio escobar, asociación chilena de energías renovables (acera); felipe cerón, aes Gener; Genaro arraigada, inter-american Dialogue; eric ahumada, Transelec, and andreas Gebhardt, chilectra William Phillips, agencia chilena de eficiencia energética (achee); Ximena ruz, consejo nacional de Producción limpia (cnPl), and rodolfo rivero, servicio de evaluación ambiental (sea) marcos Dunay, codelco; virginia Zalaquett, energy ministry, and andrés alonso, codelco

1 2

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AmChAm nEwS

on november 29, amcham’s executive director, rodrigo Ballivián, attended a lunch in honor of the former Vice president of the united states, al Gore, at the restaurant Maldito Chef in santiago.

Gore was in chile at the invitation of common pitch, a festival of entrepreneurship, social innovation and sustainability that originated in the united states. Held in chile for the first time this year, common pitch organized a competition for chilean entrepreneurs that embody these concepts, with the winner taking home us$35,000 in cash.

others who attended the lunch included maría paz epelman, a member of amcham’s advisory board

and vice-president of public affairs & csr at VTr; Jorge rodríguez, ceo of deloitte, and estanislao peña, president of nextel chile.

at the lunch, Gore discussed his vision of “sustainable capitalism”, as opposed to the current economic model based on short-term growth, which he said has caused growing inequality in the distribution of wealth. To be sustainable, and stop “borrowing from the future”, businesses must consider the enrivonmental costs of their actions, he said. later the same day, the nobel prize winner touched on some of the same issues during a speech at parque Bicentenario as part of common pitch chile.

Al Gore at Common Pitch Chile

AmChAm CommitteeSon october 16, amcham’s Trade & investment

committee met with Jason Hafemeister, Vp of allen Johnson & associates, and Gustavo rojas, director of chile’s office for agrarian research and policies (odepa), to discuss the impact of the new farm Bill in the united states on the chilean agricultural sector. The meeting was chaired by the president of the committee, pablo achurra.

on november 20, amcham’s corporate communications & sustainability committee met to discuss the theme of “social networks and the community”. The guest speakers were amparo cornejo, manager of public and governmental affairs at methanex, and andrés soto, coordinator of social networks at entel, who spoke about how their respective companies have obtained good results by using social networks. The meeting was chaired by maría paz epelman, vice-president of the committee.

Jason hafemeister, Allen Johnson & Associates; Pablo Achurra, Trade & Investment Committee, and Gustavo Rojas, ODEPA

Amparo Cornejo, methanex; maría Paz Epelman, Corporate Communicaions & Sustainability Committee, and Andrés Soto, Entel

Al Gore, former Vice-President of the United States

on october 26, the us-chile energy Business council held a meeting attended by about 30 people including members of the council and representatives of the energy sector in chile.

The speakers included alfredo solar, the president of the chilean association of renewable energies (acera), who spoke about the advantages of non-conventional renewable energies, and alfredo olivares, head of the project acceleration unit at chile’s center for renewable energies (cer), who discussed the center’s work to promote renewable energy projects.

The mission of the council is to facilitate public-private partnerships in the energy sector, incorporating authorities and companies involved in energy supply and demand.

Meeting of the US-Chile Energy Business Council


on november 13-14, management training firm dale carnegie offered a course on High-impact presentations, which was held for the first time at amcham. dale carnegie’s felipe denegri and Gabriel Gajardo taught participants how to give presentations that have a positive impact and communicate ideas clearly and forcefully.

during two eight-hour sessions, the participants practiced giving presentations that were recorded and evaluated at the end of each day. pilar García-Huidobro, amcham's coordinator of committees, participated in the workshop and commented: "They stressed that the success of a presentation depends on the presenter, not the powerpoint that goes with it, and they showed us techniques to hold the audience’s attention, for example by speaking with conviction and motivation.”

on november 16, financial services firm principal financial Group chile gave a presentation at amcham titled "learn how to optimize your savings through tax benefits". The speakers were Valentín carril, chief investment officer at principal, and martín mujica, general manager of principal administradora de fondos. The talk was attended by around 30 members.

