As the world becomes smaller, technology advances and innovation become the name of the game. Consequently, countries need to adapt, expand, and revolutionize their economic and political practices. At the head of this globalization, the frontier is the Latin American up-and-coming powerhouse: Chile. Chile’s past economic difficulties, and the corresponding solutions, ultimately served as a catalyst to the country’s recent exponential economic growth. Who serves to benefit from this current growth? Foreign start-ups, foreign companies entering the Chilean market, and, of course, Chilean businesses themselves.
An Uphill Climb…
From the economic perspective of the 1930s & 1940s, the recovery, stabilization, and flourishment of today’s economy seemed to be as difficult of an uphill climb as that of trying to scale Ojos del Salado. After Chile’s depression in the 1930s, which was a time of unrelenting debt and economic despair due to decreasing international demand and plummeting prices, recovery and redemption seemed out of reach for the country.
Despite this bleak outlook, Aguirre Cerda, president of Chile from 1938-41, focused on supporting the middle class by stimulating and increasing industrial production within the country and by reducing the availability of imported goods. This action prompted the creation of the Corporacion de Fomento de la Produccion, or CORFO, in 1939. Seventy years later, this government entity would become the impetus driving economic stimulation and innovation.
The Growth of ChileconValley
In 2010, CORFO set out to make Chile the world’s cutting-edge entrepreneurial location. Since this decision, CORFO has lived up to its founder’s expectations of stimulating the Chilean economy. One of the hallmarks of this decision was the creation of “Start-Up Chile,” a program launched and funded by CORFO. In the first six years of this project, more than USD$40 million has been awarded to over 1,300 different nascent businesses from 80+ countries. This distribution of funds and growth in entrepreneurial spirit has given rise what some are calling “Chilecon Valley.”
This supportive, thriving business environment is serving as Latin America’s own globalized business incubator. Thus far more foreign businesses than Chilean ones are participating with the program. The program operates entirely in English. Also, the program encourages participants to build a presence for their businesses not only in Chile but also beyond the country and even region. This only further states the interest for foreign expansion within Chilean markets.
Investment and Banking Grants
CORFO is involved with different types of financing, including the following investment grants:
- The integrated foster initiatives. These initiatives support the implementation of technological investment projects, whether they are new projects or at an expansion stage. This initiative funds up to 30% of the initial investment.
- Support Program for Projects at a Pre-Investment Stage. This supports the implementation of pre-investment studies. This has been designed to accelerate the decision-making process for investing in new projects or expanding the company’s current capacities. Furthermore, it funds up to 70% of the pre-investment studies costs.
The banking guarantee is called the pro-investment guarantee. CORFO intends to improve the access and funding conditions through guarantees that it grants to the ﬁnancial lending institutions. Furthermore, the program is set up for companies developing an investment project. To conclude, it guarantees up to 80% of the funds needed with a maximum of USD$4 million.
Tax Reduction and Innovation Grants
Tax reductions are based upon income tax. It allows a reduction in income tax of 35% of the investment of R&D. Moreover, this tax beneﬁt is complementary to other COFRO´s programs and subsidies.
Lastly, the following three grants are grants for innovation:
- Technological contracts. This grant promotes links and partnerships between companies and suppliers of knowledge to help solve problems through contracts for technological innovation. It ﬁnances up to 70% of the contracts for technological innovation projects and the grant depends on the size of the company, with maximum funding of USD$300,000.
- L1: Products or Processes Innovation (Prototypes). The grant finances companies involved with testing development and experimentation among other activities.
- L2: Innovations Validation and Packaging. L2 is a grant for development initiatives related to the adjustment prototype, validation, testing, expansion, and approvals.
The Results? Economic Stimulation
Chile’s economic environment is unlike any other in the world right now because, while many countries are fighting against immigration and foreign businesses, Chile is welcoming both with open arms. Immigration and foreign businesses are helping to stimulate the economic climate in the country, while also encouraging and giving back to local, Chilean startup companies.
Additionally, due to the rise in entrepreneurial endeavors in the country, universities are adding rigorous courses to their Business and Entrepreneurship program. With courses like these, your company will have access to Chilean graduates who, in addition to their formal business education, know first-hand, the local culture, customs, and conventions.
How Can You Enter This Century’s Emergent, Innovative, Globalized Hub?
Chile is said to not only be the region’s Silicon Valley, but quite possibly, could continue to grow and morph into the Singapore of Latin America; a place of success, invention, creativity, and profitability. Entering the market now sets companies up for continued success. However, entering without any knowledge of the Chilean way of doing business may prove faulty. Therefore, it is recommended you partner with a local firm. This local partner can guide you and your company through the steps of setting up a business in Chile and successfully penetrating your desired market.
Excited by the possibilities that lie ahead in Chile for your business? Then get in contact with a team member from Biz Latin Hub. Your company has the power, Chile has a prosperous economic environment, and Biz Latin Hub has all the required experience that it takes to ensure your commercial success. Reach our today at [email protected] for personalized support.