piñera starts to rebuild - amcham chile · lessons to be learned from the government’s response....

Special RepoRtThe Business of the Beautiful Game

tRade teStimonial Women’s Entrepreneurship

SpotlightAmCham Prepares for the Bicentennial

business ChilEThE voiCE of ThE ChilEAn-AmEriCAn ChAmBEr of CommErCE n°266, APril 2010

Special RepoRtventure Capital: on Angel’s Wings

tRade teStimonial Biking Turned Business

SecondaRy StoRyCounting the Quake’s Cost

All Shook Up:

Piñera Starts to Rebuild

All Shook Up:


April 2010business Chilewww.businesschile.cl3

Contents

Biking Turned BusinessA Chilean and a u.s. entrepreneur with a shared love of biking have joined forces to offer tourists a new way of exploring santiago and its surroundings.

TRADE TESTIMONIAL

12All Shook Up: Piñera Starts to Rebuildrebuilding Chile will require billions of dollars and private sector cooperation, but President Piñera aims to make Chile a better country than before.

COvER STORy ECONOMIC SNApShOT39Piñera’s Challengereconstruction opportunities, if properly financed, could become the starting point of a more just and prosperous society.

6

8 RECONSTRuCTION

Counting the Quake’s Costbusiness ChilE takes a look at the debate over the cost of reconstruction and the lessons to be learned from the government’s response.

29Working up an Appetite for ExportsAmCham teams up with Corfo-innovaChile and a u.s. consulting firm to help Chilean food producers identify new export opportunities.

SpOTLIghT

EDITORIAL BOARD BUSInESS CHILE 2010CHAIR, Kathleen Barclay, Asesorías KCB; PAST CHAIR, Michael Combes, Marco Chilena; VICE CHAIR, Manuel José Vial, Vial y Palma Abogados; GENERAL EDITOR, Julian Dowling, AmCham Chile; ASSISTANT EDITOR, Daniela Valda, AmCham Chile.

MEMBERSJaime Bazán, AmCham Chile; Andrés Bianchi, Bci, Empresas Copec; Ruth Bradley, The Economist; Mateo Budinich, Insape; John Byrne, Boyden Consultores Chile; Francisco Courbis, Empresa Eléctrica Pilmaiquén; Paulina Dellafiori, AmCham Chile; Richard Diego, Royal Bank of Canada; John P. Dill, Project Management; Francisco Garcés, Banco de Chile; Claudio Hohmann, D&S; Charles Kimber, Celulosa Arauco y Constitución; Olga Kliwadenko, K&D Comunicaciones; Gideon Long, BBC; Vincent McCord, Asesorías e Inversiones CarCon; James Newbold, Business News Americas; Patricia O’Shea, AmCham Chile; Roberto Ossandón, Ossandón Abogados; Karen Poniachik, Independent; Rodrigo Silva, Silva & Asociados; Mitch Larsen, U.S. Embassy; Mauro Valdés, BHP Billiton.

PRODUCTIOnK & D Comunicaciones Ltda. Olga Kliwadenko, General Manager, 11 de Septiembre 1945 - Of. 213, Providencia. Phone: 481-6940 / 481-6941, Cell: (09) 874-0619; e-mail: [email protected]; [email protected];www.kyd.cl

Printed in Worldcolor Chile S.A. (ex Quebecor).

Special RepoRt

Venture capital: on angel’s Wings

Thanks to state support and eager private investors, a new venture capital industry has taken root in Chile, but to reach its potential the industry will have to become more international.

February 27th, 2010 – a Night to RememberSantiago eneldo was caught with his pants down when the earthquake struck, but lived to tell the tale.

© 2010 AMCHAM CHILEReproduction in whole or in part is strictly forbidden without permission from the publisher. Opinions expressed in bUSiness CHILE are those of the authors and do not necessarily reflect those of AmCham or bUSiness CHILE. We accept no responsibility for the accuracy of the articles and any unforeseen errors. bUSiness CHILE is published monthly, 10 months a year and mailed free of charge to AmCham members. Letters are welcome. They should be accompanied by the author's name and daytime telephone and sent to [email protected] For reasons of space limitation, AmCham reserves the right to edit letters published.Advertising inquiries should be addressed to AmCham's Sales Department: Paulina Dellafiori: E-mail: [email protected]; Phone: 290 9700 Fax: 212 2620 Av. Presidente Kennedy 5735, Torre Poniente, Of.201, Las Condes, Santiago de Chile; E-mail: [email protected]; www.amchamchile.cl; www.businesschile.cl

42 liFe iN the SloW laNe

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SPECIAL REPORTThe Business of the Beautiful Game

TRADE TESTIMONIAL Women’s Entrepreneurship

SPOTLIGHTAmCham Prepares for the Bicentennial

bUSiness CHILETHE VOICE OF THE CHILEAN-AMERICAN CHAMBER OF COMMERCE N°266, APRIL 2010

SPECIAL REPORTVenture Capital: On Angel’s Wings

TRADE TESTIMONIAL Biking Turned Business

SECONDARY STORYCounting the Quake’s Cost

All Shook Up:


All Shook Up:


All Shook Up: Piñera Starts to RebuildAfter a shaky start, President Sebastián Piñera has settled into his new job and has promised to not only rebuild Chile, but make it a richer and more productive country.

INTERvIEw40Protecting Intellectual Propertymaximiliano santa Cruz, director of Chile’s national industrial Property institute (inAPi), talks to business ChilE.

April 20104 business ChilE

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at 3:34am on Saturday, February 27, the central-southern area of chile was rocked by an 8.8 magni-tude earthquake, the fifth most powerful quake ever recorded. it was followed by a devastating tsunami. although the death toll was lower than at first feared, over 400 lives were lost, 200,000 homes were leveled and billions of dollars worth of infrastructure was des-troyed. the axis of the earth shifted and days are now shorter by seconds around the globe.

