Despite the pandemic, Chile managed to attract a record amount of foreign investment during the first half of 2021 and is now focusing on new opportunities to attract foreign companies.
Foreign direct investment (FDI) is going through a particularly dynamic time in Chile. According to official data, a record amount of US$13.7 billion was invested in the country between January and June 2021. This amount not only marks a 66% increase compared to the first half of 2020, but also exceeds the total FDI amount registered in that entire year (US$8.5 billion).
Although the pandemic caused an overall drop of 45% in foreign investment in the region, investment in Chile is showing positive and stable growth. This can be attributed to a variety of factors, such as the multitude of market opportunities, a solid track record as an investment recipient, economic openness, and the work being done by InvestChile - the country's investment promotion agency.
InvestChile, which is managing projects worth over US$24 billion, is now committed to promoting opportunities in sectors like clean energy, technology, 5G, green hydrogen and even vaccine laboratories.
We spoke with the Managing Director of InvestChile, Andrés Rodríguez, to learn more.
What attracts foreign investors to Chile?
Chile has an excellent track record as a foreign investment recipient. This is extremely important for companies with a long-term vision. Although our country faces many challenges, we have been able to consistently maintain various positive qualities. These include an excellent business environment, the best competitiveness indices, access to clean energy, and the ease of setting up a company in the country (something that has been recognized by major international rankings). Additionally, our different industries are economically open, we have an export vocation (with a network of 30 commercial agreements with 65 economies), and very high-level professionals. As a result, international companies see Chile as an attractive market to set up in, as well as a strategic jumping-off point to grow their activities in other parts of Latin America.
We also have the ability to effectively manage and support foreign companies’ projects and offer them business opportunities in highly attractive and innovative sectors. Chile takes a leading role, spearheading innovation and is always willing to explore opportunities in new areas.
What role does InvestChile play in attracting foreign investment?
InvestChile is managing a project portfolio of more than US$24 billion. Each year, we advise more than 700 companies in order to facilitate their arrival in Chile. We offer a range of services that include delivering tailor-made sector reports, performing field visits and developing meeting agendas with key industry stakeholders. Our team is able to meet foreign companies’ needs in 8 different languages, thus facilitating their decision-making process and speeding up their arrival in our country.
While the pandemic caused a 35% drop in FDI flows worldwide in 2020, InvestChile’s portfolio grew 23%. We can attribute this to the implementation of an aggressive strategy that allowed us to maintain the dynamism of the projects that were already under development, while also working on innovating our digital marketing strategies, using business intelligence tools, and attracting investment from a distance. This included one-on-one meetings with the heads of established companies, including some that hadn’t been considering investing in Chile. We developed new services and began holding online events like seminars, webinars and roadshows in markets of interest. We also created a series of new sector e-books, which are a good way to initiate business conversations with companies.
What new strategies have been implemented this year?
In 2021, we have strengthened our work by focusing on accelerating companies’ decision-making processes. We have implemented strategies such as “Invest in Chile Now,” where we proactively contact leading companies (such as Tesla, Alibaba or Amazon) to discuss business and invite them to develop business in Chile.
One of InvestChile’s primary areas of focus in 2021 is a new strategy to attract investment from the Middle East. This marks the first time the agency is prioritizing this market. We are working with investment funds that together manage more than US$2 trillion. Our team is also contacting a series of companies from India, exploring the potential of Food and Technology sectors.
Until the end of this year, we will be developing an aggressive agenda with more than 30 business activities in key markets, including roadshows in the United States and Europe.
UNCTAD projects a recovery in FDI flows of around 10% for this year. Our goal is to exceed that number and we're working hard to that end.
Chile is attracting attention with its new business opportunities, such as those offered in the digital economy sector. According to InvestChile’s portfolio figures, the number of technology sector projects has tripled from 52 projects worth US$1.6 billion in 2017 to 173 worth US$4.3 billion in 2021.
“Over the past few years, companies like Google, Microsoft, AWS, Oracle, Ascenty and Huawei have installed technological infrastructure in Chile. Only last December, Microsoft announced its biggest investment in the country of the last 28 years, with potential profits of US$11.3 billion over the next four years. Oracle has also launched its Cloud Region, which will serve clients in Argentina, Peru, Uruguay, Paraguay and Bolivia, as well as Chile. And that’s not all: this year, via its Starlink subsidiary, SpaceX chose Chile to launch its Latin American satellite internet operations. These are clear signs of the opportunities that Chile has on offer,” Rodríguez comments.
Chile also leads Latin America in terms of clean energy. Bloomberg’s Climatescope ranking places the country first among the emerging economies with greater investment potential in the area. The last ten years have seen significant clean energy development in Chile. In 2011, the country had 540 MW of NCRE installed capacity; today, this figure has increased eleven-fold.
In this regard, Rodríguez highlights that “Chile’s goal was for its renewable energy plants to have the capacity to generate 20% of the country’s energy matrix by 2025. Well, we’ve surpassed that goal and will reach 25% this year. But there’s still plenty of room to grow and innovate: Latin America’s first concentrated solar plant, Cerro Dominador, was inaugurated in mid-2021 and it is set to produce 210 MW of solar energy. Clean energy is, in fact, currently leading InvestChile’s portfolio, with projects worth more than US$9 billion.
And, while we're on the subject of energy, Chile is in a race to develop its green hydrogen production capacity. Labeled the “energy of the future”, companies like Engie from France, Siemens from Germany and Spanish companies Enel, Acciona and Enagás are already developing projects in Chile. Thanks to its abundance of clean energy, Chile hopes to become the world’s cheapest green hydrogen producer by 2030.
“All these sectors, together with the more traditional ones like mining and infrastructure, are opening up new possibilities both for developing large-scale projects and for auxiliary industries and suppliers. Chile now offers a dynamic business ecosystem in which innovation is highly valued,” Rodríguez comments, adding that InvestChile is also opening new markets. “We’ve focused on supporting sectors like Venture Capital, in order to attract foreign investors to the innovation and development that is happening here. We want to help Chilean talent grow with the aid of investors who support the potential we have today,” he added.
InvestChile is also supporting the development of food industry sectors with high potential. Chile is a world leader in food exports, with annual shipments of more than US$18 billion (especially fresh fruit and salmon). The country is now embracing technology and innovation in order to develop healthier foods. “We have food industry projects worth more than US$1.2 billion and we’re now focusing on promoting opportunities in areas like agtech and foodtech. Chile is set to become an important supplier of functional foods and ingredients, as well as food innovation, and foreign companies can now be part of this development,” Rodríguez said.
Speaking of new sectors, InvestChile played a key role in Sinovac’s decision to come to Chile. The Chinese company has announced that it will set up not only a vaccine production plant (initially for COVID-19 vaccines and later it will also produce vaccines for other diseases), but also as an R+D center that will allow Chilean scientists to develop new formulas that can be exported to the rest of the region. “Our idea is to generate a hub for setting up different research laboratories and technology companies. We’re already talking about this with European and American companies,” Rodríguez explains.
These are just some of the investment opportunities that Chile is working hard to develop with a view to attracting even more investment, regardless of the challenges presented by the pandemic. To judge by the figures to date, InvestChile’s work is achieving good results.