The executives discussed different saving mechanisms in chile for both pension and non-pension investments. "if you have a good strategy and are responsible, the

return on your investment will be good," said mujica.

Principal Financial Offers Investing Tips

Dale Carnegie Course on Presentation Skills

nEw mEmbErS

asembioBiotechnologyfelipe camposano,president

Wall chase Partnersconsultants sebastián rago, associate director

Komunicaciones Korporativascommunications & marketing Gonzalo iglesias,director

Degrafenvironmental related BusinessGabriela pérez,General manager

on october 24, chilean economist Jorge desormeaux spoke at a meeting of amcham’s finance & capital markets committee about the global economic situation and its implications for chile. The meeting was chaired by the committee´s president, fernando cocha.

on november 6, amcham’s legal committee held a workshop on the chile-us agreement on avoidance of double taxation. The guest speakers were liselott kana, head of international taxation at chile’s national tax service, the Servicio de Impuestos Internos (sii), and ricardo escobar, former director of the sii, currently head of tax policy for the americas at ernst & young.

Fernando Concha, Finance & Capital markets Committee, Jorge Desormeaux, and Rodrigo Ballivián, AmCham

Rodrigo Ballivián, AmCham; Liselott Kana, SII; Ricardo Escobar, Ernst & Young, and michael Grasty, AmCham

Dale Carnegie’s Gabriel Gajardo at AmCham

martín mujica, Principal Administradora de Fondos


In November Anglo American and the educational organization Elige Educar offered a special screening of the Chilean documentary Profes (Teachers), directed by Sebastián moreno. The screening, in Quillota, was attended by regional authorities, teachers, and executives from Anglo American.

The documentary, filmed in various locations throughout the country, tells the story of six teachers who invite the audience to return to the classroom and discover with them the true meaning of teaching and learning.

"For Anglo American, improving the quality of education is a priority,” said Roberto martínez, general manager of Anglo American’s El Soldado division.

AmChAm mEmbErS nEwS

Corporate travel managers again rated Delta Air Lines No. 1 in this year's Business Travel News Annual Airline Survey. The airline ranked first among all carriers in key categories including: Value of Relationships with Account managers and Sales Representatives; Distribution Channels; Complaint/Problem Resolution; Quality of Customer Service; and Networks, Airline Partnerships and Frequencies.

Delta also earned the distinction of being the first carrier in the survey's 15-year history to be rated No. 1 in all 10 categories.

"Recognition from our most frequent customers is the most important recognition we can receive. To finish first a second year in a row and in all 10 service delivery categories is a great acknowledgement of our efforts to build a better airline, said Ed Bastian, Delta's president.

DhL Global Forwarding, the air and maritime transport arm of Deutsche Post DhL, and LAN Cargo have signed an agreement to improve security for high value cargo. LAN Cargo has worked with DhL for the past 30 years, establishing a close relationship in different areas of the business.

"With our joint efforts in the field of security, we aim to simplify the lives of our customers, giving them the peace of mind that their cargo will arrive safely to its final destination," said Richard Kolbusz, vice president of security for DhL Global Forwarding Americas.

Delta Earns Business Travel News Top Rating for 2012

Anglo American and Elige Educar Promote Teaching in Chile

Roberto martínez, Anglo American, with teachers and guests at the screening of Profes

DHL, LAN Sign Cargo Agreement

Ed Bastian, President of Delta Airlines

In September Chilean bank Bci issued US$500 million in US dollar-denominated short-term commercial papers in the United States. The issuance is part of a US$1 billion debt program designed to diversify the bank’s sources of funding, both geographically and by type of investor.

The private placement was aimed at institutional investors including pension funds, mutual funds, hedge funds, banks and

municipalities. To launch the program, Bci had access to the FED’s discount window facility, thanks to the work of Chilean and US lawyers as well as Bci miami.