Just 12 days later, on march 11 at the precise time specified by the constitution, and despite strong aftershocks and a tsunami warning in the port city of Valparaiso where the event was held, Sebastián pinera was inaugurated as chile’s 48th president and its first center-right president in over 50 years.

a major natural disaster of cataclysmic propor-tions combined with the most significant political change in two decades would be a challenge for any country. how did chile respond?

While mistakes were made, overall it handled these events remarkably well.

in the first instance, the building and construction codes that were in place prevented major loss of life and assets. the fact that only a handful of buildings have been earmarked for demolition means that not only did chile have high construction standards, but it also speaks well of the private sector which built the buildings and roads to these specifications and of the public sector which regulated their application.

power and water supplies returned to a large part of the affected area within a couple of days. the inter-national airport, albeit with a damaged terminal, was able to resume operations soon after and north-south road connectivity was restored within a week.

the government eventually called out the armed forces (after some initial hesitation) and the private sector worked to ensure the safety and livelihoods of employees and their families. the country de-monstrated a high level of solidarity and institutions generally worked as they are supposed to in such a disaster. individuals and companies dug deep into their pockets for the telethon chile helps chile, which raised nearly US$100 million for the relief effort.

While there are many lessons to be learned and improvements needed in areas like the tsunami war-ning system, chile’s quake response demonstrates the strength of its political and economic system as well as the strong sense of nationhood embraced by its people.

it is said that it takes extraordinary circumstances to demonstrate extraordinary character. chile has clearly demonstrated it is an extraordinary nation.

the days ahead will be difficult ones. there is much work to be done that will take months and even years. When the international press and aid agencies have gone home, the task of rebuilding chile in a way that leaves it better and stronger than before will remain.

We at amcham are certain this work will not only help those who have lost homes and possessions, but also improve the lives of all chileans. our mem-bers remain committed to this task by supporting the reconstruction effort and also through a renewed en-thusiasm for trade and investment.

in the face of disaster, chile has demonstrated character, resolve and commitment to building a better future. amcham and our members share this goal and stand by our partner.

A Nation of Character

editorial

eXecUtiVe coMMittee

PRESIDENT Ricardo García, Seguros Interamericana – ALICOVICE PRESIDENT; CO CHAIR CORPORATE AFFAIRS COMMITEECharles Kimber, Celulosa Arauco y Constitución S.A. TREASURER Julie Beamer, General Motors ChileSECRETARY; CHAIR LEGAL COMMITTEEMichael Grasty, Grasty Quintana Majlis & Cía.

PAST PRESIDENTMateo Budinich, InsapeGENERAL MANAGERJaime Bazán, AmCham Chile

DIRECTORSKathleen Barclay, Asesorías KCBCHAIR EDITORIAL COMMITTEEAndrés Bianchi, Bci Pamela Camus, American Airlines CO CHAIR CORPORATE AFFAIRS COMMITTEEFernando Concha, Citigroup Chile CO CHAIR FINANCE AND ADR COMMITTEE

Javier Irarrázaval, The Walt Disney Company Chile CHAIR LABOR & HUMAN CAPITAL COMMITTEEMitch Larsen, U.S. EmbassyEX OFFICIOLuis Marcelo Moncau, Microsoft Chile Enrique Ostalé, D&SLuis H. Siles, IBM Chile CHAIR TRADE & INTERNATIONAL BUSINESS COMMITTEE

ADVISORY COUNCILRubén Covarrubias, Rector, Universidad Mayor

boArD oF DireCTorsAlfredo Ergas, EnersisCO CHAIR FINANCE AND ADR COMMITTEEMauricio Ramos, VTR Global Com

amcham Mission StatementTo promote free trade and investment between Chile and the United States, and to be an effective voice for the membership while facilitating related services.


Biking Turned Business

n most people’s imagination, lawyers - and, especially, gra-duates of Santiago’s traditional catholic University - wear pins-tripe suits and silk ties. instead,

32-year-old Joel martínez wears jeans and a lime green t-shirt - the same color as the bicycles that his start-up company uses for its tours of chile’s capital city.

after graduating, martínez started a family law practice but did not give up the bicycle as his preferred form of transport. nor the seed of an idea for turning biking into a business.

at the same time, a different story was unfolding. peter lewis, a U.S. stu-dent, had visited chile as a backpac-ker, liked what he saw and gone on to obtain a scholarship to take a post-graduate degree in political science at

the University of chile. and he was also wondering whether biking, his favorite sport, couldn’t be turned into a living.

When, in late 2007, the two were in-troduced by a mutual friend, the result was Bicicleta Verde, the company that, with its iconic green bikes, now offers tours not only of Santiago but also the alto maipo wine valley, just to the south of the city. “Santiago is an ideal place for biking,” points out martínez, “because most of the city is flat and it only rains 15 days in the year.”

Starting the company was a big risk, he admits. its first home was the ware-house of a bar in Santiago’s Bellavista neighborhood and the two partners had just their own savings - enough to buy ten bikes and survive for a mere six to eight months, he recalls.

moreover, they started business

TrADe TesTimoniAl

in February 2008, just as the peak summer season was ending, and the following winter was tough for the new company. So much so that martínez initially carried on working full-time in his law firm to help sustain it.

But, then, cash flow started to kick in. today, the company, with offices on Santa maría avenue, just across the mapocho River from downtown Santia-go, has 66 bikes, two full-time emplo-yees and six part-time bilingual guides.

most of its clients are foreign tourists, says martínez, although chi-leans also like its night-time tour. Star-ting in the el golf district in the east of the city, it winds its way through parks and along the mapocho River - “all downhill,” points out martínez - before ending up in a bar in Bellavista.

