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(Last updated: 05 May 2008)
Trends and opportunities
The market
Chile’s macroeconomic environment is strong with solid fiscal and external accounts, according to the World Economic Forum; the entity also highlights Chile’s public institutions, especially in terms of transparency and the laws protecting contracts and private property.
The Economist Intelligence unit places Chile as the best country in Latin America to do business, measuring indicators such as political and institutional environment, macroeconomic stability, policy towards private enterprise, foreign investment policy, financing and infrastructure. Chile is also ranked 24th among 125 economies according to the Global Competitiveness Report 2006-2007.
Market highlights:
- Chile is considered Latin America’s most e-ready market according to ranking from The Economist Intelligence Unit in 2005.
- The categories evaluated are general business environment, adoption of e-commerce by consumers and business, legal and regulatory environment, support to e-services and social and cultural infrastructure.
- Eight out of 10 Chileans own a cell phone. A third of Chile’s telecommunication investments have gone into the mobile telephony market. As a result, Chile features the highest level of mobile phone penetration in Latin America (86 per cent).
- Chile leads Latin America in digital access to public information and is ranked 22nd worldwide in e-government, according to the United Nations’ 2005 Global e-Government Readiness Report. The Chilean Government is actively using the Internet as a channel for servicing citizens and encouraging public participation in decision-making, as well as increasing efficiency. Today, 97 per cent of income taxpayers file and pay their tax information online.
Government Digital Agenda
In January 2008, the Chilean Government launched a digital strategy program, which sets down guidelines for IT development and economic growth. Among key announcements was the creation of an IT federation that will include the largest associations in the sector.
The strategy aims to coordinate better government policy with the needs of the local ICT industry; it also boosts the level of internet access in homes, workplace and school.
The government stated it is committed to helping the private sector increase productivity and competitiveness through the use of IT, develop better regulations to improve the IT business environment and improve regulations related to intellectual property.
IT industry
Chile's IT industry saw sales of US$1.65 billion in 2007 with US$250 million in exports. Of the total sales last year, which represented a 12 per cent increase compared to 2006, 45 per cent was from hardware, 35 per cent from software and the rest from services.
For 2008, the Chilean IT companies association (ACTI), expects exports to total US$350 million, while the goal is to reach US$1,000 million by 2010. The industry goal is to focus on becoming a platform for exports of IT services, just as India and Ireland have done and a main focus is to become a base for offshore and nearshore servicing.
A major challenge for the local IT industry is low investment in IT research and development, which currently only represents 0.7 per cent of the nations’ GDP, while in developed countries it is 3.2 per cent. If Chile aims to become a developed nation by 2020 it requires speeding up spending process in research and development.
Telecommunication, government and retail IT sectors are the sectors that have the highest technology purchase rate, according to the companies associated to Gechs.
Opportunities
In Chile there are around 70 Australian companies with offices in Chile covering a variety of business areas. In the case of IT-related products and services, there are a number of suppliers already successful in Chile. Some examples are suppliers for the retail sector, mining exploration, irrigation and water management sector, land imagery, education and training, geographical positioning.
As a whole, due to its high rate of Internet penetration and its competitive Internet service provider market, the country has the ability to rapidly absorb technologies.
The Chilean Government encourages technology-intensive foreign investments. The government investment program offers a range of services to help companies set up successful ventures in Chile. It supports those companies that decide to establish permanent operations in Chile. These companies range from businesses offering international services such as contact centres and shared service centres to enterprises that work on the development of state-of-the-art technology.
Projects typically support aggressive development and/or use of new technologies in the fields of computer science and communications, biotechnology, new materials and electronics, such as: shared service centres for financial, accounting and human resources
call centres and technical support centres, IT and back offices, software development, electronic integration and assembly operations.
Health
The sector has improved efficiency significantly; however mainly at private level. The Chilean Government considers it is fundamental to improve servicing productivity and for this reason it has been announced that a new association - the Chilean Health Informatics Association (ACHISA) - has been formed.
The main objective of this organisation will be to promote the development of health IT and promote international cooperation. The University of Queensland is already cooperating on this front through an MOU between the university and the Chilean digital agenda department, from the Ministry of Health.
Chile is improving its public health electronic recording systems, not only at administration level. The key aspect is to find solutions that will allow inclusions of clinical data supplied by medical doctors. The Health Ministry plans to have an annual budget for network and IT systems of US$9.5 million starting in 2009.
Competitive environment
The market is competitive. Chile has Free Trade Agreements with many countries, including USA, Canada, Europe and China among others, allowing products from these countries to enter the Chilean market without the six per cent import duty that is levied on all Australian products. In addition there is no current direct shipping service between Australia and Chile meaning average shipping time from Australia to Chile is 55–60 days nearly twice that of North America to Chile.
However, this panorama can change in the future; progress was made at a second round of negotiations of a potential Chile-Australia Free Trade Agreement.
The market presents risk of concentration in a few big players and shows lack of efficient laws to avoid copy, imitation or piracy. Chile can be proud of the quality of its professionals, prestigious researchers, management capacity and strong infrastructure in telecommunications. Industry professionals, however, at both management and technical level, may have limited English skills. In general, software requires translation to the Latin America language.
Local companies still need to improve and focus more on the customer; they currently remain focused in technical and productive aspects. There is inefficiency in pre- and after- sales services and delivery timings are not adequate.
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