BGI_Chile_Business_Environment

Small Business, Policy, and Exports: The Case of Chile Jorge L. Daly, Management Systems International February 7, 2008 www.BusinessGrowthInitiative.org

In This Presentation We Consider: • The political economy for trade-led development • Economic performance related to exports • SME export participation • Role of the b business siness en environment ironment to promote exports • Lessons for enterprise p development p February 7, 2008

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350

35

300

30

250

25

200

20

150

15

100

10

50

5

0

0 1985 GDP

1990

1995

2000

GDP per capita

Inflation %

Ind dex 1985 = 100

GDP and Inflation

2005 Inflation

Index values expressed in constant 2000 US Dollars Percentage Change of Consumer Prices February 7, 2008

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600

80 70 60 50 40 30 20 10 0

500 400 300 200 100 0 1985

1990 Exports

1995

2000

Trade / GD T DP

Exports Index, 198 85 = 100

Indicators of Success

2005

Trade / GDP

Index values expressed in constant 2000 USD February 7, 2008

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Comparison p of Selected Latin American Countries 1985 = 100

GDP

GDP per Capita Exports

Trade/GDP (1985)

Trade/GDP (2005)

Change 1985-2005

Chile

320

237

551

30

75

+ 150 %

Peru

164

115

320

39

44

+ 13 %

Argentina

168

131

340

18

44

+ 144 %

Colombia

193

134

354

26

42

+ 62 %

Mexico

165

122

566

25

61

+ 144 %

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Principal Products Exported in 2005 (Percent of total exports)

Wine (2.1 %) Paper and pulp (4.0%) Fish products (5.6 %) February 7, 2008

Copper (45 7 %) (45.7 Fruit (8 4%) (8.4%) Chemicals (6.9%)

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Chilean Exporting p g Firms Year 2000

Number by Size

Export Value by Size 96%

26% 36% 29%

Micro

0% Small

9% Medium

3% Large

Micro

Small

Medium

1% Large

Total SME participation: 3.9% of total export value February 7, 2008

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Measures to Promote Exports • • • • •

Elimination of all export bans Tax rebates Pro Chile Free trade zones F Free trade t d agreements t

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Real SME Contribution to Exports is Probably Much Higher Because • Indirect exports are not captured by official statistics • Maximum dollar value for SME annual sales is low February 7, 2008

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Elements El t off the th Business B i Environment to Consider • Macro economy • Regulatory framework

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Key Components of the Macro Economy That Facilitate Exporting • • • •

Exchange rate T incentives Tax i i Free trade agreements Infrastructure improvements

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National N ti l Regulatory R l t Framework • • •

Transparent Efficient Ad Adequately t l enforced f d

“Friendly to SMEs”

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Challenges Ch ll Remain R i for SMEs • • • •

Municipal over regulation Excessive vigilance Labor legislation Environmental regulation

Few firms join SME incentive programs 12

Key Issues 1. Macroeconomic policies successful for economic and export p g growth with low inflation.

2. Growing absolute value of exports by SMEs, 84% growth in value from 1997 to 2004, however . . .

3. Declining share of exports by SMEs, from 4.2% (1997) to 3.1% (2004).

4 Does a greater share of SME exports benefit Chile?

4.

5. Challenges for promoting SME participation.

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Questions and Discussion Q The USAID/EGAT Business Growth I iti ti project Initiative j t iis managed db by: Weidemann Associates, Inc. (prime) J.E. Austin Associates, Inc. Management Systems International

Visit the BGI Knowledge Portal www.BusinessGrowthInitiative.org February 7, 2008

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