Word of mouth, as well as men-tions in tourist guides like lonely planet, attracts many customers. Social networks are important too - “a group from holland just contacted us through twitter,” reports martínez - but are an administrative challenge. “you shouldn’t use them unless you really have the capacity to respond properly,” he warns.

the company is, however, also boosting its numbers by starting to work with tour operators. that door was opened in august 2008 when it was selected to participate in www.mercadoturismo.cl, a platform

A Chilean and a U.S. entrepreneur, both in their 30s and with a shared love of biking, have joined forces to offer tourists a new way of exploring Santiago and its surroundings.By ruth Bradley

i

To ensure its sustainability, Bicicleta verde is working to develop a business expansion plan with financial support from innovaChile.

April 2010 7business ChilE

Biking Turned Business

developed by the chilean association of tourism companies (achet), the eurochile Business Foundation and the national tourism Service (SeR-natUR) to serve as a bridge between tour operators and innovative tourism start-ups.

as martínez recognizes, other start-ups have also tried Bicicleta Verde’s line of business - and failed. he has talked to these would-be entrepre-neurs and says the difference is that they saw it as a week-end activity, not a formal business commitment.

in a bid to ensure its sustainability, Bicicleta Verde is now working to de-velop a business expansion plan, with financial support from innovachile, a program developed by the chilean government’s economic development agency (coRFo) to promote business

innovation. in november, it obtained 6 million pesos (some US$11,000) from innovachile to finance 70% of the cost of hiring the consultants who are helping it with market studies and planning.

But Bicicleta Verde already has some ideas of how to achieve its aim of a five-fold increase in revenues over the next five years. although tours in Santiago, supplemented by the rental of bicycles, may be its bread and butter, margins are more generous on its alto maipo wine tour.

as a result, its likely next step will be tours in the casablanca Valley to the west of Santiago - the heart of chile’s white wine industry - that, unlike its day tours to the alto maipo, would include an overnight stay. according to martínez, that may be followed by

two-night visits to the famous colcha-gua Valley south of Santiago, once it recovers from its devastation by the recent earthquake.

Valparaíso, beloved of foreign tourists, is also in Bicicleta Verde’s sights. true, the port is hilly but its flat lower part is suitable for biking, points out martínez, and it would also be a useful center of operations for casa-blanca Valley tours.

in the meantime, the earthquake has put a damper on Bicicleta Verde’s business - “we’ve had a lot of cancella-tions,” admits martínez, “but we know this is a business in which we’ll have lows as well as highs.” in other words, a business in which the answer is to keep pedaling. chilebUSiness

Ruth Bradley is the Santiago correspondent of The Economist.


reConsTruCTion

early two months after chile was hit by one of the biggest earthquakes in its history, the extent of the damage is be-coming clearer, but even now

there are widely diverging estimates of how much the reconstruction process will cost.

Some have put the figure as high as US$50 billion, others as low as US$8 billion. in march, Finance minis-ter Felipe larraín estimated the total cost to the country at US$30 billion, or around 17% of gdp. this includes US$20.9 billion in damaged infrastruc-ture, with the losses split more or less equally between the public and priva-te sectors. the remainder includes a

negative impact of US$7.6 billion on gdp growth over the next four years.

industry, fishing and tourism bore the brunt of the infrastructure damage, accounting for a quarter of the total cost, while housing accounted for 19%, education 14% and health 13%. insurance should cover some of the cost, but it’s not clear how much.

While some economists have up-graded their 2010 growth forecasts for chile, arguing that the country will be-nefit from a construction boom, others have downgraded their figures, noting the country’s productive capacity has been badly hit.

days after the disaster, U.S. inves-tment bank J.p. morgan hiked its 2010

nNo one knows the exact economic impact of the

February 27 earthquake but everyone, it seems, has an estimate. bUSiness CHILE

looks at the debate over the cost of reconstruction

and at what lessons can be learned from the government’s response.

By Gideon long

Counting the Quake’s Cost


to assess,” said Rodrigo galilea, the newly appointed head of maule’s re-gional government.

the worst hit sectors were forestry, wine and fishing, but other industries suffered damage too. Steel produc-tion was dented by damage to the huachipato plant near concepción, and chile’s capacity to refine oil has been reduced due to damage at the Bío Bío refinery.

in the forestry sector, industry leader arauco took a severe blow, particularly at its five wood pulp operations, which were all brought to a standstill. two of those plants, Valdivia and licancel, have now reopened, but the constitu-ción plant, which produces 11% of the company’s wood pulp, was very badly damaged – not by the earthquake but by the tsunami that pounded the town afterwards – and it will be out of action at least until late may.

Further north, the earthquake smas-hed millions of bottles and tipped over storage tanks in the vineyards of the maule and o’higgins regions. the in-

dustry association Wines of chile esti-mates that 125 million liters of wine, or 12.5% of annual production, was lost. the disaster struck just as vineyards were preparing to celebrate the new harvest and many festivals have been scrapped.

For the fishing industry, the good news is that chile’s industrial fleet escaped virtually unscathed. most of the country’s large fishing boats were south of Valdivia when the quake struck - far enough away from the epi-center to avoid serious damage.

But the artisanal fishing industry along the coast of the maule and Bio Bio regions was devastated. industry body Sonapesca estimates that, in the Bío Bío alone, half the industry’s pro-duction capacity was damaged.

