Special Issue business Chile · for my portfolio’.” patagonia Sur joins a growing conser-vation...

business ChileThe voiCe of The Chilean-ameriCan Chamber of CommerCe n°267, JulY 2010

Special RepoRtred Devils: sponsoring manchester united

tRade teStimonialWhere business meets Conservation

Scienceexploring the universe from Chile

Investing in Codelco's Future

SpecialIssue

AIG SEGUROS

July 2010business Chilewww.businesschile.cl3

Contents

Where Business Meets Conservationa u.s.-Chilean joint venture promises investors a financial return in addition to environmental protection in Patagonia.

TRADE TESTIMONIAL

12IInvesting in Codelco’s Future With new management and improved corporate governance, the state copper miner aims to increase productivity through an ambitious investment program.

COvER STORy BREAkfAST46A More Efficient Foreign Serviceforeign minister alfredo moreno plans to reorganize Chile’s embassies to better serve Chilean companies in foreign markets.

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8 SCIENCE

Exploring the Universe from Chilea giant new telescope to be built in the northern atacama Desert should make Chile into an astronomical star provided its scientists can take advantage.

30Globalizing Financial Marketsnon-profit organization inbest aims to promote Chile as an investment destination.

SpOTLIghT

EDITORIAL BOARD BUSInESS CHILE 2010CHAIR, Kathleen Barclay, Asesorías KCB; PAST CHAIR, Michael Combes, Marco Chilena; VICE CHAIR, Manuel José Vial, Vial y Palma Abogados; GENERAL EDITOR, Julian Dowling, AmCham Chile; ASSISTANT EDITOR, Daniela Valda, AmCham Chile.

MEMBERSJaime Bazán, AmCham Chile; Andrés Bianchi, Bci, Empresas Copec; Ruth Bradley, The Economist; Mateo Budinich, Insape; John Byrne, Boyden Consultores Chile; Francisco Courbis, Empresa Eléctrica Pilmaiquén; Paulina Dellafiori, AmCham Chile; Richard Diego, Royal Bank of Canada; John P. Dill, Project Management; Francisco Garcés, Banco de Chile; Claudio Hohmann, D&S; Charles Kimber, Celulosa Arauco y Constitución; Olga Kliwadenko, K&D Comunicaciones; Gideon Long, BBC; Vincent McCord, Asesorías e Inversiones CarCon; James Newbold, Business News Americas; Patricia O’Shea, AmCham Chile; Roberto Ossandón, Ossandón Abogados; Karen Poniachik, Independent; Rodrigo Silva, Silva & Asociados; Mitch Larsen, U.S. Embassy; Mauro Valdés, BHP Billiton.

PRODUCTIOnK & D Comunicaciones Ltda. Olga Kliwadenko, General Manager, 11 de Septiembre 1945 - Of. 213, Providencia. Phone: 481-6940 / 481-6941, Cell: (09) 874-0619; e-mail: [email protected]; [email protected];www.kyd.cl

Printed in Worldcolor Chile S.A. (ex Quebecor).

Special RepoRt

Red Devils: Sponsoring Manchester United chilean winery concha y toro’s deal to sponsor Manchester United is aimed at promoting its premium wines among the football club’s huge global fan base.

Football Diplomacyin a world full of economic and environmental disasters, Santiago eneldo finds that soccer can teach us some important life lessons.

© 2010 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: 290 9700 Fax: 212 2620 Av. Presidente Kennedy 5735, Torre Poniente, Of.201, Las Condes, Santiago de Chile; E-mail: [email protected]; www.amchamchile.cl; www.businesschile.cl

54 liFe in the Slow lane

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20

bUSiness CHILETHE VOICE OF THE CHILEAN-AMERICAN CHAMBER OF COMMERCE N°267, JULY 2010

SPECIAL REPORTRed Devils: Sponsoring Manchester United

TRADE TESTIMONIALWhere Business Meets Conservation

SCIENCEExploring the Universe from Chile

Investing in Codelco's Future

SpecialIssue

Investing in Codelco's Future. Copper income has long financed Chile’s economic growth, but Codelco needs to make huge investments to improve its productivity in the coming decade.

AACCLA MEETINg49An Opportunity for Latin AmericaaaCCla, the umbrella organization of u.s. Chambers in latin america, believes the time is ripe for latin america to improve its competitiveness.

ECONOMIC SNApShOT45Crisis in Greece: Lessons for ChileChile should learn from the european debt crisis to balance public spending with fiscal discipline.

39Recovery in Emerging MarketsPresenters at amCham’s economic Projections seminar agreed latin america’s prospects for a continued economic recovery are good.

AMChAM SEMINAR INTERvIEw52Strengthening Bilateral Bondsarturo fermandois, Chile’s new ambassador to the united states, talks to business Chile.

July 20104 business Chile

PLATINUM

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business Chile sponsors

AmChAm GlobAl sponsors

July 2010business Chilewww.businesschile.cl5

this month the United States celebrates its 234th birthday along with the principles on which the country was founded - freedom, the equality of all people and the right to pursue their dreams.

We also celebrate the strength of the bilateral rela-tionship between chile and the United States that is based on those same shared values.

in September, chile will mark its own 200th anni-versary since independence and, thanks in part to its excellent relationship with the United States, it is on track to becoming a developed country by 2018, a goal highlighted by Foreign minister alfredo moreno at an amcham event in June and outlined by president piñera in his state-of-the-union address in may.

to get there, chile will need to harness its comparative advantages in areas like astronomy, which are discussed in the article “exploring the Universe from chile.” northern chile’s clear skies provide the competitive advantage that resulted in the european Union selecting the country for the construction of what will be the world’s largest telescope. this large investment, combined with investments in existing observatories, is an incen-tive to generate a world-class knowledgebase in astronomy leading to technological innovations, more high quality jobs and a greater focus on this science in universities.

mining is another area where chile has long held a comparative advantage. this month’s cover Story “Investing in codelco's Future” focuses on the need for chile’s state-owned copper company to improve efficiency and make investments that will significantly improve productivity over the next decade. the large amount of investment needed, some US$15 billion over five years, should create many opportunities for local service companies and their workers. Given codelco’s

global leadership position in the copper industry, we can expect its investment program to lead to many in-novations with the label “made in chile.”

any direction you look, whether up at the sky or down to earth at its huge copper reserves, chile’s needs offer new opportunities for an even deeper rela-tionship with the United States at the inter-governmen-tal, educational and business levels. energy, science, education and entrepreneurship are powerful motors for growth in both countries, especially for chile which can draw on the know-how and experience of one of its most important allies.

of course, this relationship is sustained by many individuals who work tirelessly to strengthen bilateral bonds. this month we bid farewell to one such indi-vidual, U.S. ambassador paul Simons, who has com-pleted his assignment in chile having made important contributions to building opportunities for cooperation, particularly in the areas of reconstruction and energy.

at the same time, we welcome a new chilean am-bassador to the United States, ambassador arturo Fermandois, who is interviewed in this issue (see p.52). He goes to Washington with a renewed commitment to achieving an even stronger relationship with the U.S. focusing on areas like education and energy, while making the opportunities of this relationship available to the broader population.

amcham is committed to continuing to strongly su-pport this new chapter in the relationship between our two countries. this includes the organization of an im-portant trade mission to california later this year which will focus on strengthening ties in knowledge-based industries and innovation.

meanwhile, we wish the United States a very happy independence day and look forward to many more years of mutually beneficial partnership.

Celebrating In(ter)dependence

editorial

eXecUtiVe coMMittee

PRESIDENT Ricardo García, Seguros Interamericana – ALICOVICE PRESIDENT; CO CHAIR CORPORATE AFFAIRS COMMITEECharles Kimber, Celulosa Arauco y Constitución TREASURER Julie Beamer, General Motors ChileSECRETARY; CHAIR LEGAL COMMITTEEMichael Grasty, Grasty Quintana Majlis & Cía.

PAST PRESIDENTMateo Budinich, InsapeGENERAL MANAGERJaime Bazán, AmCham Chile

DIRECTORSKathleen Barclay, Asesorías KCBCHAIR EDITORIAL COMMITTEEAndrés Bianchi, Bci Pamela Camus, American Airlines CO CHAIR CORPORATE AFFAIRS COMMITTEEFernando Concha, Citigroup Chile CO CHAIR FINANCE AND ADR COMMITTEE

Javier Irarrázaval, The Walt Disney Company Chile CHAIR LABOR & HUMAN CAPITAL COMMITTEEMitch Larsen, U.S. EmbassyEX OFFICIOLuis Marcelo Moncau, Microsoft Chile Enrique Ostalé, D&SLuis H. Siles, IBM Chile CHAIR TRADE & INTERNATIONAL BUSINESS COMMITTEE

ADVISORY COUNCILRubén Covarrubias, Rector, Universidad Mayor

boArD oF DireCTorsAlfredo Ergas, EnersisCO CHAIR FINANCE AND ADR COMMITTEEMauricio Ramos, VTR Global Com

amcham Mission StatementTo promote free trade and investment between Chile and the United States, and to be an effective voice for the membership while facilitating related services.


Where business meets Conservation

ranco Valdés’ bloodshot and tired eyes are signs that busi-ness has been good. as ceo of the coyhaique-based firm pata-gonia Sur, Valdés recently retur-

ned from the U.S. where he pitched the virtues of his conservation business to prospective investors.

Valdés and his partners operate at the high-minded intersection where con-servation and business ideals converge. By aligning economic incentives with conservation practices in chilean pa-tagonia, the U.S.-chilean joint venture hopes to create a space for sustainable development in the region.

“i think what we’ve created here is a very innovative and cutting edge con-cept for conservation,” said Valdés. “our clients can say ‘i’m doing the right thing, but at the same time this is good for my portfolio’.”

patagonia Sur joins a growing conser-vation movement in chilean patagonia, with its own for-profit twist. in contrast to traditional conservation models that re-quire periodic donations to stay afloat, patagonia Sur promises investors a financial return in addition to environ-mental protection.

“ours is a sustainable model that not only provides resources for land main-tenance, but a healthy return for our in-vestors,” said Valdés.

the concept is to join chilean and international investors in creating a US$30 million conservation fund, which then buys diverse swaths of land in chilean patagonia to protect and develop in a sustainable way.

to achieve this ambitious goal pata-gonia Sur has developed three business divisions: carbon offsets, an eco-broke-rage service and a membership club.

TrADe TesTimoniAl

investors, who pay US$350,000 a share, own the assets and all the cash flows provided by the business

“instead of donors we have inves-tors,” explained Warren adams, a Har-vard-trained entrepreneur and one of patagonia Sur’s founders.

“instead of donating US$1 million which is put to good use and the donor gets a tax write-off, we put the investor’s money to good use and, in ten years, give US$2 million back.”

So far the business has raised around US$20 million, some of which has been invested in its forestry program. patago-nia Sur will plant nearly 500,000 native seedlings on its Valle california property in palena province with the aim of selling carbon credits down the road.

over the next 50 years each tree will sequester somewhere between 0.25 and 0.4 tons of carbon per tree with carbon credits worth around US$15 a ton.

meanwhile, the company’s eco-brokerage division looks to capitalize on its expertise gained from acquiring and managing its own portfolio of over 60,000 acres to help conservation-oriented buyers interested in patagonia.

prospective buyers are expected to share the company’s core values, and in return patagonia Sur charges a com-mission for access to their database of available land. For an additional fee, the business can also maintain their land.