“This new funding alternative in US dollars allows us to finance the diverse needs of our clients in international operations at very competitve rates,” said Bci in a statement. The papers are rated A by Standard & Poor’s.

Bci's US Debt Offering a Success

Bci’s Commercial Paper Team

Richard Kolbusz, DhL


Cristina Valdés, is the new product manager for Large Format Printers at Epson Chile. Cristina has six years of experience in the world of digital design, printing and stationery, having previously worked as asistant sales manager at Ártica Impresores.

Sebastián Reisch has been appointed marketing manager of Finning Sudamérica. he previoulsy held the position of commercial strategy and CRm manager at Finning. Reisch, who is currently pursuing an Executive mBA at Adolfo Ibáñez University, has spent the last five years with Finning. he previously worked for Entel in the sales area.

Alejandra Lamilla has joined Alessandri & Compañía as director of human resources, a newly created position in the company. Before joining Alessandri, she worked in SCA (formerly Papeles Industriales, PISA);Vendomática; Agencia de Aduanas Ricardo Fuenzalida Polanco & Cía.; and Oris Consultores.

Cristina Valdés, epson Chile

ExECUTIVE aPPoinTmenTs

Sebastián reisch, Finning

VTR Launches Safe Internet Campaign“Keep your password safe” -

that is the message in the new campaign launched by VTR and the ministry of Transport and Telecommunications in November.

The campaign, which has enlisted the support of Chilean tennis star Fernando González, is a response to VTR`s study “Uses and habits of young Chileans on social networks.” The study showed that 43% of young Chileans share their passwords with friends and

boyfriends or girlfriends.The launch ceremony,

held at the Escuela Bilingüe del Paraguay in Recoleta, was attended by the minister of Transport and Telecommunications, Pedro Pablo Errazuriz; Oliver Flögel, VTR’s executive secretary of digital development and Guillermo Ponce, CEO of VTR, among other executives, students, teachers and parents from the school.

Back row (left to right):Nicolás Copano and Oliver Flögel, VTR; Pedro Pablo Errázuriz, minister of Transport and Telecommunications; Guillermo Ponce and maría Paz Epelman, VTR with students at the launch of the Safe Internet campaign.

Carozzi Opens Chile’s Largest Food Production PlantLast November, two years on since a huge fire devastated

Carozzi’s pasta production plant, the company inaugurated Chile’s largest food processing complex, including two new pasta plants, a breakfast cereal plant, a cookie plant, a Civic Center, a sports center and an expanded distribution center.

The complex, which covers 130 hectares in the area of San Bernardo on the outskirts of Santiago, employs close to 4,000 people. The opening ceremony was attended by Chile’s First Lady, Cecilia morel, and the minister of Economy, Pablo Longueira, among others. The project is part of Carozzi’s biggest investment plan in its 114-year history, totaling US$350 million.

Carozzi’s president, Gonzalo Bofill, said he is proud of this important milestone that will allow the company to meet projected demand growth in the next 20 years.

Alejandra Lamilla, Alessandri & Compañía

minister of Economy, Pablo Longueira; Gonzalo Bofill, Carozzi; First Lady Cecilia morel and José Juan Llugany, Carozzi.


AmChAm pEoplE

The annual Good corporate citizenship awards were announced in a ceremony at the sheraton Hotel on october 17. chile’s first lady, cecilia morel, presented the awards with amcham’s president, Javier irarrázaval. The winning companies were: BBVa, in the category of large enterprises, and Target-ddi in the category of small and medium-sized enterprises (smes).

Good Corporate Citizenship Awards 2012

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4 manuel hadjiconstantis, claudia vargas, mariana soto and marcelo Grifferos, aes Gener Pablo vera, amparo cornejo and Paul schiodtz, methanex Gonzalo iglesias, amcham; rosario lazcano; maia seeger, sustentarse; Pilar vives, san antonio Terminal, and Juan carlos urquidi, sustentarse rodrigo ballivián and Javier irarrázaval, amcham; chile’s first lady cecilia morel and the us ambassador to chile, alejandro Wolff

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in celebration of secretary’s day on november 30, a lunch was held at casa piedra for secretaries from amcham member companies. The entertainment included a performance by the chilean singer and elvis presley impersonator, ignacio kliche.