Banks step up

the role of chile’s big banks, which survived the economic crisis relatively well compared to other countries, has been crucial in helping not only survi-vors of the quake who lost their homes and their livelihoods, but also compa-nies in the worst hit areas.

chile’s major banks including San-tander, Banco de chile, Banco de crédito e inversiones (Bci) and Sco-tiabank, announced special measu-res like allowing their maule and Bío Bío clients to postpone mortgage and loan payments. clients in these re-gions also received a discount – 20% in most cases – on credit card pur-chases in local pharmacies, hardware stores and gas stations.

arturo tagle, head of institutional relations at Banco de chile, declined to say how much these measures have cost, but the number of clients who have taken advantage of the bank’s offer to postpone loan payments for up to three months has been “very high,” he said.

even with these measures, howe-ver, the extent of the damage is such that companies have been reasses-sing their investment plans. the cor-poración de Bienes de capital (cBc), a Santiago-based institute that moni-

“We have to help those sectors that have been

badly affected like small-scale fishing, which

is fundamental to the economies of coastal

areas,”

forecast for chile from 5.0% to 5.5% in anticipation of a rebuilding bonanza.

But that appears to be wishful thin-king and the consensus is that growth will be hit this year before rebounding in 2011. the central Bank has down-graded its projection for 2010 growth to between 4.25% and 5.25%, and economists polled by bank have, on average, downgraded their growth fo-recast to 4.5% from 4.9%.

Broken Bottles, leaky Boats

the economies of the two worst affected regions, maule and Bío Bío, which together account for 14% of gdp, took a real battering from the earthquake and the ensuing tsunami.

one of piñera’s first actions as pre-sident was to appoint governors of the five most affected regions to oversee the reconstruction.

“the costs vary a great deal, de-pending on which sectors we’re ta-lking about, and they’re still difficult

rodrigo Galilea, head of the Maule Region government

Cruze Amcham_traz.indd 1 25-03-10 16:25


tors private investment in chile, said many projects in the construction and forestry sectors will be postponed, although not necessarily scrapped.

“We’re expecting delays of between one and three months in many projects, mostly due to a loss of logistical capaci-ty,” said orlando castillo, the cBc’s ge-neral manager.

transport is a major logistical problem since the main north-south highway lin-king Santiago to concepcion – the Ruta 5 Sur - has been cut in several places, which has prevented construction com-panies from bringing in heavy machinery.

“the earthquake is not going to halt investment, but it is going to alter the ti-meframe for it,” said castillo.

Who will pay?

chile is not a poor country like haiti, which is also struggling to rebuild after a recent earthquake, and it has plenty of options to pay for the reconstruction, but the new government has to decide where the funds will come from.

piñera has indicated three main sources of financing: firstly, he will re-order his spending priorities, freeing

up US$700 million from non-essential projects to deal with the impact of the quake; secondly, he will dip into the state’s economic and Social Stabiliza-tion Fund (FeeS), which is still plush with nearly US$12 billion of copper dollars; and, thirdly, he will seek credit on international capital markets.

the government has said it is stu-dying other financing sources too. it is considering, for example, raising the royalties on chile’s big mining compa-nies or selling some state holdings.

But the most efficient option, wi-thout increasing public spending, is to tender much of the reconstruction work to private companies. the quake represents a huge opportunity for construction companies that are it-ching to get to work.

they may have to be patient though. the current system for tendering con-tracts is far too slow to deal with such a vast and immediate challenge, said herman chadwick, president of the chilean association of public works concessions companies, copSa.

“the process is eternal, it can often take 12 to 18 months and we can’t afford to wait that long,” said chadwick.

the government should create a fast-track system specifically to deal with earthquake damage that could award contracts within 90 days, he said.

“concessionaires could handle the rebuilding of all the public roads, brid-ges, hospitals, schools, and prisons as well as a new road running down the coast,” said chadwick.

local solutions

in contrast to the United States, chile is highly centralized which means most of the reconstruction work will be planned, and tendered, in Santiago. But local knowledge is essential to re-build housing and infrastructure better than before.

For example, new buildings in coas-tal towns should be built on higher ground, safe from the threat of tsuna-mis. But for that to happen, chile must devolve more power to the regions,

said miguel Flores, Undersecretary for Regional development in the new government.

“We need to rebuild from the regions, not from Santiago… the regional go-vernors, mayors and local councilors should be the ones guiding us so they can take decisions in the best interests of their communities,” said Flores.

the small town of tirúa near the coast in the Bío Bío region was wiped out by the tsunami but rebuilding the town in the same place is not an option, he said.

“looking at the problem from San-tiago one might be tempted to rebuild in the same place, but the locals will tell you they want to be away from the river and we have to listen to them,” said Flores.

as with all hard lessons, however, some good might come from it. the reconstruction effort offers the chance not just to replace buildings, roads and bridges, but to improve them. if chile can seize this opportunity it could emerge from this disaster as a better, safer place in which to live.

reConsTruCTion

Gideon long is a freelance journalist based in Santiago. He also works for the BBC.

chilebUSiness

“A lot of investment is going to be focused on repairs

and reconstruction of the damaged areas,”

orlando Castillo, general manager of CBC

“The earthquake is a tragic lesson in the need

for decentralization,”

miguel flores, Under-secretary for Regional Development


s president piñera arrived in Valparaiso on march 11 to accept the presidential sash from michelle Bachelet, presi-dents and foreign dignitaries

gathered for the occasion looked afraid. as well they might since chile’s biggest political shake-up in two decades was accompanied by several strong afters-hocks that rattled chileans already on edge since the February 27 earthquake that killed over 400, destroyed 200,000 homes and caused billions of dollars in damage to infrastructure.

despite a tsunami warning that forced onlookers to flee to the hills, the inaugu-ration ceremony went ahead on schedule

and president piñera became chile’s 48th president. But he didn’t have long to bask in the glory or even have lunch with his guests. his first day on the job included a helicopter tour of some of the worst-hit areas and a speech to the nation about the challenges ahead.

and the challenges are many. much of chile’s second city – concepción – lies in ruins and rebuilding shattered infrastructure including schools, hos-pitals and highways will be costly and time-consuming.