For each investment, investors donate five percent of the capital to the patago-

a u.s.-Chilean joint venture offers ecologically minded investors the

chance to buy pristine wilderness areas in Patagonia while at the

same time protecting and developing them in a sustainable way.

F

The concept is to join Chilean and international investors in creating a us$30 million conservation fund.

By aaron nelsen

July 2010 7business Chile

nia Sur Foundation. and, when an in-vestor sells shares, the foundation also gets a portion of the profit.

the foundation, a 501c nonprofit cor-poration in the U.S. with a sister founda-tion in chile, hopes to raise about US$25 million for conservation research and economic development in patagonia.

“one reason this works is becau-se land is incredibly reasonably priced, which allows you to buy big pieces of land and then do things that are econo-mically sustainable,” adams said.

and adams knows patagonia first hand. in 1996, he founded and deve-loped planetall.com, one of the first social networking sites, and a pre-cursor to Facebook and myspace. He sold the site to amazon.com in 1998, and a year later embarked on an ex-tended backpacking trip with his wife and fellow Harvard mBa.

as outdoor enthusiasts, they toured the best the natural world has to offer, from alaska and the Himalayas to new Zealand and patagonia – and like most people they returned home, but patago-nia crept into their dreams.

“i couldn’t get patagonia out of my head - it was like alaska on steroids,” adams said.

adams maintained his connection with chile as a board member of tiaxa, a Santiago-based billing clearinghouse for wireless operators, founded by chilean technology entrepreneur Felipe Valdés.

Felipe and Steve Reifenberg, the then

director of Harvard’s first university-wide international office in Santiago, shared adams’ passion for patagonia. they be-lieved if they could join like-minded fami-lies to buy large tracts of land they could protect it in a sustainable way, and make a profit in the process.

“the mBa and nature lover sides of our brains clicked,” adams said.

From the outset the business was meant to be a U.S.-chilean joint ven-ture, with local and international in-vestors. currently 75 percent of its investors are international.

if the project was to succeed, howe-ver, they would need someone with the right mix of business acumen and ability to thrive in a small town setting.

“not everyone would thrive in coyhai-que,” adams said of the chilly patagonian city located 1,650km south of Santiago. “For this to work you do need to be living, breathing and sleeping in patagonia and not in a Santiago office.”

they found the right fit with Franco Valdés. Valdés had graduated at the top of his mBa class at the Universi-ty of colorado’s leeds School of Bu-siness, and was already familiar with the region, having spent two years as a guide for the explora lodge in torres del paine national park.

Franco heads a staff of 13 who manage six properties in chile’s Regions X and Xi (see map) that give clients a variety of in-vestment options.

the vast majority of the land patago-nia buys, around 85 percent, goes into conservation. the membership club di-

vision offers members exclusive access to the company’s pristine coastal areas, river valleys, lake frontages, volcanoes, fjords and forests.

to limit the carbon footprint, mem-bership has been capped at 100 fa-milies each worth US$40,000, but in-vestors are not automatically entitled to membership.

“that’s no different than if you were an investor in lan chile,” said Valdés. “Just because you own shares of lan chile doesn’t mean you fly for free.”

patagonia Sur’s founders chose to launch their business in chilean patago-nia for a variety of reasons; political and economic stability, and clear property ownership laws among them.

However, existing chilean law has done little to encourage conservation. the company is also helping to push through legislation that would mirror the conservation restriction as it works in the U.S. where landowners have a legal vehicle to permanently protect their land without giving up ownership.

if the conservation finance model works, Valdés hopes others will join the fray and validate the model. the end goal, however, is the conservation of patagonia, and that will require a varie-ty of approaches.

“in the future i see this area be-coming an outdoor epicenter of the world, and patagonia Sur a positive role model in conservation finance,” concluded Valdés. chilebUSiness

aaron nelsen is a freelance journalist based in Santiago

Where business meets Conservation


sCienCe

is there life on other planets? as-tronomers tend to think so and hope that a giant new telescope in chile will take them closer to finding it or, at least, the places

where it might exist. in april, the european Southern ob-

servatory (eSo), a 14-country alliance, selected the armazones mountain in northern chile’s atacama desert as the site for the european extremely large telescope or e-elt. With a 42-meter mirror - four times that of the largest telescope currently in operation - it will represent a massive leap in viewing power, allowing astronomers to peer into still hidden corners of the universe.

they will be looking for planets at just the right distance from their sun - neither too close nor too far or, in other words, neither too hot nor too cold - to sustain life. So far, some 400 planets have been identified outside our solar system and only one of them is in the so-called ha-bitable zone, says massimo tarenghi, eSo’s representative in chile.

But as well as allowing astronomers to scout for new planets, the e-elt will allow them to take a closer look at those already discovered. With today’s tele-scopes, astronomers can’t actually see distant planets - their faint light is obs-cured by that of the star around which they orbit - and only infer their existence from the star’s movements or by obser-ving the eclipses they cause.

Seeing the planet is key to gathering information about the composition of its atmosphere - “if we find evidence of ozone, we can be sure there’s life,” points out tarenghi. But the search for life isn’t the only reason for building the e-elt.

astronomers also want to see the first star that was created after the Big Bang or, in other words, to see where the universe started. What’s at stake there is nothing less than the laws of physics and the question of whether, at that time, they were the same as we un-derstand them today.

that is something that the european organization for nuclear Research (ceRn) is also studying by using the large Hadron collider to recreate the conditions that existed just after the Big Bang. “it’s not that our description of physics is wrong - Galileo and newton weren’t wrong - but it could be incom-plete,” says tarenghi.

The view from Chile

it wouldn’t be the first time that chile has contributed to the advance of astro-nomy. in the mid-19th century, an expe-dition from the United States establis-hed a small observatory on Santiago’s Santa lucía Hill that helped to measure the distance to mars - and was only 3.5% out - while, in the early 20th cen-tury, pioneering pictures of the mage-llanic clouds, two galaxies visible from the southern hemisphere, were taken at northern chile’s chuquicamata mine.

more recently, in the 1990s, astrono-mers at the U.S.-run cerro tololo ob-servatory, near the city of la Serena, made a major breakthrough with work which helped to show that the expan-sion of the universe is accelerating, rather than slowing as had been assu-med. that discovery was selected by Science magazine in 1998 as the most important of the year across all scien-ces, recalls malcolm Smith, an astro-

iIn northern Chile’s Atacama Desert, ever larger

telescopes are delving deeper into the universe

but, apart from the honor of being cited in scientific

publications, what’s in it for Chile?

By ruth bradley

exploring theuniverse from Chile


nomer at tololo and former director of the observatory.

cerro tololo was the first of the international observatories that have been built in chile over the past 50 years. it was soon followed by the car-negie institution of Washington’s las campanas observatory and eSo’s la Silla observatory.

initially, these observatories were built so that astronomers could study the southern sky. But the larger telesco-pes now being built are looking much further afield and it makes little differen-ce whether they are in the northern or southern hemisphere.

Still, they have kept coming to chile. eSo chose cerro paranal, 120 km south of antofagasta, for its Very large tele-scope (Vlt), which started operations in 1998, and the Gemini observatory, a partnership that includes the United States, the United Kingdom, canada, australia, Brazil and argentina as well as chile, has one of its twin telescopes in chile (the other is in Hawaii).

But, while it is essentially northern chile’s clear skies that have attracted these optical telescopes, the atacama desert also has another advantage - its

dry air. that was a key factor in the deci-sion to locate the alma (atacama large millimeter array) radio telescope on the chajnantor plateau in the andes moun-tains east of San pedro de atacama.

eventually, this multinational facility, which brings together eSo with equi-valent bodies from the U.S., canada, Japan and taiwan, will be a vast array of 66 antennas of which five are so far working, with another 16 due to start next year. “But, with just eight in opera-tion, it will already be the world’s largest radio telescope,” points out tarenghi.

Still, the decision to locate the e-elt in chile wasn’t easy. Spain, a member of eSo, was eager to see it built in the canary islands and backed its bid with the offer to contribute 300 million euros. although mostly in kind, that would have gone nicely towards outlay on the tele-scope which is estimated to reach 1 bi-llion euros, whereas chile was offering only the site near the existing paranal observatory.

What clinched the deal was the fact that, at cerro armazones, there are clear skies 320 nights in the year, a fifth more than at the proposed canary islands site. and that also represents money,

points out mario Hamuy, director of the University of chile’s astronomy de-partment and one of chile’s representa-tives in the negotiations with eSo.

in chile, astronomers will only need 20 years to do the viewing that would have taken 24 years in the canary is-lands. and, given that it will cost an esti-mated 100 million euros a year to run the observatory, that represents a saving of 400 million euros, notes Hamuy.

focus on returns

But, for chile, allowing foreign obser-vatories to use its clear skies is not en-tirely without cost. the duty-free imports to which they have long been entitled cut little ice now that the country has so many free trade agreements but, over the last few years, it has been spending to protect the observatories from light pollution.

By the 1990s, that had started to become a problem around la Serena and, in 1998, the government respon-ded with a law to regulate and limit light emissions in the antofagasta, ata-cama and coquimbo Regions. over the past few years, it has gone on to spend several million dollars on a pro-

massimo Tarenghi, ESO

“increasing local expertise is another reason why Chile is attractive for observatories.”

gram that is gradually changing street lighting in these regions so that it points downwards, says Smith.

But chile’s clear skies - in practice, an intangible export - do have a tangi-ble return. the money that an obser-

vatory leaves in the country where it is located is such that the 300 million euros offered by Spain for the e-elt would have been “a high-return inves-tment,” says tarenghi.

due to the specialized nature of the

equipment, only a small part of the ca-pital outlay on the e-elt will be spent in chile. at “more than a single-digit” percentage of the total, according to tarenghi, that’s still not insignificant but it is from the operating expenses of its observatories that chile really benefits.

Smith calculates that the observato-ries currently operating in chile spend around US$100 million a year and that around two-thirds of that amount stays in chile. other estimates are lower - some as low as one third - but it is clear that the amount is rising as local exper-tise increases.

By far the largest item of expenditure for an observatory is staff and, accor-ding to tarenghi, there are now very few areas in which observatories have to bring in overseas expertise. these are areas like optical engineering, he adds, where the situation would be much the same in many european countries.

then, there is another bonus. Under

E-ELT, the future European Extremely Large Telescope.

Cour

tesy

of E

SO.

Av. Vitacura 5093 - 7th & 8th floors - Santiago - Chile • Phone: (56-2) 787 4100 / Fax: (56-2) 206 0540 • contact: [email protected]

Fruit instinct!