Secretary’s Day Luncheon

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mónica hernández and verónica mesina, asociación de isapres marcela núñez, cargo Park; susana matus, servicio & asesorías los altos and ismenia rodríguez, cargo Park mylene fernández, Karen blamberg and cristina Torres, nextel Jeanette flandes, yasna castillo and irma Paredes, optimisa arlette masías, aileen morales, catherine contreras, claudia Palma and sandra muñoz, Transelec

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Time for Macroprudential Measures?By brian P. chase

Economic Snapshot

chile has been on a credit binge this past year with all levels of the economy taking advantage of favorable market conditions in order to add leverage, whether necessary or not. However, the high level of loan growth has raised some concerns from authorities, especially at the consumer level. unfortunately, with the peso strengthening considerably this year, the traditional monetary policy response of interest rate hikes is not a realistic option. Therefore, authorities are now contemplating alternative measures, often referred to as “macroprudential”, which haven’t been used in chile in nearly two decades. although there are some signs that just the mention of the word is helping to stem overheating, in the event that chile’s economy continues to outperform and credit growth remains elevated, this will likely be the key issue weighing on the minds of market participants heading into 2013.

The latest credit binge has essentially been the result of chile’s macroeconomic strength, coupled with low inflation and interest rates. This is especially true at the consumer level, where near full employment and excess bank liquidity has fueled year-over-year loan growth. although growth has dropped off since the high of 33% in July this year, it still remains above trend at around 19% (as of september). regulation in chile may have also played a role, with the so-called dicom law wiping the negative credit bureau’s records clean in January 2012 for those with non-performing loans of less than 2 million pesos (about us$4,100).

a similar trend has been seen at the corporate level, with loan growth peaking at nearly 29% in July before settling around 15% in september. furthermore, although lending rates have traditionally been cheaper in chile, a flight to quality by fixed income investors abroad also made foreign debt issuance by chilean companies a more attractive option. as a result, we saw a record year for corporate bond issuance abroad, totaling us$6.2 billion year-to-date through november. Within this context, we have also seen total consolidated foreign claims on chilean banks increase to us$20 billion this year from just us$11 billion two years ago, which has provided a key source of liquidity.

meanwhile, the government has also taken advantage of market conditions, recently issuing bonds abroad in 10 and 30-year tranches of us$750 million each at record low interest rates. The 10-year tranche came at a rate of 2.379%, the lowest ever achieved for a latin american or emerging market and represented a historically low spread of 55 basis points relative to treasury bonds in the united states. The proceeds were not critical to the government’s finances, but a portion will go to pay us$840 million of expiring debt in January 2013, with the remainder going to pad the

brian P. chase Portfolio manager, head of Andean Equities, at Itau Asset management

country’s sovereign wealth funds. it is only natural for people, companies and

governments to take advantage of favorable market conditions; however, this behavior has its limits and there are some signs that action may be needed to curb the current trend. consumers are traditionally the most vulnerable and, although non-performing loans in this segment have not increased considerably, bank provisioning has, suggesting banks are preparing themselves for potentially greater fallout. meanwhile, some companies with sizeable investment plans, including the likes of salfacorp, cencosud, cmpc, corpbanca and sonda have begun to approach external and/or internal debt limits, requiring alternative sources of funding, such as asset sales, spin-offs or equity issuance.

The traditional response to these leading indicators is typically in the form of monetary policy intervention, or interest rate hikes. However, such a maneuver would widen the rate spread with the united states (locked at 0% for the foreseeable future), leading to dollar inflows and thus a stronger peso. With the exchange rate already below the psychological mark of 500 pesos, this is not a viable option.