“nature has delivered us a blow, but chile is a country that knows how to face adversity… we will rebuild together, stone by stone, brick by brick. and we won’t just

rebuild, we will rebuild better,” said piñera in his inaugural address.

it’s not exactly what piñera had in mind after his election in mid-January but the timing of the earthquake – at the end of the Bachelet government just 12 days before the handover – was at least propitious.

piñera dodged criticism of the pre-vious government’s immediate response, including its delay in sending troops into concepción, and he will have a longer political honeymoon than he would have enjoyed without the earthquake.

“piñera has an excellent alibi, if nothing works he can blame the earthquake,” said patricio navia, a master teacher in liberal Studies at new york University.

Reconstruction also plays to piñera’s strengths gained from decades as a ma-nager of companies like lan airlines, in-cluding an emphasis on efficiency, and a limited tolerance for bureaucracy.

“the earthquake has cornered piñera… but if he’s going to be cornered he’d prefer the corner of efficiency and productivity, which is the one he knows best,” said navia.

and piñera has come out swinging, announcing a special subsidy of 40,000 pesos (about US$80) per child for low-income families and promising to create 60,000 new jobs in the worst-hit areas.

employment and social inclusion were two of the pillars of piñera’s pre-

By Julian Dowling

Chile’s new government has been working around the clock to

determine the scale of the earthquake’s devastation and organize the

reconstruction effort, but once the rubble is cleared away President

sebastián Piñera has promised to make Chile a more productive and

prosperous country.

COVER sTorY

All shook up: Piñera starts to rebuild

a


earthquake program – the third was productivity - but reconstruction and how to pay for it without undermining core macroeconomic values is the new government’s immediate focus.

Paying for repairs

the government has estimated the total price tag of the disaster at US$30 billion including US$20.9 billion worth of damage to infrastructure, split roughly equally between the public and private sectors (see Counting the Quake’s Cost on p.8).

new Finance minister, Felipe la-rraín, has said the state’s share not covered by insurance – around US$9.4 billion - will be financed by reorganizing the budget, private donations, issuing national and foreign debt, awarding infrastructure concessions, selling off some state assets and possibly raising

taxes, among other measures.piñera’s government has created a

reconstruction fund and drafted a new donations law that will allow private companies to donate money to speci-fic projects.

chile clearly has plenty of financing options, but it must be selective.

“We are studying a mixed financing formula but we have to do this very ca-refully because we don’t want changes in the exchange rate or interest rate to cause problems in sectors already devastated by the earthquake,” said Rodrigo Álvarez, Undersecretary of Finance.

Since the earthquake, chile has recei-ved a flood of financing offers from inter-national institutions like the inter-american development Bank. “the problem here is not a lack of resources, and we are grate-ful for these offers, but we have to strike a delicate balance,” said Álvarez.

a flood of dollars from foreign institu-

tions or chile’s economic and Social Sta-bilization Fund would weaken the dollar and boost inflation, just as exporters are beginning to recover from the recent eco-nomic crisis.

But Álvarez admits public spending will increase in the short-term and, as the scale of the disaster becomes clearer, piñera will face pressure from the oppo-sition and factions within his own govern-ment to increase fiscal spending.

larraín, a friend of piñera´s, has vowed to maintain fiscal discipline following in the footsteps of his popular predecessor, andrés Velasco, but navia predicts he will come under pressure from members of the independent democratic Union (Udi) conservative party to increase spending.

on the positive side, piñera had spoken of forming a government of “national unity” in January but the earthquake has unified the government in a way even he could not have foreseen.

All shook up: Piñera starts to rebuild


“the concertación has called a truce in the interests of national unity which is positive for piñera, but he may have pro-blems on the side of fiscal discipline be-cause he needs higher approval ratings,” said navia.

piñera is not the first chilean president to take office after a major political uphea-val with the support of a unified govern-ment behind him.

the first concertación government led by patricio aylwin, who governed chile from 1990-1993 after pinochet ste-pped aside, increased public spending on infrastructure which resulted in higher inflation but also higher employment, economic growth, and productivity.

“piñera will probably take a similar approach to aylwin, which will mean higher inflation this year but also more growth,” said navia.

analysts agree that economic growth will slow in the next few months due to lower consumer demand, but growth should rebound strongly in the second half of the year as employment picks up.

estimates of the quake’s impact vary, but the central Bank has down-graded its 2010 growth forecast to bet-ween 4.25% and 5.25%, with annual inflation expected to rise to 3%.

despite the negative impact of the quake, piñera still aims to achieve ave-rage annual gdp growth of 6% during his four-year term. the challenge,

however, will be to increase producti-vity amid higher public spending.

Boosting Productivity

despite chile’s steady economic growth in the last two decades, producti-vity has declined dramatically from a peak of around 3% annual growth in the early 1990s to an average 0.5% annual decli-ne during the Bachelet administration in 2006-2009.

“chile has been losing economic lea-dership in the last 20 years because of a decline in productivity,” said Ricardo matte, director of the economic program at Santiago think-tank libertad y desa-rollo, which provided several of piñera’s cabinet ministers.

despite increased spending by suc-cessive concertación governments in areas like health and education, funded by income from copper exports, produc-tivity has not improved.

“if you invest more resources and don’t get results, this is an issue of productivi-ty,” said matte.

piñera aims to change that. one of his key campaign pledges was to lift annual productivity growth to 1.5% by 2014.

on the plus side, the political unity that has emerged in the aftermath of the earthquake is an opportunity to fast-track legislation to boost productivity and im-prove efficiency, said matte.