AVISO COLGATE

the terms on which international ob-servatories operate in chile, local as-tronomers are entitled to 10% of the viewing time.

that’s a welcome injection to chile’s scant science budgets, roughly equi-

valent to 10% of the observatories’ operating costs. and local astrono-mers, whose numbers have doubled over the past decade, are making good use of it, says Hamuy.

on average, they each publish 3.5 papers a year in top-level science jo-urnals, well above the international average, and they are achieving qua-lity as well as quantity. By the stan-dard measure of a paper’s credibility and influence - the number of times it is cited by other researchers in their papers - they are close to 40% above the international average.

But, as more observatories are built, the challenge for chile will be to increase the number of astronomers it produces, adds Hamuy, in order to provide services for these new faci-lities and to ensure that chile’s 10% of the viewing time is put to the best possible use. Foreign capital may, in other words, be unlocking access to

chile’s clear skies but it will only be able to reach for them by creating the necessary human capital.

ruth bradley is the Santiago correspondent of The Economist.

mario hamuy, University of Chile

“international observatories are good business for Chile.”

“Chile’s political stability is important as well as its natural viewing advantages.”

malcolm smith, Cerro Tololo

chilebUSiness


COVER sTorY

hanks to soaring prices and booming demand in china and other emerging economies, chile’s giant state-owned copper company codelco, the world’s largest producer of the malleable metal, has seen its profits rocket to levels unthinkable a

decade ago. and it’s not just copper. a global commodities boom

means that prices of other metals produced by codelco, including molybdenum, gold and silver, have also hit record levels. as a result, chile’s cash cow earned more than US$27 billion in 2005-2008, more than in the previous 18 years combined.

the collapse in global financial markets sent copper prices plummeting from almost US$4 a pound in mid-2008 to less than US$1.50 a pound. But thanks largely to record demand from china, the world’s largest consumer of the metal, prices have rebounded over the last 18 months to pre-crisis levels.

that’s good news for chile since the state receives all of codelco’s earnings either in the form of taxes, net profits or the copper Reserve law, a legacy of the pinochet go-vernment, which gives 10% of the company’s revenues to the armed Forces.

With billions of copper-dollars rolling in, chile has been able to finance a major reform of its pension system and one of the world’s largest economic stimulus packages, re-lative to the size of the economy. the copper boom has also left the government of president Sebastian piñera in good shape to tackle the huge task of rebuilding schools, homes and hospitals flattened by last February’s earthquake.

But, while codelco’s bottom-line results have been spectacular, many say that high profits have masked the company’s worsening situation on the ground.

this is, in part, due to production costs that have been rising almost as fast as copper prices, although this is not a problem unique to codelco, said Gustavo lagos, director of the catholic University’s center for mining.

When prices rise, mining companies rush to lift produc-tion, pushing up demand, and prices, for a myriad of goods and services from dump trucks and their huge tires to geo-logists and electricity.

But codelco’s costs are rising faster than at other mining companies. “this is a major loss of competitiveness… codelco is much more exposed to low price cycles than before,” said lagos.

and higher costs aren’t the only problem. in 2009, codelco posted a 16% jump in copper production to more than 1.7 million tons due to the start-up of its new Gaby mine, but the rise follows years of sliding production as its operations age and ore grades fall.

the company’s mines, some of which have been in pro-duction for more than a century, are desperately in need of investment to continue exploiting huge mineral reserves.

“We have to use part of our cash-flow to keep the com-pany healthy,” said diego Hernández, codelco’s new chief executive officer.

Recent projects like Gaby and Radomiro tomic should maintain production at current levels through 2012, but if codelco fails to carry out a series of huge structural pro-jects at its main divisions, production will collapse within the next five years to around 900,000 tons a year, or just over half of current output, warns Hernández.

this outlook is the result of serious under-investment over the last decade. crucial projects have been repeate-dly delayed so that the company must now pack a decade worth of investment into the next five years, said Juan

By Tom azzopardi

Codelco has earned billions of dollars over the last decade, allowing

Chile to expand its welfare system, ride out the worst economic

crisis in decades and overcome one of the worst earthquakes in

its history. now the company needs a cash injection of its own to

continue supporting the country’s growth.

investing in Codelco's future

t


carlos Guajardo, executive director of Santiago’s center for copper and mining Studies (ceSco).

“these should have been better distributed over time, instead they have piled up and have to be done all at once now,” he said.

investing in productivitycodelco’s board has approved a US$15 billion inves-

tment plan in the next five years to increase productivity but it has yet to determine where this money will come from.

this plan is supposed to include a record US$2.4 billion investment this year, but the government has refused to reinvest US$378 million from codelco’s 2009 profits, blaming the cost of post-earthquake reconstruction.

codelco can finance around US$1.6 billion of its investment plan through cashflow by depreciating the value of its assets, but this is not enough to cover all investments, said Hernández.

the company could raise additional funds by issuing up to US$500 million in debt or selling non-core assets, such as its 40 percent stake in northern chilean power generator e-cl, formerly known as edelnor, he said.

in this way, codelco should be able to finance this year’s investment portfolio without reinvesting any profits, but the government will have to reinvest some of the company’s profits in coming years to fund future investments.

“Reinvesting profits is standard prac-tice in the mining industry,” said Her-nández.

But chilean governments have a poor record of doing just that. Since its creation, codelco has been allowed to reinvest just 3% of its profits.

that needs to change to avoid a drama-tic drop in copper output and consequently codelco’s financial performance, warns lagos.

according to codelco’s website, large projects at its el teniente, chuquicamata,

Diego hernández, Codelco


andina and ministro Hales mines are scheduled to be brought into pro-duction in quick succession from the middle of this decade onwards.

if these projects are successful, codelco should be able to lift its pro-duction to around two million tons a year, thereby ensuring the company’s production for decades to come, said Hernández.

“We have to invest now so that production can continue at this level and eventually rise,” he said.

despite the huge task ahead, Her-nández is confident that codelco, with decades of operational expe-rience behind it, has the professional abilities to succeed.

“We are the inheritors of 105 years of mining tradition and know-how, so yes, we have the capacity,” he added.

corporate governanceBut there is concern that a lack of

independent leadership has been hol-ding codelco back. this is, in part, due to the circumstances surrounding the foundation of the company.

General augusto pinochet created the company in 1976 mainly out of assets that were expropriated during the nationalization of the country’s copper mines five years earlier under the government of Salvador allende.

With a strong executive president

holding almost all the power, the board of directors was designed to act more as advisors than overseers. this model was effective in consolidating the country’s mines in the 1970s, but left little room for modern corporate notions of transparency and accoun-tability.

this has all changed in the last six months. as part of chile’s accession process to the oecd, then-president michelle Bachelet promulgated legisla-tion in late 2009 to improve codelco’s corporate governance and make it run more like its privately-owned rivals.

Responsibility for the company’s performance now lies with a board of

fixed-term directors with the power to hire and fire the chief executive as they see fit. the finance and mining minis-ters no longer sit on the nine-member board, which is comprised of three presidential appointees balanced by four independent directors, chosen in the same way as senior civil servants, and two workers representatives.

the reform did not go as far as some would have liked. on the cam-paign trail, president piñera said he would sell a 20% stake in codelco, claiming that only the involvement of private capital could really improve the company’s failing productivity.

chile would not be the first coun-try in the region to go down this road. in Brazil, the partial privatization of state-owned mining firm cVRd, now renamed Vale, and energy behemoth petrobras, has helped transform them into global giants.

But president piñera has shelved this plan for now, while calling on workers and executives to build “a codelco for the 21st century.”

the changes at codelco may seem intangible compared to the dirty work of blasting and hauling ore, but their potential impact should not be under-estimated, especially in limiting politi-cal influence, argues Guajardo.

Until now, he suggests, political alle-giance has been an important factor in codelco appointments “almost all the way from the boardroom to the rock face.”

But as a result of its new corporate governance, codelco’s decisions should be taken with only the company’s best interests in mind, said Guajardo.

under new management

it is still early days, but the new board’s first appointments have raised optimism about the company’s future.

previous chief executives have come from chile’s political elite, but diego Hernández joins codelco after a highly successful career in the pri-vate sector including stints at all four of the world’s largest mining groups:

COVER sTorY

Carlos Guajardo, Center for Copper and Mining Studies (CESCO)

“Crucial projects have been repeatedly delayed,”

Codelco Pre-Tax Profit 1990-2009

01,000

2,000

3,000

4,000

5,0006,000

7,000

8,0009,000

10,000

1990

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2002

2005

2008

million us$


anglo american, Rio tinto, Vale and, most recently, BHp Billiton, where he was head of the company’s global base metals division.

in addition, newly-elected chairman Gerardo Jofre is a former banking exe-cutive at Santander who has sat on the board of some of chile’s biggest firms including lan, endesa, d&S and Viña San pedro tarapacá.

“this is a fantastic example of what an independent board can do,” says lagos.

according to Guajardo, codelco’s senior management used to suffer du-plication of roles and confused chains of command, but Hernández is sha-king things up.

it’s true that bringing in new blood could be hindered by public sector wage caps - Hernández himself re-portedly took a hefty wage cut to join codelco - but that didn’t stop the chief executive recruiting Rodrigo toro and thomas Keller, two experienced mining executives, to run the firm’s marketing and finance departments respectively.

even more important for codelco’s renewal than these new faces will be the relationship the new management strikes with the piñera government.

For all that the corporate governance reforms seek to limit political influence, the state remains codelco’s sole share-

holder and has the final say on critical issues, especially financial ones.

managing the workers

one of Hernández’s first tasks will be to establish a good relationship with the company’s 19,000-strong workforce that will be crucial to the success of his administration.

Some union officials fear the new chief executive could change tact from the previously close relationship between management and unions. He comes with a reputation as a tough negotiator; under his watch, BHp Bi-lliton endured lengthy strikes at major mines until workers agreed to soften their demands. He has already indica-ted that he will not renew the Strategic alliance, a framework agreement with workers that has governed labor rela-tions at codelco since 1994.

“as in football, the manager has to be the manager and the players, the players. if the players want to manage, and there have been some cases of this, then it doesn’t work,” said Hernández.

codelco’s overall wage bill is com-parable with private sector rivals and,

while overstaffing exists, it is not ge-neralized, he noted.

Still, there is room to improve effi-ciency. the company’s workers are amongst the best paid in chile even though their productivity is lower than at large privately-owned mines, said lagos.

But Raimundo espinoza, head of the copper Workers Federation and a workers’ representative on codelco’s board, warns against such compari-sons since conditions at no two mines are exactly the same.

“codelco’s workers enjoy rights and benefits won over decades,” he said.

even so, some of these benefits, es-pecially those which are not cost-effec-tive or attractive to younger employees, could be restructured to save money, argues lagos. For example, free health-care, which is very expensive, could be replaced by private insurance.

But codelco’s unionized workers are not the only ones demanding better conditions. they are outnumbered by around 30,000 employees of subcon-tractors providing a multitude of servi-ces to codelco, from security and ca-tering to construction and transport.

COVER sTorY

Gustavo lagos, Catholic University’s Center for Mining

“rising costs are affecting Codelco’s competitiveness,”

Codelco Production 1990-2009

0200

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Thou

sand

tons

in 2007, a small group of them launched a devastating campaign of violent protests that cost the com-pany millions of dollars until it agreed to improve pay and conditions.

if copper prices remain high, the issue could return, but workers may find it harder to negotiate with the new management.

codelco should not be run as a pri-vate company, said Hernández, “but it can be run well,” which means kee-ping costs down and investing more in production.