Therefore, authorities are now exploring various alternatives, or macroprudential measures, that would directly intervene in the financial system. There are many options on the table, but the most common examples include increased reserve requirements on banks, limits on personal credit levels and limits on the banking system’s debt in foreign currency. in addition, the government has decided to form a group to monitor risks in the real estate sector, which could lead to measures, such as limiting the leverage ratio on mortgages.

ultimately, this “tough talk” is starting to produce results, which means actual measures may not be needed. However, with chile’s economy continuing to outperform, inflation surpassing market expectations in the latest readings from september/october, and some signs of life on the external front, we can’t rule out direct action by the authorities.

Por segundo año consecutivo, la destacada revista “International Tax Review”, distinguió a PwC Chile, entre todas las firmas del país que prestan servicios legales y tributarios, como “Mejor Firma del año en materia Tributaria”, el reconocimiento internacional más importante en el mundo tributario. A éste se suman dos importantes premios, “Mejor Firma del año en Precios de Transferencia” y “Mejor Firma del año en Disputas y Litigios”.

Agradecemos a todos nuestros clientes, que han hecho posible esta distinción, al reconocer una vez más nuestro compromiso con la excelencia y calidad de servicios.

© 2012, PricewaterhouseCoopers Consultores, Auditores y Compañía Limitada. Todos los derechos reservados. Prohibida su reproducción total o parcial. “PwC” se refiere a la red de firmas miembros de PricewaterhouseCoopers International Limited, cada una de las cuales es una entidad legal separada e independiente.

www.pwc.cl

PwC Chile, firma líder en materia legal y tributaria

Servicios PwC ChileConsultoría y Asesoría EmpresarialAsesoría Legal y TributariaAuditoría

Socios del Área Legal y Tributaria junto a Socio Principal de PwC Chile. Luis Avello, Sandra Benedetto, Germán Campos, Marcelo Laport, Miguel Rencoret, Luis Enrique Alamos, Socio Principal de la firma; Roberto Carlos Rivas, Didier Lara, Carlos Vergara, Francisco Selamé y Loreto Pelegrí.

Por segundo año consecutivo, la destacada revista “International Tax Review”, distinguió a PwC Chile, entre todas las firmas del país que prestan servicios legales y tributarios, como “Mejor Firma del año en materia Tributaria”, el reconocimiento internacional más importante en el mundo tributario. A éste se suman dos importantes premios, “Mejor Firma del año en Precios de Transferencia” y “Mejor Firma del año en Disputas y Litigios”.

Agradecemos a todos nuestros clientes, que han hecho posible esta distinción, al reconocer una vez más nuestro compromiso con la excelencia y calidad de servicios.

© 2012, PricewaterhouseCoopers Consultores, Auditores y Compañía Limitada. Todos los derechos reservados. Prohibida su reproducción total o parcial. “PwC” se refiere a la red de firmas miembros de PricewaterhouseCoopers International Limited, cada una de las cuales es una entidad legal separada e independiente.

www.pwc.cl

PwC Chile, firma líder en materia legal y tributaria

Servicios PwC ChileConsultoría y Asesoría EmpresarialAsesoría Legal y TributariaAuditoría

Socios del Área Legal y Tributaria junto a Socio Principal de PwC Chile. Luis Avello, Sandra Benedetto, Germán Campos, Marcelo Laport, Miguel Rencoret, Luis Enrique Alamos, Socio Principal de la firma; Roberto Carlos Rivas, Didier Lara, Carlos Vergara, Francisco Selamé y Loreto Pelegrí.