“this is an opportunity to increase pro-ductivity and innovation,” said matte.

For example, the government could support the formation of clusters of small wineries in areas like the colchagua valley near Santiago as well as encouraging partnerships with local universities.

“innovation is like a snow ball, it just needs a little push,” matte said.

But higher public spending is not con-ducive to improved efficiency. “it’s more difficult to improve efficiency when you increase fiscal spending, you can’t do both at once,” said navia.

piñera may be cornered, as navia says, but he has time on his side. and there are different ways to rebuild. Rebuil-ding slower, but with higher standards, could have a positive impact on long-term productivity growth.

Jobs and houses

chile’s shipyards, pulp and paper mills and wineries concentrated in the maule and Bío-Bío regions near the quake’s epicenter have been devasta-ted and many will not start back up for months if not years.

COVER sTorY“This as an opportunity for Chile to boost productivity, which has been declining steadily since the early 1990s,”

ricardo matte, Director of the Economic Program at Libertad y Desarollo

Patricio navia, Master Teacher in Liberal Studies at New York University

“Piñera has an excellent alibi, if nothing works he can blame the earthquake,”


thousands have lost their jobs as a result and some companies have taken advantage of a clause in the labor law allowing them to claim force majeure as a reason to fire workers wi-thout paying severance.

“We will ensure labor regulations are not misused in these cases and we will also create new jobs by offering incentives for hiring and job training,” said Álvarez.

employment is expected to pick up as these incentives kick in and piñera aims to create 200,000 new jobs a year over the next four years, but a more immediate challenge is putting roofs over the heads of those made homeless by the quake.

the government’s housing plan, A United Chile Rebuilds Better, is divided into two stages. the first, providing emer-gency houses and tents to thousands of chileans before the Southern hemisphe-re winter arrives, is in full swing.

But the tents leak and at least one municipality in the hard-hit province of arauco has rejected temporary shelters known as mediaguas, which are basic prefabricated structures with no kitchen or bathroom.

“there is the perception mediaguas are not very good… people would much rather wait and have a permanent solution than a temporary one,” said navia.

piñera may pay a political price this winter if people are still homeless when

the rain falls, but waiting for more per-manent housing solutions will benefit the country in the long-term, said navia.

the second stage of piñera’s program aims to do exactly that. “We will not just rebuild what has fallen down, but rebuild it better with new technologies and desig-ns that are more people friendly, greener and more energy efficient,” said piñera.

of course, this costs money and the government has announced investment of US$2.5 billion to rebuild 134,000 houses and provide subsidies to repair another 62,000 over the next two years.

“the government can’t just start throwing money around… in the end we will all benefit if the reconstruction is done properly, but this takes time,” said matte.

and it’s not just houses that need to be rebuilt – hundreds of roads, bridges, ports, hospitals and schools lie in ruins in the maule and Bio Bío regions.

although chile’s construction stan-dards are high, as shown by the limited damage in Santiago, they can be impro-ved. “the earthquake is an opportunity to improve the quality of chile’s infrastructu-re,” said matte.

the government plans to tender some of the work in the form of build-operate-transfer concessions, which will allow chile to attract foreign com-panies with the latest technology, ma-terials and expertise.

“chile should strengthen the con-cessions scheme since it reduces the financial burden on the government,” said navia.

But strengthening the firewall between business and politics is key to ensuring fair competition. although piñera sold his shares in lan airlines in march, he broke a campaign promise by not doing so before taking office and he still owns the television channel chilevisión and football club colo colo.

piñera’s personal business interests may not be directly related to the recons-truction but public tenders would ensure new contracts are awarded fairly. “piñera has to show he is more pro-market than pro-business,” said navia.

opportunities in the ruins

as chile starts rebuilding, there are plenty of opportunities for U.S. and chi-

COVER sTorY

rodrigo Álvarez, Undersecretary of Finance

“The problem is not a lack of resources, but we have to be careful about the macroeconomic impact of financing the reconstruction,”

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lean companies to come up with innova-tive solutions.

“chile needs creative solutions and companies to help in the rebuilding pro-cess with technology like pre-fabricated homes,” said Susan Segal, president and ceo of the americas Society and council of the americas in new york.

For example, canadian-chilean firm tecno Fast atco, which provides mo-

dular solutions to the mining industry, donated a school to the coastal village of iloca that was hit by the tsunami and plans to build more schools in the affec-ted areas.

U.S. companies could also bring their experience and larger economies of scale to help small chilean firms find so-lutions in niche areas, said Segal.

“there is an important opportunity

for U.S. and chilean companies to work together rebuilding the country and im-plementing new processes and techno-logy,” Segal said.

chile has nothing to prove – it’s the only South american country to be invi-ted to join the organisation for economic cooperation and development (oecd) - but reconstruction is an opportunity to enhance productivity and build a more competitive country, said Segal.

despite a shaky start, piñera says he is up to the challenge. he has four years but there is much work to do that will requi-re the combined efforts of the public and private sectors.

it’s too early to judge the new government’s performance but Segal is optimistic that chile, as it has in the past, will dust itself off quickly.

“chile is a very resilient country and i have no doubt it will emerge stronger as a result of this.”

COVER sTorY

susan segal, Presi-dent and CEO of the Americas Society and Council of the Americas

“This is an important opportunity for u.s. and Chilean companies to work together rebuilding the country,”

Julian Dowling, Editor of bUSiness CHILE

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hat do a chain of pre-school nurseries, new technology to manage supermarkets and a plan to grow lemons in the atacama desert have

in common? not much at first glance, but they are all beneficiaries of chile’s surging venture capital sector.

the industry barely existed at the turn of the century but thanks to ag-gressive state support and a network of talented entrepreneurs, administra-tors and investors, venture capital is showing vigorous growth.