Given the billions of dollars codelco has earned for chile, it is only fair, and sensible, that the government allows the company to invest some of its profits to ensure its ability to keep producing copper for decades to come.

COVER sTorY

Tom azzopardi is a freelance journalist based in Santiago

chilebUSiness

raimundo espinoza,Copper Workers Federation

“our rights and benefits have been won over decades,”


SPECIAL reporT

s legend has it, don melchor de concha y toro, founder of chile’s largest winery concha y toro, used to keep thieves away from his private reserve

collection by spreading the rumor that the devil lived in the cellar, hence the name casillero del diablo, or devil’s cellar. But these days concha y toro has enlisted the help of some different devils to grow its brand globally.

in may, concha y toro signed a three-year sponsorship deal with england’s manchester United football club, nicknamed the Red devils, one of the most popular professional sports teams in the world.

the official partnership launch, to be attended by the club’s manager Sir alex Ferguson and the players, will take place in august on the hallowed turf of man-chester United’s stadium, old trafford.

Under the terms of the agreement, concha y toro wines including ca-sillero del diablo, marqués de casa

concha and terrayuno will be stoc-ked in the lounges, boxes and bars of old trafford from the beginning of the 2010/11 season.

more importantly for the winery’s global marketing strategy, it will have its name on the digital billboards surroun-ding the field. considering United’s home games are watched on television by close to one billion people worldwi-de, that is a huge market of potential wine consumers.

“With its global exposure, manches-ter United is a perfect match for us,” said Rodrigo maturana, Foreign offices marketing manager at concha y toro.

concha y toro produced 38% of chile’s bottled wine exports in 2009 and its wine is sold in 135 countries inclu-ding the United Kingdom, which is the winery’s number one export market fo-llowed closely by the United States.

But selling more wine in the UK was not the main attraction of the manches-ter United deal, explained maturana.

Red Devils: Sponsoring Manchester United

Concha y Toro’s sponsorship agreement

with english football club manchester

united will allow the Chilean winery to reach

a vast new market of potential wine drinkers

around the globe, but it will take time to

build a premium brand image.By Julian Dowling

a


“United is such a strong brand that it will be a good ally for concha y toro to build our brand awareness around the world,” said maturana.

United, like concha y toro, is a global brand with some 333 million fans in europe, latin america, north ameri-ca and especially asian countries where United is increasingly popular.

“Football is so popular globally that it can attract a lot of new consumers who are just starting to drink wine and know about our brand,” said maturana.

the chilean winery plans to use images of United players in promo-tions later this year with slogans like ‘win a shirt signed by [United star forward] Wayne Rooney’ or ‘casillero

del diablo invites you to old trafford.’the agreement also entitles concha

y toro to organize an event once a year with the players, advertise in the club magazine Inside United, which is pu-blished in indonesian, cantonese and english, and use match tickets as gifts for clients or prizes in internet contests.

“they are open for us to use their team in as many ways as possible, which benefits both of us,” said maturana.

it also helps that United’s manager, Sir alex Ferguson, is something of a wine connoisseur himself.

“like United, [concha y toro] is a company with a lot of history that, while never afraid to change, has always kept hold of its roots,” said

Ferguson in a press release. “this is a partnership that unites

the two great passions in latin ame-rica: football and wine. i’m looking forward to it.”

Devils in the details

manchester United approached concha y toro about becoming the club’s official wine sponsor in december 2009, and the deal was closed in may.

From United’s perspective, concha y toro is a brand that fits the club’s core values of “excellence, innovation and excitement,” said Richard arnold, the club’s commercial director.

concha y toro joins a list of official

sponsors that includes audi, Budweiser, turkish airlines, Betfair.com, Korea’s Kumho tires and chinese high-tech company aigo, in addition to the club’s main 2010/11 sponsors: insurance brokerage aon corporation and nike.

“the club aims to partner with the best companies in their field ... concha y toro is clearly an organization that strives for excellence and is ambitious to improve,” said arnold.

according to arnold, the negotia-tions were conducted “in an extremely professional manner – an example to other companies.”

But they were nearly derailed by February’s devastating earthquake. like other chilean wineries, concha y toro lost around 10% of its stock in the destruction and many of its wor-kers lost their homes.

“We were very keen to partner with concha y toro and wanted to give them all the space and time they needed to take stock and assess what

they wanted to do,” said arnold.But concha y toro recovered and

only lost one week of production due to the quake. “We got back on our feet very quickly,” said maturana.

concha y toro, in partnership with

the charity casaBásica, is now helping rebuild houses in its main winemaking area, the colchagua valley south of Santiago, and United also plans to help out.

“We hope that through our charity, the manchester United Foundation, the club can work with concha Y toro to help rebuild communities that need it,” said arnold.

although the financial value of the deal has not been made public, it is “an important investment,” said matu-rana. concha y toro also sponsors the chilean football team Universidad ca-tolica, but the agreement with United is a much bigger marketing gamble.

if it pays off, concha y toro hopes to extend the deal. “We really need three to five years to have a real impact and build up our brand recognition,” said maturana.

But that also depends on the streng-th of the manchester United brand. although the team continues to draw

sir alex fergusion


new fans and win games – United fi-nished a narrow second to chelsea in Barclays premier league in 2009/10 - the club’s owners, the american Glazer family, are deep in debt after buying a controlling stake in the club in 2005.

the Glazers are also despised by many United fans for raising ticket prices and failing to retain star portu-guese international cristiano Ronaldo last year. But maturana does not expect

concha y toro’s deal to be affected by these problems.

“We made the deal with the club and the team, not with the owners,” he said.

building a premium brand

By associating with one of the top clubs in the english premiership, concha y toro is hoping to change the image of chilean wine internationally and, in the process, increase demand for its premium wines.

the idea is to make football fans associate concha y toro with pre-mium, or oak-aged, wines, which is why its campaign will feature casi-llero del diablo and higher end wines like terrayuno and marqués de casa concha.

“a lot of people don’t think chilean wine is good quality, but we are trying to change that image because chile produces great premium wines,” said maturana.

Still, other chilean wineries can only dream of concha y toro’s marke-ting clout. “concha y toro is probably the only winery brand name that has truly global reach,” said michael cox, the UK director of the chilean wine in-dustry association Vinos de chile.

“the deal especially helps them in their progress to make further inroads into the Far east markets where United’s brand strength is very strong,” said cox.

Japan and South Korea are key

markets for casillero del diablo partly because a Korean, park Ji-Sung, plays for United. “the team has many followers in asia and we hope to build on that,” said maturana.

of course, most of United’s fanba-se watches their team on television, so concha y toro is negotiating with eSpn for the sponsorship rights to games shown in latin america and other markets.

as for the U.S. market, maturana’s “dream” is to sponsor the new York Yankees or the new Jersey devils, but he is limited by the company’s marke-ting budget.

at any rate, United has millions of fans in north america and after the World cup in July the club will play several exhibition games in canada and the U.S.

“We hope the team also comes to South america in the short-term, but this is a complete package for us in terms of global and local exposure,” said maturana.

SPECIAL reporT

“adding advertising exposure of this scope is a natural step in Concha y Toro’s growth strategy.”

andrés Palma, Tironi Asociados

“The business case for the relationship was clear.”

richard arnold, Manchester United

Old Trafford stadium


SPECIAL reporT

Global marketing

concha y toro’s deal with man-chester United is groundbreaking, not just for a wine brand but for any chi-lean company.

“the deal marks a turning point in the internationalization of chilean companies,” said andrés palma, head of corporate affairs at chilean public relations firm tironi asociados.

other companies like lan airlines have sponsored sporting events such as tennis tournaments, but this is the first time a chilean firm will sponsor a top tier football club in europe.

“concha y toro has developed a global communications strategy, not just by sponsoring individual events but by maintaining a permanent presence in spaces of high exposure,” said palma.

Being the club’s ‘official wine’ will also allow concha y toro to offer wine tastings at old trafford, which should drive all-important word-of-mouth ad-vertising, said palma.

But few other chileans companies have the money and brand power to launch global marketing campaigns.

“i don’t think other top chilean retail brands are in the condition to follow in concha y toro’s footsteps,” said emilio Sanfuentes, the general mana-ger of public relations agency Burson-marsteller’s chile office.

“concha y toro is the only company that has a significant market share at a

global level and enough brand power to take such a leap forward,” he said.

But that’s not the case in the services sector where lan could follow concha y toro given its excellent reputation and presence in other markets, especially in latin america, said Sanfuentes.

“lan has already shown interest in becoming a global brand by spon-soring the Key Biscayne tennis tourna-ment in miami,” noted Sanfuentes.

other chilean companies with global aspirations, such as technology firm crystal lagoons which builds huge salt-water lagoons, could consider global marketing campaigns to raise brand awareness, said Sanfuentes.

But they need lots of cash and sha-reholders willing to support a long-term marketing strategy, said palma, adding that sponsoring a professional

sports team is not for everyone. “there must be affinity between the

brand being sponsored and the spon-sor,” he said.

there is clearly brand synergy bet-ween concha y toro and United, but football may not suit other brands. “Where should salmon producers or fruit exporters be? probably not in a stadium, but they should be exploring new for-mats of mass publicity,” said palma.

Such formats, he adds, might include reality tV shows or pR events in foreign cities like paris, milan or new York.

as chile advances towards its goal of becoming a developed country by 2018, it will not only require more in-vestment but also companies with the imagination and drive to market them-selves to consumers around the globe.

concha y toro has recognized the value of the global exposure offered by one of the most powerful brands in sport and continues to strengthen its brand in foreign markets. Whether other chilean companies follow suit remains to be seen, but the door, at least, has been opened.

From United’s red shirts, to the club’s nickname and Sir alex Ferguson’s love of wine, the two brands look to be a match made in heaven, or maybe in the other place since it was, after all, the Red devils that brought them together.

“Concha y Toro is the only global Chilean brand with a distribution network on five continents.”

emilio sanfuentes, Burson-Marsteller

Julian Dowling is Editor of bUSiness CHILE

chilebUSiness

“manchester united is a perfect match for us.”

rodrigo maturana, Concha y Toro


4th of July


Congratulations on the 234rd Anniversary of the Independence of the United States


spoTliGhT

t’s hardly news that the solid regula-tory framework of the chilean finan-cial market offers a stable platform for both local and foreign investors to develop new investment projects.

this is the result of a series of reforms in capital markets over several decades, which have transformed chile into an in-vestment magnet in the banking, retail, telecommunications, energy and mining sectors to name a few.

But we aren’t alone as other coun-tries have implemented similar reforms, sometimes copying or improving on chile’s reforms, and in doing so trans-forming themselves into more attractive investment destinations than chile.

to remain competitive, the financial integration of the local market with fo-reign markets, and especially the north american one, is important since it fa-cilitates access by foreign investors to investment opportunities in chile.

in September 2008, the Finance mi-nistry created the capital markets advi-sory council to promote public-private sector interaction in the development of the local financial market.

the council brings together the ex-perience and concerns of local actors in different areas of the financial sector. aside from its advisory role in the mi-nistry, the council proposes reforms, identifies legal obstacles, and evaluates regulatory changes in the sector.

on the sidelines, a group of council members noticed the potential for an independent organization that would group professionals from public and private entities interested in promo-ting the internationalization of chilean capital markets.

