How Chile adapts its investment offer to satisfy Asian demand

To counter economic slowdown and boost industrialization, Chile is positioning itself as a gateway between the Asia-Pacific and Latin America. 

During his recent trip to China, President Gabriel Boric promoted a project portfolio covering the energy, mining, telecoms and infrastructure sectors. But Chile is also an established market for Japanese and South Korean companies, among others.

To learn more about Chile's pitch, BNamericas spoke with Vicente Pinto, who is investment promotion agency InvestChile's Asia head.

BNamericas: Which sectors of the Chilean economy are most preferred by Asian investors?

Pinto: I am going to refer mainly to Japan, since it is the continent's largest investor in Chile, without ignoring the investment from South Korea and other Asia-Pacific countries, but this is smaller in amount, less profound and more recent.

From a historical perspective, Japan’s strategy has been to ensure supply of critical products for its economy.

The main Japanese companies have significant investments in three major sectors of our country: mining, forestry and food. I would say that now, although they continue to seek to ensure the supply of critical products, their demand has become more sophisticated.

On the one hand, the experience of Japanese companies in Chile allows them to produce agricultural seeds out of season, but especially high-value processed foods, such as juices and concentrated pulps, frozen products in general and foods related to agriculture, livestock, aquaculture and fishing

I find it very interesting that companies have joined the global trend of investing in projects that are powered by renewable energy in these last few years. In doing so, they add value to their offering by reducing emissions and contributing to global climate action.

BNamericas: What advantages does Chile offer Asian investors compared to the rest of the region?

Pinto: Personally, I am convinced that energy transformation is Chile’s trump card. The quantity, quality and especially the availability of various sources of renewable energy and the strategic wealth in critical minerals is what best opens doors for investors.

This energy transformation in Chile and the industrialized world opens up as an opportunity with a multiplier effect for all sectors of our economy. The advanced industry derived from lithium is one of them. After the pandemic, there has been enormous interest among Japanese and especially South Korean companies, something that was reaffirmed in the meetings held during a trip by economy minister Nicolás Grau and InvestChile director Karla Flores.

Companies want to test new lithium extraction technologies in Chile and develop projects to ensure at least part of the supply of the mineral. There is a lot of interest in participating in the next storage tender in which the State will make available more than US$2bn for [battery energy storage systems].

And there is much more. Energy efficiency, increasing digitization, “packaging” the sun or wind in the form of green NH3 [ammonia] or in replacement fuels for the maritime transport of our products to the world and that contain a low CO2 content. I believe that these ideas in Chile will be a reality and not just a promise.

But obviously we offer more than natural resources. There is a solid base of public policies that have allowed investors to see their needs for optionality, sustainability and competitiveness met in recent decades. These needs intersect with the mandate of carbon neutrality and the security of the global supply chain and, critically, energy security to develop projects with a low emissions footprint.

BNamericas: Chile and South Korea are discussing deepening trade, while the latter’s ambassador to Chile signaled his country’s interest in green hydrogen. Will a new agreement facilitate investment in the sector?

Pinto: These are issues that obviously must be incorporated or modernized in the revision of the trade treaty. The conclusion of the agreement with South Korea 20 years ago has made it evident that the asymmetry between trade and investment with South Korean companies is important.

This is what Grau told South Korea’s commerce minister during his recent visit to that country. South Korean investment is not only welcome but its objectives are complementary to ours.

For some time now, we have clearly noted the interest South Korean companies have taken in green hydrogen. This demand comes from large generators and their most relevant industrial sector, which sometimes self-generates part of its energy requirements. The need to ensure stable supply and the commitment of these companies to advance decarbonization is urgent.

This is an issue where the demand of these companies still does not have a correlation in productive projects globally. However, progress in the development of numerous projects that are already beginning to be structured more solidly in our country will allow it to be satisfied very soon.

BNamericas: Considering China’s growing share in Chilean infrastructure, do Japanese and South Korean companies still have room to grow in this sector?

Pinto: Of course, there is room for South Korean and Japanese firms, as well as others with vast experience in infrastructure works. I am thinking about the port authorities of several countries, for example, their builders and operators especially.

The tenders, especially the [short] deadlines from call to the delivery of proposals, represent still certain complexities which in some cases mean … they are not even able to study them. We must consider that the language barrier in the case of Asia is evidently a disadvantage with respect to some EU countries and evidently the Americas.

BNamericas: What suggestions have Asian investors made to improve the approach of InvestChile?

Pinto: Our role has two key aspects. First, and most obvious, is that we listen to the interests and needs of investors. We guide them to provide solutions that accelerate their decision-making and installation in the country. But equally relevant is taking that information back to the State, to the ministerial foreign investment promotion committee, which approves our strategy, to explore and propose improvements in our public policies related to foreign investment.

It is always necessary to emphasize that these foreign companies, despite representing only 10% of all companies in Chile, generate over 51% of tax revenues, maintain more than 30% of full-time formal employment and pay average incomes 30% higher than local companies. In this sense, Asian investment could keep contributing so that these numbers are not only maintained, but increase.