“the development of the sector in the last five years has been explosive,” says gonzalo miranda, ceo of austral capital partners, one of chile’s new breed of ven-ture capital funds.

Venture capital has, in theory, always existed: behind every great innovation have been investors willing to risk their money to support it. christopher colum-bus would never have discovered ame-rica without the financial backing of the Spanish monarchy.

But modern venture capital was in-vented in post-war United States, coming into its own in the information technology

revolution of the 1980s and 90s.apple, oracle and google are just

some of the firms that benefited from ven-ture capital.

Unlike more conventional sorts of investors, venture capitalists, whether direct investors or fund managers like miranda, usually take a more hands-on approach to their companies, tweaking the business plan, identifying promising markets and also looking how to exit the investment with a healthy profit.

“We are trying to connect worlds: that of talent with the world of capital and markets,” explains miranda.

Without someone willing to stump the money early on, inventions could take de-cades winning acceptance.

in exchange for the increased risk of supporting a fledgling company pushing an untried technology or business model, investors expect big profits if they suc-ceed. in chile, that means returns of at least 20%-30% per annum.

Corfo innovation funds

as in most countries, including the United States, the United Kingdom and

israel, chile’s venture capital sector has benefited from state intervention.

Spotting a gap in the country’s finan-cial sector, the chilean economic develo-pment agency, coRFo, began to develop a series of funds designed to encourage innovative projects.

Under this mechanism, coRFo do-ubles or triples the original investment in the fund and, when it comes to liquidating the fund, the winnings are paid back in-versely so that the private investors walk away with the bulk of the profits.

this significantly reduces the risk for investors and increases their potential profits, says patricio Reyes, coRFo‘s head of financial intermediation.

So far 30 such funds have been laun-ched under coRFo totaling US$570 mi-llion. through the end of 2009, the funds had invested in 86 companies and still have around US$300 million to invest in new projects.

investments range in size between US$1 million and US$5 million. and the range of businesses supported through the scheme is equally impressive.

austral capital specializes in new te-chnologies and biotechnologies, such as

SPECIAL reporT

Venture Capital:

Innovating on Angel’s WingsThanks to state support and eager private investors, a new venture

capital industry has taken root in Chile, supporting dozens of new start-

up businesses. But to grow the industry will have to become more

international in its quest for finance, ideas and deals.

By Tom Azzopardi

W


producing bio-fuels from microalgae or using computers to help supermarkets monitor customer behavior.

others have more modest goals, like applying modern management techni-ques to running a kindergarten or planting new fruit or grain varieties.

But many of the investments suppor-ted by coRFo are not what would count as venture capital in the United States or europe where start-ups need to offer a significant innovation to obtain capital.

of the 30 funds which have received funding from coRFo, only two or three are genuine venture capital funds, says alan Farcas, ceo of endeavor chile, an ngo that promotes entrepreneurship.

austral is one; Fundación copec-Uc – a partnership between Santiago’s catholic University and one of the country’s largest industrial conglome-rates - is another.

many have acted more like private equity funds, taking stakes in privately-held companies to fund a major expan-sion or turn-around of the business. as a result, of the US$570 million managed by the funds, less than US$100 million will go to start-up businesses.

“the funds are being misused: lega-lly they are doing nothing wrong but it’s not within the spirit of the law,” Farcas argues.

at coRFo, Reyes concedes not all the money has gone into new companies but says changes have been made to the ori-ginal model to ensure that funds are more focused in the future.

For example, the F3 line of credit, laun-ched in 2005, added incentives to ensure more of the money goes to innovative companies or industries and the new F4 program will be directed 100% at innova-tive projects.

and, despite its initial lack of focus, coRFo is likely to continue to play a major role in venture capital for at least another four to five years, says Reyes, after which the sector should be strong enough to grow on its own.

Entrepreneurs Wanted

already coRFo’s support has helped chile leapfrog to the vanguard of venture capital in latin america. For three straight years chile has topped the regional ran-king by the new york-based latin ame-

“There are not as many good projects as we would like to have, which is a structural problem,”

Alan farcas, CEO of Endeavor Chile

SPECIAL reporT

rican Venture capital association and many governments are looking to replica-te the coRFo model.

But it is not just a question of strong state support.

chile’s financial stability, clear ac-counting rules and social stability, all qualities long appreciated by multinatio-nals investing in the country, also make it a good place to start a new business.

and there are plenty of rich indivi-duals willing to risk their money in new businesses. But some fret there is a lack of attractive opportunities.

“there are not as many good pro-jects as we would like to have – that’s a structural problem,” said Farcas.

the poor quality of education signifi-cantly reduces the number of potential entrepreneurs. Farcas estimates that no more than 10% of the population has the skills and contacts necessary to de-velop a business. While chile’s high-im-pact entrepreneurs total no more than a hundred, israel, a much smaller country, can call on almost 2,000.

and when they do dream up a busi-ness, entrepreneurs rarely consider its potential beyond the narrow confines of the andes mountains and the paci-fic ocean.

“as a country, we tend to think small,” said Farcas.

But that is starting to change. chile’s business incubators are an important source of innovative companies ripe for investment, says Reyes.

thanks to coRFo, 19 such orga-nizations exist, often based at major universities, which have supported 500 projects in the last four years. coRFo’s innovation promotion arm, innovachile, has also provided seed capital for 650 early stage start-ups over the same period.

But there is a long way from projects at this stage of development, with in-vestments normally in the US$10,000-US$50,000 range, to the point where they ready to be taken on by a venture capital fund, which rarely invest less than US$1 million in a business.