Merry Christmas and a Happy New Year


port of los angeles: Gateway to the U.S. and asia

t america’s busiest container port - the port of los angeles in san pedro Bay, california - speed and efficiency are the name of the game. it’s here that most of the fruit, wine and other goods that chile exports to the united states enter the country after two weeks at sea. once unloaded, fruit can

be fumigated, packed and shipped to grocery stores in the united states or asia within two business days.

and trade with chile is booming. Two-way trade through the port increased 28% from 2010 to 2011 by volume, and has recovered to levels not seen since before the 2008 financial crisis. in the first half of this year trade with chile reached us$456 million, with chilean exports accounting for about two thirds of this including us$238 million worth of fresh fruit.

kathryn mcdermott, deputy executive director of the port, visited chile in november as part of a trade mission from los angeles. she talked to business cHile about the advantages for chilean exporters of shipping to los angeles, including its access to asian markets, and what the port is doing to accelerate the processing of perishable goods.

What is the focus of your visit to chile?it’s predominantly trade related. We’re also doing some

business surrounding energy and the airports, but really we’re looking at trade partners. The port of los angeles is the southern california gateway for the fruit chile exports to the southwestern united states. so we’re here to talk about how to increase trade with chile, both on the seaport and airport side.

yesterday we visited the port of Valparaiso, which while much smaller than los angeles shares common themes and issues, like adapting our facilities to larger ships and how we’re dealing with our communities, including things like truck traffic and pollution. We’ve been sister ports since 2004 and they are part of the pacific coast collaborative initiative that promotes environmentally sustainable port operations.

has the composition of chilean exports changed in recent years?

We’re seeing more chilean wine and fruit, particularly as the demand for fruit in the off-season in america increases. There has been an increase in both the volume and types of fruit - one of the reasons is that chile’s hygiene standards are so good that it’s been able to take advantage of export opportunities more than other countries. chile is our 33rd

largest trading partner worldwide. china is by far the largest.

What are the main us exports to chile from the port?The largest containerized export from los angeles is

beer and ale. a number of microbreweries are sending beer down here, so we like your wine and you like our beer. other exports include machinery parts, wastepaper, cardboard and household appliances.

how long does it take to ship goods from l.a. to valparaiso or vice versa?

Between 12 and 15 days depending on the type of ship. Time is of the essence when you’re dealing with perishables so we have a great logistics system that brings fruit from chile to our dedicated warehouse in san pedro. We can get fruit from harvest on day one to a store in southern california on day 22.

What advantages does the port offer?one is geography since it’s closer to come in through this

port. secondly, we have the ability to get the cargo into the southern california region, which has a population of about 16 million people. We can also get it on a train or truck to go the southwestern u.s. or put it on a plane or ship to asia. our advantage is our proximity to so many places of eventual consumption.

We also have the airport very close by with non-stop flights to asia. There are no planes that have the ability to fly direct from south america to asia so they have to stop somewhere. passenger aircraft can carry cargo as well so it makes sense, in logistical terms, to go through l.a. We’re clearly the best solution to get to asia and the southwestern u.s.

are us customs regulations an issue for chilean exporters?

california is a very agriculture-dependent state so the u.s. department of agriculture (usda) is very strict when it comes to identifying potential threats. in terms of technology, we’re looking at a new process that allows the cargo to stay in the container to be fumigated so it doesn’t have to come out. This would save time and add value to our facility.

are there any other challenges for exporters?i asked someone from Hellmann’s about this and they said

the only issue has to do with paperwork not being submitted at the right time. But generally our facility functions without

By Julian Dowling

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InTErvIEw


a lot of red tape. it’s a seamless process from unloading, to fumigation and shipping to the grocery store. a small percentage of cargo gets a random physical inspection but we try to be value-added; if we hear something isn’t working we go directly to the federal agency and see if we can work with them – we want cargo to come in and out efficiently.

are some months of the year busier than others?yes, august through november is our peak season when

christmas goods are coming in. The chilean fruit season starts in august with containerized avocados and in december the port of l.a. will receive the first reefer vessels with grapes, avocados and stone fruit. The season ends in april.

What opportunities are there under the chile-u.s. free Trade agreement?

since the agreement took effect in 2004 about 95% of the tariffs both ways have been eliminated. We’ve increased trade between our two countries by about 300% since 2004, so it has been great for both countries.