With this aim, the non-profit organi-

zation inBest was born in 2009. in addi-tion to promoting the chilean financial market as an investment destination and a platform from which to export fi-nancial services, inBest provides a me-chanism to channel the concerns and requirements of foreign investors inter-ested in doing business in chile.

today, inBest has nearly 200 mem-bers from the financial sector inclu-ding stockbrokers, financial managers, bankers, attorneys, consultants, pen-sion fund managers and insurance company executives.

However, membership is on an indi-vidual basis which means anyone can participate regardless of his or her af-filiation. By making inBest an open pla-tform in this way, the aim is to maintain its independence from companies and institutions involved in the financial

market.the members are organized into 14

working groups, or subcommittees, which meet regularly. Some members participate in more than one group, but the aim is to bring together professio-nals who work in the same area such as the stock market, banking, derivatives or financial regulation.

each subcommittee has one or two coordinators, usually recognized figu-res in their respective fields, who co-ordinate meetings, listen to concerns and report back to the board. Based on their findings, they are responsible for submitting a five-year plan to the board, which in turn presents a unified vision to the authorities.

By bringing the concerns of all par-ties to the attention of financial regula-tory bodies, inBest is becoming an im-

i

inbest: Globalizing financial marketsBy alfredo ergas

Chile Day 2009, New York City.

portant link between the local financial community and foreign investors.

at the end of the day, the organization’s main goal is to help the government make financial institutions more modern and efficient. By iden-tifying areas for improvement, inBest aims to facilitate investment and deve-lop a local financial industry that meets world-class standards.

Showing the world a united front in this regard is imperative, which is why one of inBest’s most important activi-ties is chile day. this annual two-day event, held in new York city, brings together important figures from the fi-nancial industry, capital markets and foreign investors.

the first chile day was held in 2000 and organized by amcham’s adR is-suers committee headed by Juan ignacio domínguez, then cFo of enersis Group.

inBest took over organizing the event from amcham this year and aims to con-tinue the tradition begun a decade ago.

led by Finance minister Felipe la-rraín and his team, chile day 2010 on July 15-16 was expected to be a great

success with the participation of execu-tives from the private sector, including inBest members, who planned to meet with Wall Street investors and analysts.

most importantly, chile day is an outward sign that chilean authorities and the private sector are on the same page when it comes to improving the functioning of the financial market and increasing investment.

not everyday can be chile day but, at inBest, we believe that by providing an independent forum for executives and authorities to meet and discuss ideas, chile can internationalize its capital markets and attract more investment, which is good for everyone.

alfredo ergas is President of InBest and Chief Financial Officer of the Enersis Group. He is also a member of the Finance Ministry’s Capital Markets Advisory Council, an advisory member of AmCham’s board and president of its Finance and Capital Markets Committee.

chilebUSiness

Alfredo Ergas


AmChAm news

the U.S. food market was the focus of a seminar hosted by amcham at Santiago’s Sheraton Hotel on July 1. the seminar, the first in a series, is part of amcham’s export empowerment program, financed through corfo’s innova program, which is aimed at helping small and medium-size chilean food producers enter the U.S. market.

Keynote speaker, agriculture mi-nister José antonio Galilea, reaffir-med the new government’s com-mitment to helping the food sector increase exports and turn chile into a global food power.

allen Johnson, of U.S. consulting firm allen F. Johnson and associa-tes, highlighted the important health food trends in the U.S. market, but noted chilean exporters will have to meet rigorous food safety stan-dards and reduce their carbon foo-

tprint to be competitive. other presenters included Ri-

cardo ariztía, director of chile’s state-run institute for agricultu-ral development (indap); Juan pablo matte, general secretary of the national agricultural associa-tion (Sna); and pilar Yrarrázabal, head of prochile’s agri-Food de-partment.

AmCham Seminar on Food Export Opportunities

Expo Rebuild Chile a SuccessSixty-five U.S. and

canadian companies participated in expo Rebuild chile held at espacio Riesco on June 15-17. Sponso-red by amcham, the U.S. embassy and other partners, the trade show gave north american firms a venue to offer technology and service solutions in support of chile’s rebuilding program after February’s earthquake.

the list of participants included suppliers of construction materials, architectural services, tents, emer-gency service vehicles, cranes, led lighting solutions, fire alarms, solar heating panels and air conditioning units. Some participating compa-nies already have a presence in

chile while others are new to the market.

the event was organized by the new Jersey-based marketing firm Kallman Worldwide inc, which also organizes chile’s annual mining trade show, expomin. part of the re-sources generated by the show will be donated to the charities Hogar de cristo and Fondo esperanza that are helping people affected by the earthquake.

Agriculture Minister, José Antonio Galilea with AmCham’s president, Ricardo García

AMChAMCOMMITTEES

Chilean government officials and businesspeople inaugurate Expo Rebuild Chile in June.

Michael Grasty, Grasty, Quintana Majlis & Cía, Carolina Schmidt, Minister of Sernam; María Gracia Cariola, Women’s Work and Maternity Commission and Javier Irarrázaval, president of the Labor & human Capital Committee.

Steve Jordan, senior vice-president and executive director of the Business civic leadership center at the U.S. cham-ber of commerce, met with members of amcham’s corporate communications & Sustainability committee on June 29 to discuss the reconstruction effort after February’s earthquake. Jordan has helped channel donations by U.S. companies to the most devastated areas while amcham continues to coordinate help in the areas of education, health and productivity.

Steve Jordan, U.S. Chamber, Pamela Camus, president of the Corporate Communications & Sustainability Committee, Javier Irarrázaval, The Walt Disney Company Chile

labor & human Capital the minister of chile’s national Women’s

Service (Sernam), carolina Schmidt, and the president of the Women’s Work and ma-ternity commission, maría Gracia cariola, spoke at a meeting of amcham’s labor & Human capital committee on June 24. the women discussed the new government’s proposals in the areas of employment and maternity, noting that the participation of chilean women in the workforce is only 41%, compared to an average of 65% in the oecd and 53% in latin america.

Corporate Communications& sustainability

new members

APL LOGISTICS

ProcomexImporterMaximilian Terc / General Manager

Travel securityTourismEduardo Correa / General Manager PnC bank na, usaFinancial & Investment ServicesAlberto Martin, / Chile Representative

matriz ideasExporter & ImporterGustavo Gómez / General Manager

urenda, rencoret, orrego y Dörr abogadosLegal Services José Bustamante / Administrative Partner fort lauderdale Gladys v. mellaBusiness Related Services Gladys Mella / General Manager

hacienda Tres lagoshotels & Tourism Sebastián Elsinger / Sales & Marketing

TelechequeCredit & Financial Information ReportsClaudio Ortiz / President

laboratorio Cosmético ColorbelChemical ProductsMaría Ivon Abuawad / General Manager

Special Offers by AmCham Partners Santiago language institu-

te (eClass english) offers amcham members a 13% dis-count on english classes at all levels.

For more information con-tact Gabriela Serrano, tel: 245-0875.

IEDE Chile Rector, Jorge Monsalves, with Jaime Bazán, General Manager of AmCham.

Jaime Bazán, AmCham, with María Soledad Gutiérrez, Executive Director of eClass English.

Spain’s ieDe business school offers postgraduate scholarships worth up to 50% of tuition for amcham mem-bers and their employees.

For more information, contact maribel Flores at iede chile, tel: 496-0134 cel: 7 792-3976, [email protected]


AmChAm members news

ExECUTIvE aPPoinTmenTs

Anglo American Opens Sixth Modular SchoolMining firm Anglo American has

opened Chile’s biggest modular school in the 8th Region devastated by February’s earthquake. The school, in the city of Yungay, covers over 2,700 square meters and has room for 2,000 students from pre-school through 12th grade.

The school includes 34 classrooms and comes furnished with computers, school supplies and teaching equip-ment. Anglo American has now built six

modular schools in Chile that will bene-fit 4,500 schoolchildren as part of the company’s US$10 million donation an-nounced a few days after the quake.

The construction of the school “re-affirms our commitment to the recons-truction and education of Chile,” said Anglo American’s Chile president, Miguel Ángel Durán, in a ceremony at-tended by Education Minister Joaquín Lavín amongst other government offi-cials and company executives.

Fruit Island is the name of a game for Facebook created and developed by Cristian Peña, a computer programmer and professor at DuocUC Professional Institute with Microsoft’s support. To play the game, a monkey must sort and eat fruit in various scenarios through levels of increasing difficulty.

“We support this kind of initiative because we want to give entrepre-

neurs a chance,” said Andrés del Al-cázar, program director at DuocUC’s Information and Technology School.

Alejandro Pacheco, Academic Re-lations Manager at Microsoft Chile, said it is “an honor” to provide the tools for such innovations, adding that he hopes more entrepreneurs will create products using Microsoft’s technology.

Facebook Game Developed in Chile

The Facebook game Fruit Island

Scotiabank Chile has named José Luis Zepeda as its Senior vice-President of Wholesale Banking. Zepeda has more than 30 years of experience in Mexico, venezuela and the United States. he previously ran this division at Chase Manhattan Bank in Chile. Scotiabank’s new Wholesale Banking division combines its Corporate Banking, Large Companies, and Real Estate divisions.

Jorge Rodríguez has been named the new CEO & Managing Partner of Deloitte Chile. Rodríguez joined the firm in 1980 and has served as an Audit partner and chairman of the board. he has specialized in financial auditing, accounting services and internal control systems for the financial industry, insurance companies, AFPs, Isapres and other companies in the health sector.

Jaime Alcalde has been named Rector of the Professional Institute and Technical Training Center, DuocUC. An engineer by profession, Alcalde specializes in the forestry industry and has experience in the public and private sectors. he was Director of Economic and Administrative Affairs at the DuocUC Foundation.

CorpBanca to Offer Title Insurance

Jaime Alcalde, DuocUC

Jorge Rodríguez, Deloitte Chile

CorpBanca will be the first bank in Chile to offer title insurance after signing a con-tract with FAF International, a subsidiary of California-based First American Corp.

This type of insurance, used in property transactions, covers buyers and their mort-gage lenders during the period between the acquisition of the insurance policy and offi-

cial registration of the change in a property’s ownership as well as against any possible defects in the corresponding titles.

“This is a great opportunity to make this type of insurance, which brings benefits for banks and house buyers, more widely avai-lable in Chile,” said FAF International CEO Barbara Locke.

Barbara Locke, CEO of FAF International Chile and Mario Chamorro, CEO of CorpBanca

José Luis Zepeda, Senior VP of Wholesale Banking at Scotiabank

Education Minister, Joaquín Lavín, with Miguel Ángel Durán, Anglo American


Chubb Supports Earthquake ReconstructionThe insurance company Chubb

Chile, a subsidiary of the U.S.-based Chubb Corporation, has donated US$100,000 through the Miami-ba-sed Fundación Manos Del Sur to help the NGO Un Techo para Chile build houses in the earthquake-hit areas.

