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Innovation, what it takes to keep Chile on top

Innovation, what it takes to keep Chile on top

Posted by PanamericanWorld on February 19, 2014

Over-reliance on mineral resource exploitation for development is a common saga in Latin America, and Chile is no exception; no surprise in a country that provides roughly one-third of the world’s copper. With the economy consistently outgrowing the region, it will be industries, other than its leading one, that will keep Chile on top.

Mining accounted for two-thirds of the nation’s exports last year, and while metal exports are growing at a robust pace in terms of tonnage, metal prices are driving a less favorable result. In fact, copper output grew nearly +6% year-on-year in 2013, but prices fell (8)%. Molybdenum posted even stronger growth of over +9% and saw a (19)% reduction in prices.

This sector, which generates roughly one-fifth of the nation’s GDP, however, faces more than just price risks. Declining ore grades, increasing extraction costs and rising costs of electricity also put pressures on the sector. Moreover, foreign currency income derived from metal exports and investment is key to funding the import of electricity from markets such as Argentina, Bolivia and Brazil.

However, market conditions are right to further the nation’s industrial (and export) diversification agenda to sectors like tourism, technology and agriculture. Last year, Chile was ranked as Latin America’s most competitive economy by the World Economic Forum, with strong institutions, low corruption levels and solid public finances. With the right market structures in place, fostering innovation remains the key to transitioning the economy towards higher value-add activities and breaking the dependence on a sole sector.  

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