We’re looking at a few things – one is this new fumigation process. another area of opportunity we see is in appliances. chile’s middle class is continuing to grow and is buying more appliances, so more products made in asia or the u.s. could be shipped here.

We’re also talking about energy and technology collaboration. The los angeles mayor's council on innovation and industry, which is a group of entrepreneurs and venture capitalists, will soon announce a new partnership with start-up chile so companies can come to l.a. and develop their products, and vice versa.

how can the port assist companies?We have to do a better job finding out where the growth

sectors are, identifying challenges and helping to resolve them. for example, to better utilize both the port of l.a. and our international airport for sending produce to asia, we need to work with the usda and us customs to streamline the processes and paperwork to make an efficient connection between seaport and airport, so chilean exporters can increase their exports to emerging counties in asia.

how important are ties with business associations like amcham?

We’re here to develop stronger relationships with business associations so next time we have a company interested in growing its business in chile we can call and ask: what are the challenges and opportunities? does this make sense to you? once we get the feedback we can start working on our side with the mayor’s office and the us department of commerce. it’s about building relationships with people. no matter how advanced computers become, you still need that human relationship to do business and the port of los angeles understands that. cHilebUSiness


By santiago eneldo

recently attended a dinner offered by an important chilean industrial association. There were about 700 guests – so i was but a fly upon the wall… The organization was superb, if a little impersonal,

and the videos shown on massive screens were very impressive. There were two speeches before dinner, with the second one very long and packed with detail. dinner was a late affair…

it was during the second speech, delivered by an extremely important individual, when i noticed that five of the eight people at my table were “texting” and not “listening”. in fact the individual to my right was continually on facebook, while to my left Whatsapp was in full play.

i looked around the room, as far as my eyes and neck allowed me, and was appalled by the number of lowered heads. no doubt many an “important” guest was Tweeting, so as to be first with comments about the on-going discourse.

i found this very disturbing. Have we really reached the point in technological and social development where “being connected” is more important than participating in the event you are attending?

i must admit to being a “user” but i believe i have found the correct balance. people are more important than things; as in, if you are using a device while meeting or dining with me, then you are saying that the device or information you are sharing is more important than i am. Well, this may be true but it is also offensive!

another time, the eneldos were having a family dinner when i noticed three lowered heads…. and so i sent all three a text saying “not now – family first”. it worked! We are so used to being “connected” that we feel uncomfortable and even isolated when our smartphone goes silent for more than five minutes. i have a colleague with a major “tic” – he needs to open his iphone every 30 seconds just in case… i say: “leave it alone”, but he is unaware of the fact that he even has this habit.

so, where are we headed? However far we have come with mobile technology, we are still on the tip of the iceberg – which is quite frightening! i believe these

devices are designed to serve us and not for us to be subservient to them. perhaps when my smartphone is smart enough to scratch my back, tie my shoelaces and brush my teeth i will be more sympathetic.

Basic social etiquette should govern what is correct behavior and what is incorrect, but these days most people are generally selfish with poor social skills. i still give up my seat in the metro for older people (fewer and fewer of these…) and pregnant women but no young person would ever stand up for me. i still hold doors open for women – does that make me a sexist? in some people’s view – yes! i say “thank you” but i am working hard to eliminate my own ego’s requirement to be thanked. i don’t need thanks (at least that is what i tell myself) because i know people are grateful and that i have done the right thing. But also because in santiago no one is going to thank you anyway, so why get all hot and bothered about the lack of a simple gesture of gratitude!!

Which brings us back to smartphones and cryptic texts like “r u up 4 2moro? c u 5pm”. i can play the game but will choose when and where, ‘cos i was brung up proper…

Be aware that etiquette says much about the person and, if you do not look me in the eyes when shaking my hand, then i know you are just “going through the motions” – how rude!

i remain fastidiously correct in changing times,

santiago eneldo.

(comments and abuse to [email protected])

life in the Slow lane

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Una nueva forma de hablar

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