“Donations like this allow us to continue helping those who suffered most in this catastrophe,” said Un Techo para Chile’s executive director, Juan Pedro Pinochet.

Mars Provides Pet Food in Quake-Hit Area

The Chilean subsidiary of U.S.-based candy and pet food producer Mars has donated chocolate snacks as well as dog and cat food in areas hit by February’s earthquake. Mars pet food brand Pedigree has partnered with local animal rescue organizations like the Organization for the Protection and Respect of Animals (OPRA) to support the “Chile Animal help Network” created after the earthquake to provide food, veterinary supplies and transport.

Teradata Showcases Data Warehousing Solutions

The Chilean subsidiary of U.S. firm Teradata held a training course for journalists on June 10 at the Ritz-Carlton hotel in Santiago to explain concepts such as Data Warehousing and Business Intelligence. Teradata executives discussed how these concepts are used by companies in various industries to add value to their services and make them more competitive.Teradata’s Chile and Peru Director, Leonardo González, used case studies to show the benefits of the company’s Active Enterprise Intelligence business solutions, which allow employees to make near real-time decisions based on strategic or operational data analysis.

Claudio Rossi, Chubb Chile, gives a check to Juan Pedro Pinochet, executive director of Un Techo para Chile.

Jorge Caruso was named Commercial Director of outplacement and coaching firm DBM Chile. The civil engineer from the Catholic University has 18 years experience in commercial management and has working in insurance, retail and financial companies

Jorge Caruso, DBM Chile

IT leasing firm CSI Leasing has named Elena Fernández-Cavada as its new CEO in Chile. Fernández-Cavada joined the firm in 2009 and before that was Senior Accounts Manager at SGEF Spain.

Elena Fernández-Cavada, CSI

Teradata’s Leonardo González speaking to journalists

Chilean telecommunications firm Entel and South Korea-based multinational conglomerate Samsung have signed an agreement to promote innovation, research and development with the aim of increasing access to new technologies in Chile.The agreement, signed in Seoul by Entel PCS CEO, hernán Marió, and Samsung Chile president, Julio hong, will allow Entel to offer new applications to Chilean companies that use the new BADA mobile operating system created by Samsung. .

Entel Promotes Technology Innovation

Julio hong, Samsung Chile, and hernán Marió, Entel PCS, signing the agreement in Seoul.


alfredo moreno, the minister of Fo-reign affairs, was the guest speaker at an amcham breakfast on June 20 in casapiedra. moreno spoke about the key issues for chile’s foreign policy under the new government, especially in terms of strengthening the bilateral relationship with the United States and the need for a better trained diplomatic service.

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Foreign Affairs Breakfast

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AmChAm people

alfredo moreno, foreign affairs minister, with amCham president, ricardo García luiz marcelo marrey, microsoft Chile and Jaime bazán, amCham José manuel Campos, Direcon; frank Tressler, foreign affairs ministry; sandra ramos, Direcon; isauro Torres, foreign affairs ministry and David edwards, u.s. embassy fernando alvear, CPC and Carlos fernández, Coasin Carlos Pareja, Peru embassy and marcelo fuentes, Dutch embassy Gabriel rodríguez, foreign affairs ministry and Walker san miguel, bolivian Consulate.

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Juan Jaime Diáz, el mercurio; Juan andrés fontaine, economy ministry, and ricardo García, amCham Pablo vezzani and Guilermo ochoa, 3m leonardo riquelme, Cristián busquets and Gustavo Contreras, mutual de seguridad CChC miguel andrade, Travel security and Jorge malloca, american airlines Daniel riveros, seguros interamericana; Carmen aspillaga, aon; and eduardo bustamante, seguros interamericana rodrigo bulnes, Cruz & Cía and José luis Donoso, morales, Donoso & Cía.w

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Economic Projections Seminaramcham’s economic projections Seminar ‘Recovery in emerging markets’ was held on June 15 at Santiago’s Hotel Grand Hyatt. the seminar was organized in con-junction with the U.S. chamber of commerce, the Univer-sity of miami’s center for Hemispheric policy and the el mercurio newspaper.

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mcham’s economic projec-tions Seminar, organized in con-junction with the U.S. chamber of commerce, the University of miami’s center for Hemispheric

policy and the el mercurio newspaper, took place as the world was pondering the implications of the european debt crisis. Yet the overall conclusion was that latin america’s prospects for a steady recovery from last year’s recession remain promising.

Speaking at the seminar, economy minister Juan andrés Fontaine was reas-suring about the outlook for chile, despi-te its two recent earthquakes - the “real” earthquake of February 27, with its des-truction of part of chile’s capital stock, and the european crisis, with the resul-ting international financial turbulence.

a strong recovery from the February earthquake is underway, he told the semi-nar. preliminary figures for april showed that Gdp growth had already returned to its pre-earthquake level, he noted.

and, despite the european crisis, the international context remains fa-vorable for chile, he added. the U.S. economy is recovering better than ex-pected, he argued, and growth in asia is very strong, with high export prices accompanied by low interest rates.

in other words, according to minis-ter Fontaine, there is no reason why chile should not “reach the summit of development by 2018” as promised by Sebastián piñera, chile’s president since march. on its side, chile has the “hidden wealth” of unexploited growth

potential, he told the seminar. However, there are important cha-

llenges, he warned, highlighting chile’s recent loss of productivity. in addition, it will have to tackle problems, such as low labor market participation and educatio-nal attainment, where it will necessarily take time to achieve results.

But there are some short-term risks for the chilean economy, suggested oscar landerretche, an economist at the University of chile and former advisor to Senator eduardo Frei whom president piñera defeated in last year’s election.

With the economy regaining momentum and the post-earthquake surge in cons-truction yet to kick in, there is a potential risk of overheating, he argued.

inflation will run ahead of market expectations and reach over 4% - the upper limit of the central Bank’s me-dium-term target range - at the end of this year, he anticipated. that will, in turn, mean higher-than-expected in-terest rates, he added.

and then, according to landerret-che, there is the issue of the exchange rate. in his view, chile is hovering on

a

recovery in emerging marketsBy ruth bradley

eConomiC projeCTions seminAr

at this year’s version of amCham’s economic Projections

seminar, international and local speakers looked at the economic

and political outlook for the region as well as Chile.


the verge of the so-called dutch di-sease, with foreign-exchange income from copper strengthening the peso to the detriment of other sectors such as agriculture, forestry and agribu-siness that are important for jobs as well as for the recovery of the areas of southern chile that were worst hit by the February earthquake.

regional outlook

a picture of good news tempered with risks also prevails in the rest of the region, according to claudio loser, president of centennial Group latin america, a stra-tegic advisory firm, and a former offi-cial at the international monetary Fund (imF). a feeling of prosperity, born of the region’s sustained growth from 2004 to 2008, and declining inflation are not grounds for complacency, he warned during a roundtable chaired by marcela Vélez, coordinator of the economics and business section of el mercurio.

per capita income in the region is a lot higher than in china or india, he noted, but it is growing more slowly than in developed countries and far more slowly than in china or india. indeed, he insisted, latin america’s share of world income is dropping.

moreover, although the region is, in general, doing well at the moment, there are some very important risks, he told the seminar. one of those risks is china,

the driver of the commodity prices that are key to its fortunes.

according to loser, the recent drop in commodity prices, triggered by the european debt crisis, is unlikely to con-tinue. it would, however, be a different matter if growth in china were to slow.

Some analysts believe there is a bubble of over-investment in china, noted loser. and, if the government de-cides to cool the economy significantly or the bubble simply stops growing, that would have major consequences for latin american economies.

the growth of china and other asian countries means that the United States is no longer so pivotal for latin america, but it is still important, par-ticularly for value-added exports. and the U.S. is not doing so well, according to Susan Kaufman, director of the Uni-versity of miami’s center for Hemisphe-ric policy.

“it’s set to grow at 2-3% which isn’t terrible, particularly as compared to europe,” she told the seminar, “but it is essentially a jobless recovery.”

that view was echoed by John murphy, vice-president of international affairs at the U.S. chamber of commer-ce. “Recovery is well underway but it’s disappointing compared to other pre-vious recoveries,” he said.

the recessions of the early 1970s and 1980s were followed by a couple of years of 6% growth, he recalled. But,

despite one quarter at 5.6%, that’s not happening this time.

consumption, the largest component of Gdp in the U.S., has been hit by the destruction of household wealth during the recession while still low capacity utilization in industries is a deterrent for new investment. moreover, unemplo-yment is running at close to 10% - its highest level in several decades, noted murphy - and projections suggest that it will take “years to recover.”

looking further ahead, Walter Bas-tian, deputy assistant secretary for the western hemisphere at the U.S. de-partment of commerce, identified edu-cation as a key challenge for latin ame-rica. “the picture is pretty abysmal,” he told the seminar.

technology is changing at a dizzying pace, he pointed out, and, without edu-cation, latin america won’t be able to take advantage of the changes, he po-inted out. “no-one knows exactly where technology will take us,” he admitted, “but we need to be prepared.”

hemispheric relations

different speakers at the seminar noted that, by raising barriers to trade, the recent international recession has had a negative effect on the prospects for longer-term growth. “in the reces-sion, countries have continued to raise protectionist barriers to tilt the playing

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field to their advantage,” noted murphy.U.S. trade policy is in “a state of sus-

pended animation, with a lot of good talk but not a lot of action,” he said. like Susan Kaufman, he blamed organized labor and its opposition to free trade agreements for this situation.

Still, it is “inexcusable for congress and the administration to be sitting on three excellent free trade agreements with colombia, panama and South Korea,” he complained. the benefits are, after all, abundantly clear.

chile-U.S. trade supports over 270,000 jobs in the United States, he re-ported, and 44,000 of those jobs can be attributed directly to increased trade as a result of the two countries’ free trade agreement. “i defy anyone to name ano-ther budget-neutral initiative that has generated anything like that number of jobs,” he told the seminar.

For U.S. trade policy, mid-term congressional elections, due to take place in november, could have impor-

tant implications, suggested Kaufman. the democrats, who are generally less enthusiastic about free trade than the Republicans, could lose control of both houses, she said.

But that is not the only challenge for U.S. relations with latin america. Spea-king in a roundtable chaired by Karen poniachik, a former chilean mining mi-nister, peter Hakim, president of inter-american dialogue, a U.S.-based think tank, argued that it has yet to recognize the changes that have taken place in a region that is still perceived as poor and politically unstable.

one of those changes, he said, is the emergence of Brazil as a global power. now accounting for over 40% of regional Gdp, it has far outgrown mexico and, according to Hakim, the U.S. needs to recognize its role and influence and approach bilateral and regional relations accordingly.

probably for the first time, the U.S. now also has real adversaries in the region, he

added. “You can call them anti-democra-tic if you like - i’m talking about Venezuela, ecuador, Bolivia, nicaragua, etc.”

