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While most of Latin America is just launching free-market reforms, Chile already has built one of the hemisphere's most successful economies. Its open market has attracted big U.S. and Japanese investors, and competition has honed the efficiency of Chilean companies. Chile's exporters have learned how to crack markets throughout the Americas, while its privatized pension system is building up the country's financial muscle by generating savings, totaling $13 billion so far.

Now, Chile's wealth, like that of a new Taiwan or Japan, is overflowing its borders and spilling investments into the rest of Latin America. As a result, Santiago is emerging as home base for Latin America's first sizable cluster of fledgling multinationals, with such names as Chilectra, Lord Cochrane, and Matte Group. Says economist Carlos Arb a at Buenos Aires' Center for Latin American Studies: "No other companies in the region can go into other countries like the Chileans are doing."

These growing cross-border links are helping knit together a more integrated Latin economy, outrunning governments' efforts to negotiate trade blocs. "What states have not achieved in 50 years, despite a lot of rhetoric," says Edgardo Boeninger, chief of staff to Chilean President Patricio Aylwin, "is now becoming a process of real integration through trade and investment."

Chilean investments are turning up all over the map:

-- In Lima, Santa Isabel supermarkets, a Chilean chain, took over Peru's Scala markets in April. It now is offering credit cards to Scala customers while raising money on the Santiago stock market to buy more Peruvian chains.

-- In Mexico City, Chilean conglomerate Matte took a 20% stake in Rothschild Mexico de Capital Variable, a financial consultancy it set up with London's N.M. Rothschild & Sons in early May.

-- In Buenos Aires, managers from Chilectra, Chile's biggest electricity-distribution company, are overhauling Edesur, the dilapidated utility that supplies the city's southern half. Chilectra leads a consortium that bought formerly state-run Edesur for $511 million last year.

On a world scale, the outflow of Chilean investment still is modest, but the growth rate has been steep. Chile's direct foreign investment rose from $10 million in 1988 to $428 million last year, according to Chile's Central Bank--and possibly $800 million, counting undeclared investments, observers say.

GROWING POOL. Supplying the road map for the cross-border march are the management skills honed for two decades by tough competition within Chile's open market. Chilean investors bring "experience in working within a private-sector economy," says Argentine economist Ricardo Bebczuk of the Center for Latin American Studies. "They've been doing it much longer than we have."

Even though its GDP has grown 7.2% on average over the past five years, Chile's home market of 13 million people is now too small to contain the larger, more sophisticated companies that have sprung up. And Chileans are wielding financial clout--a benefit of the modern capital markets set up following the early 1980s' debt crisis. The privately run pension funds are feeding $130 million a month into the pool of domestic savings. Chilean blue-chip companies are also able to tap international markets at costs lower than those most foreign competitors have to pay. Forest products company Masisa, for example, recently issued American depositary shares to help finance expansion in Argentina.

It was a pair of Argentine privatization coups by ENDESA and Chigener, Chile's No.1 and No.2 electric power companies, that trumpeted Chilean companies' debut as major regional players last year. They plunked down cash bids totaling $182 million, as leaders of separate consortiums, to buy control of the first two Argentine power companies to be privatized. "For the Chileans, it is d j vu--they moved up the privatization learning curve 10 years ago," says Brian D. O'Neill, a Chase Manhattan Bank's senior vice-president.

Adding momentum to the investment push is the train of domestic suppliers that Chilean cross-border investors are pulling along behind them. For example, packaging company Alusa is installing a $14 million plant in San Luis, Argentina, partly to supply the Argentine subsidiary of Dos en Uno, a Chilean

candymaker. Dos en Uno started exporting candy in 1991 to Argentina, a member of the Mercosur trade bloc--which includes Brazil, Paraguay, and Uruguay, but not Chile. Now, Dos en Uno's $12 million plant in Argentina "will give us an entry into Mercosur," says Chief Executive Ricardo Glucksmann. "At a second stage, we will export to Brazil from Argentina."

LONG HAUL. More intricate regional business ties are being woven by Lord

Cochrane, Chile's biggest printer. It puts out weekly magazines for Argentine customers in Santiago and trucks them 700 miles over the Andes. Last year, Coch-rane set up a $12 million plant in Buenos Aires with Argentine printer Atl ntida--and one in Brazil, another export market, with S o Paulo giant O Globo. This year, Cochrane grabbed a weekly magazine contract with Argentine newspaper Clarin. It is printing the magazines in S o Paulo and trucking them 1,000 miles to Buenos Aires. "It was too big for our Santiago plant, so we're working with Brazil," says Luis Ugarte, Cochrane's commercial manager.

Now, Chileans are exporting their pension-fund management knowhow. In Peru, which recently launched a system of privatized funds patterned after Chile's, all eight of the funds set up so far include Chilean partners.

With their classic mix of foreign investments and export prowess, Chile's budding multinationals are altering ways of doing business in Latin America and strengthening regional ties as well. "Trade integration is more likely to be sustained if trade partners are investing in each other," says Jerry Haar, director of the inter-American business program at the University of Miami's North-South Center. For the hemisphere, Chile's companies may emerge as agents of profound influence.WHERE THE CHILEANS ARE INVESTING

Company Business Country Amount/Millions

CHILECTRA, Electric power Argentina $397*

CHILGENER, ENDESA and distribution

SIGDO KOPPERS, Oil exploration Ecuador 25

ENAP and production

LORD COCHRANE Printing Brazil, Argentina 20

UNIMARC Supermarkets Argentina 15

CMPC, PROCTER Diapers Argentina 14


CEMENTO POLPAICO Cement Colombia 10

HABITAT Pension management Peru 2

MATTE Business consulting Mexico 0.4


Alexandra Huneeus in Santiago, with John Pearson in New York

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