Hernán Felipe errázuriz, president of the chilean council for international Re-lations, agreed with Hakim in identifying the emergence of Brazil as a world power as the most important recent event in latin america but disagreed on the in-fluence of Venezuela. this has, he said, been undermined by impoverishment and the failure of the chávez government.

“it can’t be a model when there isn’t food, electricity, or vital water supplies,” he argued. and, he added, the cuban regime is sustained “only by the longevi-ty of two brothers.”

declaring himself very optimistic about latin america’s prospects, he told the seminar that the region has recently produced only good news. it is, he sug-gested, a case of no news being good news - “the lack of surprises actually makes the region rather boring.”

there is, he pointed out, no foreseea-ble risk of armed conflict in latin ameri-ca. and, as the election of Juan manuel Santos as colombia’s next president de-monstrates, fighting guerrilla movements is popular, he added.

provocatively, he also argued that the United States now plays “no role in the region, none at all.” Whether that is good news is, of course, a moot point but it is in line with the general view of speakers at the seminar that latin america is making a reasonably good job of finding its own way out of the recent recession.

ruth bradley is the Santiago correspondent of The Economist

chilebUSiness

Susan Kaufman, University of Miami, speaking at the seminars.

Karen Poniachik, ex-Mining Minister and John Murphy, U.S. Chamber of Commerce

Juan Jaime Diáz, El Mercurio, Juan Andrés Fontaine, Economy Ministry, Ricardo García, AmCham


in may, the international monetary Fund and euro-zone finance ministers approved an unprecedented US$146 billion rescue package for Greece to prevent a default and stop the crisis from spreading to other countries. at that time, the american businessman George Soros said Greece was still in danger of going into “a death spiral,” because the cost of taking on more debt was prohibitively expensive.

Robert J. Samuelson, the influential american columnist, went further; the debacle is nothing less than the “death spiral of the welfare state,” he said, and this is not just a problem for Greece. many developed countries run the risk of following the Greeks into financial ruin by offering huge health and retirement benefits for their populations without the means to pay for them.

europe is not undergoing an exchange rate crisis, but rather a crisis caused by huge debt, big government, and slow eco-nomic growth. When the euro was introduced in 2002, the new common currency was supposed to facilitate economic growth and promote grea-ter political unity. this didn’t happen. economic growth in the euro-zone averaged 2.1% between 1992 and 2001, and 1.7% between 2002 and 2008, held back by high taxes, ove-rregulation and generous subsidies.

in the political arena, the euro is dividing europeans. the greatest danger is the tendency of some poli-ticians to blame speculators for their problems instead of accepting their problems are due to excessive indebtedness. the majority of european countries run high fiscal defi-cits, which have grown since 2009 due to the global economic crisis. last year, Greece’s fiscal deficit was 13.6% of Gross domestic product and its total debt equivalent to 115.1% of Gdp.

But according to calculations by Jagadeesh Gokhale, an economist at the cato institute, Greece’s fiscal mess is much more serious, so much so in fact that its debt is 875% of Gdp when

measured as the present value of all future fiscal obligations in pensions and health.

making things worse is the early retirement age in european countries and an aging population combined with higher life expectancy. Greece is nearly the most extreme case in the region with an official retirement age of 58, second youngest only to italy with 57.

However, the fiscal austerity plans that european governments are trying to implement to stop the fi-nancial hemorrhaging are not a substitute for pro-growth economic policies. if europe takes advantage of this crisis to improve its competitiveness and rein in the welfare state, it could realize the benefits of a huge common market, stable currency and low inflation.

chile should take away two lessons from the Greece situation. First, given that world growth is by

no means guaranteed, we should moderate our level of public sector spending and focus on recovering the levels of productivity we had in the late 1980s and early 1990s. this will allow us to obtain the high levels of growth and employment needed to ensure steady progress towards achieving developed country status.

Secondly, chile’s solid fiscal si-tuation and low public debt should not be taken for granted. Faced with the constant pressure to increase social spending, chile should act cautiously and not fall into the ex-cesses of the welfare state that are

dragging many countries, including Greece, into the financial abyss. Social protection for the most needy must be balanced with certain requirements, and the assurance that they will become their own agents of change in their future welfare. that is, to go from a Wel-fare State to a Society of entrepreneurship.

Crisis in Greece: Lessons for ChileBy ricardo matte

ricardo matte is Director of the Economic Program at the Santiago think-tank Libertad y Desarrollo.

chilebUSiness

economic snapshot

Note: This column was first published in La Tercera newspaper on June 5, 2010.


friend in need is a friend indeed the saying goes, and when chile was in need after the devastating February 27 earthquake, the United States

provided all manner of help from sate-llite phones to air transport, emergen-cy supplies and donations.

now the reconstruction is underway, the new government has turned its at-tention to the longer term goal of making chile into the first developed country in latin america by 2018.

But chile won’t get there alone - it will need to work closely with its trading partners, especially the United States, said minister of Fo-reign affairs, alfredo moreno, at an amcham breakfast on June 10.

after thanking outgoing U.S. am-bassador paul Simons for his support following the earthquake, moreno highlighted the close commercial rela-tionship between the two countries and its importance for chile’s development.

“political and economic relations with the United States are as strong as they’ve ever been and we will work to make sure that continues to be the case,” said moreno.

the Foreign affairs ministry plays a key role not only in promoting trade and investment, but also in other areas of in-ternational cooperation including secu-rity, science and technology and human capital, said moreno.

Foreign investment in chile totaled US$5.1 billion in 2009, while chilean companies invested US$4.3 billion abroad, but competition is strong and

the ministry must work hard to increase investment, said moreno.

“We need to attract more investment to fuel growth and also create the con-ditions so our companies can invest in other countries,” he said.

When it comes to trade, chile has a “huge comparative advantage” given its global network of 20 Free trade agre-ements with 57 countries including the U.S., noted moreno.

as a new member of the oecd, chile needs to improve its public policies to meet the organization’s high standards,

but when it comes to trade openness chile is an example to other members, said moreno.

“our ‘Fanatic For Free-trade’ appro-ach means we have more trade agree-ments with other oecd members than anyone else,” he said.

and chile’s number one trading partner is the United States. excluding copper sales, the U.S. was the top destination for chilean exports in 2009 followed by china, which was first if copper exports are included, and the top source of chilean imports.

Bilateral trade more than doubled between 2004 and 2008 to US$20.2 billion and 94% of trade is subject to zero tariffs. “We need to keep working to include more products under the Fta,” said moreno, adding export res-trictions on baby kiwis and pomegra-nates were recently lifted.

But exporting more fruit will only get chile so far towards its develo-pment goal. to really progress, the country must exploit its comparative advantages in areas like astronomy and mining, stressed moreno.

“We need to improve our productivity to be more competitive and promoting science and technology are key elements in achieving this,” said moreno.

the recent decision by the euro-pean Southern observatory (eSo) to build its extremely large telescope, the largest ever built, in northern chile is an example of the country’s scienti-fic research potential.

“it seemed the desert in northern chile was good for nothing but the clear skies

breAKFAsT

a more efficient foreign serviceBy Julian Dowling

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alfredo moreno, minister of foreign affairs

We need to improve our productivity to be more

competitive... promoting

science and technology are key elements in achieving

this.

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are perfect for stargazing… in the coming years, many of our best students will be studying astronomy,” said moreno.

international cooperation in global en-vironmental and security initiatives, such as reducing greenhouse gas emissions by 20% by 2020, is also essential for chile to meet its development goal.

Regarding intellectual property, chile’s inclusion on the UStR 2010 priority Watch list of countries that have failed to protect intellectual property adequately is unjustified given recent progress in this area, said moreno.

“Just walking down the street you can tell that piracy is not as much of a pro-blem as it used to be,” he said.

But moreno acknowledged there is room for improvement and empha-sized the need for education so that chileans understand why producers of intellectual property should obtain the fruits of their labors.

protecting intellectual property is vital as chile looks to expand or update many of its trade agreements, he said. For example, chile recently signed a services agreement with china beco-ming only the second country to do so after new Zealand.

the ministry’s export promotion arm prochile has 57 offices worldwide, inclu-ding six commercial offices in the United States, which help organize trade fairs and other events.

But more important than the number of these events, or the amount of money spent on them, are the con-crete results in terms of export oppor-tunities created, he said.

“We are like a services company - if our clients are happy we are happy, and who are our clients? You,” moreno told amcham members and other guests.

and that means providing services in the right place at the right time. the ministry’s network of 70 embassies and 107 consulates serve expats and trave-lers around the world, while prochile helps chilean companies enter new markets, said moreno.

But the world is “changing quickly” which means reorganizing embassies in europe and other regions to better serve the needs of companies and in-dividuals.

“the world is changing and so are the needs of our companies,” said moreno.

For example, having a science and technology attaché in costa Rica or a cultural attaché in egypt “doesn’t help us much,” so the ministry is studying where to send diplomats to better serve chile’s national interests, said moreno.

another stumbling block is that chilean diplomats are often ill-equi-pped for their responsibilities, whether through lack of language skills, relevant education or experience. But this is so-mething the ministry aims to remedy by implementing a merit-based selection system similar to Brazil.

“our diplomats need to be cons-tantly trained and evaluated, this shouldn’t stop when someone enters the service,” moreno said.

chile’s free trade agreements and its good relationship with the U.S. are important advantages on the road to development, but a well trained and more efficient foreign service is essen-tial to link companies with business opportunities anywhere in the world, concluded moreno. chilebUSiness

Julian Dowling is Editor of bUSiness CHILE

Colin Rogers, Ediciones Financieras and John Byrne, Boyden.

Michael Grasty, Quintana, Majlis & Cia and Alfredo Moreno.

Arturo Fernandois, Pamela Camus and Alfredo Moreno.


AACClA meeTinG

cry for a bold region-wide stra-tegy to increase productivity and enhance regional competitive-ness – this was the resounding theme at the mid-year meeting

of aaccla, the umbrella organization of U.S. chambers in latin america, held in conjunction with the Business Future of the americas conference in lima, peru, on June 21-23.

peru’s president alan García opened the conference, highlighting his country’s commitment to sustaina-ble growth and investment as a means to continuing to improve wellbeing and opportunities for all peruvians.

after a 20-year process of establis-hing democratic principals and free markets as the foundation of growth, business leaders can now invest with confidence in the country’s future, said president García.

He expects peru to grow at a 6.5% per year in the foreseeable future with foreign investment expected to double over the next five years and exports expected to reach US$90 billion by 2021. in the future, president García envisions the development of an eco-nomy of ideas and technology.

the World Bank’s managing di-rector, Juan José daboub, built on the positive tone set by president García, focusing on latin america and the caribbean’s unique opportunity given that the region has weathered

the recent economic crisis relatively well and is second only to asia in the speed of recovery.

Harnessing this opportunity de-pends on improvements in human ca-pital, infrastructure, technology and savings rates, said daboub, who finis-hed with a warning to remain vigilant in reducing corruption.

But to really seize the opportunity, latin america must improve producti-vity and facilitate trade, which are areas

aaccla has been focused on for se-veral years and which will be critical in defining the region’s competitiveness particularly with regard to asia.

in the aftermath of last year’s reces-sion, speakers agreed that the region must be cautious regarding the poten-tial damage of populist measures inclu-ding increased levels of protectionism.

Representing the private sector, ca-terpillar chairman and ceo, James owens, sees great opportunities in latin

a

an opportunity for latin america

By Kathleen C. barclay

in June, amCham Chile director, Kathleen barclay, and the

Chamber’s general manager, Jaime bazán, attended the mid-year

meeting of the association of american Chambers of Commerce in

latin america (aaCCla) in lima, Peru.

america given that emerging economies are expected to grow 6% annually versus 2% in the developed world. in fact, ca-terpillar has just set up a regional center in panama to take advantage of some of these regional opportunities.

the U.S. chamber’s senior vice-president for international affairs, myron Brilliant, was also positive about the region’s future. He noted the chamber’s commitment to helping

shape a global environment based on principals of free enterprise, free mar-kets, and free trade – including active support in the U.S. congress for pen-ding trade agreements with panama, colombia and South Korea.

other panel sessions focused on topics such as customs and trade security, export and investment pro-motion, productive chains, small and medium-sized businesses, infrastruc-ture and logistics.

Regarding this last topic, the region’s difficult geography and the perishable nature of many of its exports means that air connectivity is hugely impor-tant for development and trade, said enrique cueto, ceo of lan airlines.

according to cueto, the greatest ba-rrier to integration is regulatory since different rules and regulations increase the cost of transport and logistics signi-ficantly in many countries of the region.

He also warned about potential “environmental taxes” as a result of

the carbon footprint generated by long distance air transport required for many of the region’s products.

the U.S. under secretary of com-merce for international trade, Frank Sanchez and Honduran Foreign minis-ter mario canahuati echoed the calls for increased regional productivity. Under Secretary Sanchez invited all the participants to the fourth annual americas competitiveness Forum to be held in november in atlanta as a means of moving the ball forward.

overall, the meeting was a great success. many countries reaffirmed their commitment to democracy and free markets as a basis for growth, as well as increased productivity and re-gional integration in order to take ad-vantage of what is broadly perceived as an auspicious time for latin ameri-ca and the caribbean.

AACClA meeTinG

alan García, President of Peru

Kathleen C. barclay is past chair of AACCLA, a past president of AmCham Chile and chair of bUSiness CHILE’s Editorial Committee.

chilebUSiness


inTerview

rturo Fermandois knows the United States. as a Ful-bright Scholar he received a masters from Harvard University in 1994, taught at Harvard law School, and travelled to new York regularly to meet with clients of his law firm, Fermandois, evans & compañia. But when

president piñera asked the constitutional law expert to become chile’s new ambassador to the U.S., he was taken by surprise. Heading up the embassy of one of chile’s main trading part-ners is no small challenge, which is why he has spent the last few months preparing for the job. He formally assumed his new duties in Washington dc in June, but before boarding the plane he spoke with bUSiness cHile about the challenges ahead.

What areas of Chile’s relationship with the u.s. will you focus on?

the president believes that our relationship with the United States should benefit normal chileans. and by that i mean chi-leans living in any part of the country that don’t have the means to travel to the United States on their own. our bilateral relation-ship is very good in areas like free trade, education and research and development, but the relationship should also benefit un-derprivileged chileans. the aim of our relationship is a better standard of living for both our peoples, but we have to stop seeing the U.S. as a country that only benefits big business and the elite. these advantages should be extended to all chileans regardless of their location, education or financial resources.

and how will you achieve this?there are many existing programs and others we want to

start. For example, in the free trade area we want to build bridges to help small and mid-size companies (Smes) sell their products in the United States, which includes english language training, cultural awareness and market studies. amcham has made im-portant progress in these areas and my role as ambassador is to duplicate these programs in the public sector.

We are planning 160 trade promotion activities in the U.S. this year including food fairs and other events. We will put Smes in touch with our chambers of commerce in the U.S. and work with prochile and corfo to coordinate support.

of course, we will also support large companies which generate income and create thousands of jobs but, in ge-neral, these companies have the tools and resources to sell their products without our help. Smes don’t have these tools, starting with english.

Why is english so important?only 5% of chilean high school graduates can speak english,

which is a huge problem in our globalized world. a new program i am working on with the education minister, Joaquín lavín, is called english traceability, which will track each chilean’s pro-gress from pre-school through graduate school. We will begin, for example, by bringing U.S. teachers to work in chilean pri-mary schools, sending chilean high-school students to english language summer camps, and helping the most talented stu-dents pursue a postgraduate degree in an american university.

the U.S. has many of the top universities in the world so it is very important for us to take advantage with programs like Becas chile and the Fulbright commission. my role will be to increase the number of chilean students who study in the U.S. and also open our doors to american students in chile. it will take years for english language programs to show results, but the benefits for chile will be huge.

and four years is not long…Yes, but we can lay the foundation of these programs, building

on the good progress made by my predecessors. on the one hand this means more money, but also more coordination. Becas chile, for example, has resources of US$6 billion, but it can be better organized. and we always need more money for education, which is the most profitable investment in the long-term.

What other areas will you focus on in Washington?president piñera is very interested in developing clean ener-

gies and protecting the environment. We hope he will travel to california in September under the framework of the plan chile-california, which is a good example of public-private sector coo-peration. Since california is a leader in renewable energies, we will emphasize the potential benefits for chile in terms of the exchan-ge of scientific personnel and know-how. chile urgently needs to diversify its energy mix and improve its environmental protection, and we have much to learn from the U.S. in this regard.

and it’s not just california that can help chile with its scientific expertise. the U.S. is a huge country and each State has some-thing different to offer chile. there’s no reason we couldn’t sign similar agreements with other States like Utah or idaho.

Do you expect obama to visit Chile?president piñera has extended the invitation but the date is

not confirmed. We want to help make this happen because it

Arturo Fermandois, Ambassador to the United States

Strengthening Bilateral BondsBy Julian Dowling

a


Julian Dowling is the Editor of bUSiness CHILE

would be a clear sign of our excellent bilateral relationship and a meeting of two partners united by the same ideals: democracy, freedom, entrepreneurship, human rights and free trade as a tool to defeat poverty.

Will you ask for u.s. support in the reconstruction?chile has received a lot of help from the U.S. including emer-

gency supplies and donations, but we know the earthquake was so massive that it will take a long time to rebuild. many of our universities suffered damage to their infrastructure and one of my duties will be to seek donations to rebuild science labs and research centers in areas hit by the earthquake. the best way the U.S. can help chile in the long-term is through the exchange of scientific knowledge.

intellectual property has been a thorn in the side of Chile-u.s. relations, how will you address this issue?

as ambassador, i would like to remove all obstacles that have created a difference between our countries in intellec-tual property. one clear goal is to remove chile from the UStR priority Watch list.

chile has made significant progress in intellectual property since the signing of our free trade agreement. We have a new law with tougher sanctions and a special police unit created in 2008 to fight piracy. But we need the pharmaceutical, entertain-ment and software industries in the U.S. to understand these reforms and, as a lawyer, i hope to explain them more clearly.

Chilean police recently arrested a Pakistani citizen who entered the u.s. embassy with traces of explosives. how important is security in bilateral relations?

chile and the U.S. have an excellent level of cooperation in international and human security including non-proliferation agreements and our common fight against terrorism. chile is a good partner for the U.S. in security issues and vice versa. my job as ambassador is to not take our foot off the accelerator and maintain this level of cooperation. We believe the case of the pakistani citizen is an isolated incident.

What about immigration?my job is to facilitate the immigration process for as many

chileans as possible to go to the U.S. and allow the 100,000 chileans who live in the U.S. to conduct their affairs normally, but at the same time respecting U.S. immigration regulations.

on a personal note, i understand you play guitar in a rock band. Will you continue to play in Washington?

one of the highest personal costs of my appointment is that i’ll have to leave my band, the Rockasaurios. But i’ll try and find some other ambassadors who like classic rock to form a new band. chilebUSiness


By santiago eneldo

his issue of bUSiness cHile coincides with the 4th of July celebrations, so it is appropriate that at the time of writing this the United States soccer team has just won its first FiFa World cup match in eight years, 1-0

against algeria.Sadly, the U.S. and chile were both knocked out of the

tournament in the second round, but, whichever team you support, watching 22 men chase a ball around a field has given us something to cheer (or cry) about just when we needed it most. that’s because, back in the ‘real’ world, there is not much to celebrate.

living in a global marketplace seems to bring extraordinary risks and the possibility of a new epidemic of uncertainty across markets and currencies appears quite probable. How terrifying!! i was recently in europe for two weeks and confidence levels are extremely low, with the preachers of doom and gloom very much in the majority. the “borrow and buy your way out of trouble” pundits are losing ground and, with the eurozone debt at an all time high, something has to give. this means drastic cuts in public spending, which could lead to massive strikes and social unrest.

But things are not much better across the pond. it must be so rewarding for americans to know that china will keep buying U.S. debt, to the point where, i am informed, the chinese now own more of america than americans do! on the positive side, china cannot allow the U.S. recovery to falter because they need this market to soak up everything produced by, generally dirty, chinese industries. china must also meet the growing demands of the chinese people. and to prove its commitment to the concept of open markets, china has floated the yuan, well just a little...

moving on to environmental disasters, things were bad enough before Bp (ex British petroleum, unless you have been asleep for a month) blew an oil rig in the Gulf of mexico causing a massive spill. president obama promised to “make Bp pay” - the culprit has committed US$20 billion for clean up and compensation and that is just the beginning. the president would also have had the pleasure of watching the U.S. soccer team draw 1-1 with england, thanks to an own goal by english goalkeeper, mr. Green. But the ‘own goal’ by Bp, a company which has tried hard over the past decade to cultivate a Green image, will most certainly have a more lasting effect.

So, the news is generally ghastly – except in africa. Well, there is always bad news coming out of africa (witness the spread of aidS) but for now the Soccer World cup is the jewel in this poor continent’s crown. the home side, South africa,

beat France in their last group match sending both teams home early; France to humiliation and investigation but the South african team will be celebrated for its achievements. literally billions of people worldwide are watching africa’s first ever mega event and, as archbishop desmond tutu said during the opening ceremony, “all of mankind originally comes from africa so welcome home...”!!

So what can soccer teach us? Well, there are winners and losers, as well as whiners and divers, and very often the presiding authority (referee or linesmen) gets it wrong with almost tragic consequences. i think the greatest lesson here is that 32 countries of all shapes, sizes, ethnicities, colors, religions, Gdp, levels of debt, tattoos and hairstyles are competing for one of the most famous trophies of all time – the beautiful FiFa World cup trophy (previously the Jules Rimet trophy) – and no one gets killed; well at least not on the playing field.

despite the hostilities and refereeing errors, at the end of the game everyone shakes hands, swaps shirts and eventually goes home. after the final whistle blows, perhaps the most important lesson is that a ball of whatever size (in this case a football called Jabulani) will always bring people together – win, lose or draw. the winner takes the trophy BUt we will go through it all again in just four years…

i remain ready to play – whatever your choice of ball,

santiago eneldo(abuse always welcome at: [email protected])

life in the slow lane

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