“Entrepreneurs often cannot answer the most basic questions an investor would ask, such as their expected cash-flow,”

nils Galdo, CEo of the investment group GlobalChile Angels.


matching Entrepreneurs with inves-tors

to bridge this gap, a number of busi-ness angel networks have been formed, which seek to bring together promising projects with interested investors.

Such networks play a crucial role by searching for and vetting potential inves-tment opportunities, while building trust between investors since one can only join on recommendation from an existing member.

these earthly angels are often high net-worth individuals, typically executives or entrepreneurs nearing the end of their formal careers. Just as important as their money, however, is the business expe-rience and contacts they can share with their protégés.

“they allow the business to grow much more rapidly than would otherwise be possible,” says maría de los angeles Romo, investment manager with Southern angels, chile’s largest and long-running business angel network.

linked to adolfo ibáñez University’s business school, the network’s 65 mem-bers have invested a total US$5.7 million in 18 businesses since its creation four years ago, with individual contributions ranging in size between US$50,000 and US$500,000.

in its wake, five more networks have been created often under the auspices of larger organizations, including other uni-versities.

although the networks receive funding from coRFo, there is no state support for angel investment itself as exists in other countries.

in Scotland, a development fund auto-matically matches investments in start-up companies in addition to the tax credits offered by the British government.

“With this type of incentive an inves-tor does not take so long to decide on making the investment,” said Romo.

a private version of the Scottish scheme is run by Santander, chile’s lar-gest bank, attracting significant interest among entrepreneurs and investors.

another barrier preventing more angel investment is entrepreneurs’ lack of busi-

ness experience, so networks spend a lot of their time coaching them how to pitch their idea and negotiate with interested investors.

“When they come to us, they often cannot answer even the most basic ques-tions that an investor would ask, such as expected cash-flow or a proper business plan,” said nils galdo, ceo of the inves-tment group globalchile angels.

Finding projects at the right stage of development is another difficulty. pro-mising projects often spend up to three years in business incubators by which time they are too old, or too well-known, to be of interest.

instead, incubators should be more selective, deciding quickly which ideas will sink and which will swim and then finding investors to help them grow, suggests galdo.

Thinking Globally

given the youth and lack of experience of chile’s venture capital industry, educa-tion and an international outlook are vital to its success.

a new course organized by the adolfo ibanez University and coRFo on venture capital investment should help increase knowledge, and what chile lacks in capi-tal, ideas or demand it can find elsewhe-re.

of course, the U.S. is an important source of both ideas and investors. aus-tral, which has an office in Santiago and another in Silicon Valley, has been able to spot businesses with potential, “whether chilean innovations for the U.S. market or vice-versa,” said miranda.

austral also works closely with U.S. investors who can supply the knowledge and contacts to help a promising project get ahead.

if entrepreneurs are thin on the ground in chile, the country could import talented entrepreneurs and help

“venture capital in Chile has no other option but to be international,”

Gonzalo miranda, CEO of Austral Capital Partners


them create new businesses here.immigration laws should be changed

to make it easier for entrepreneurs like in-ternet entrepreneur Wenceslao caceres, who hails from argentina but runs some of his businesses out of Santiago, to set up shop here, suggests Farcas.

But the small size of chile’s market is of little interest to investors looking to maximize returns. miranda spends much of his time between the U.S. and Brazil where austral has relocated some pro-jects, eyeing the greater potential demand in these much larger markets.

Still, austral has made nine inves-tments in chile in the two years since it was launched, which suggests opportu-nities do exist.

an international focus will also help when venture capital funds look to reali-ze the gains made on theiroriginal inves-tment.

chile’s small and heavily concentra-ted economy could make it difficult to sell a business at a competitive price and the stock market, dominated by

large companies and institutional in-vestors, is not a welcoming place for high-risk start-ups.

although the government and financial institutions talk hopefully of creating an emerging market in Santiago, after seve-ral failed attempts miranda is not holding his breath.

instead, investors should look abroad for exit strategies.

austral has already listed shares of one of its investments on the naSdaQ stock market while the backers of the Vitami-na chain of kindergartens have signed an agreement to sell the business to one of the United States’ largest providers of pre-school education once they grow the business to an acceptable size.

“if we can’t do it in chile, we’ll do it el-sewhere,” miranda explains.

Angels on our shoulders

the new confidence of chile’s ven-ture capital sector is attracting inter-est from aboard, but this has yet to

SPECIAL reporT

“Angel investors need more incentives to make investments,”

maría de los Angeles romo, investment manager at Southern Angels

translate into investment.endeavor’s Farcas regularly meets

with U.S. venture capitalists looking for opportunities although none has made a firm commitment. “there are many cir-cling but none have landed,” he said.

this could soon change. San Francis-co-based Burrill & company is close to tying up a deal with austral capital and coRFo to create a new business fund in

chile, said the firm’s ceo Steven Burrill.With investments totaling around

US$1 billion in over 90 biotech busines-ses around the world, Burrill would bring a new scale and international flavor to chile’s nascent venture capital scene.

as well as investing in chilean innova-tions, the firm is interested in bringing te-chnology detected by its global network of offices that could find new applications

from vaccines for salmon farms to more efficient ways to produce pulp or mine copper.

“We want to bring technology that could be transformative for the local eco-nomy… and help chilean companies be more competitive globally,” said Burrill.

But attracting more funds like Burrill will be difficult unless they are offered more incentives, says miranda.

in canada, Brazil and some U.S. states, foreign funds are exempt from paying taxes but in chile they must pay a capital gains tax of at least 5%.

“to be competitive, we need to reform the tax system: today we are too expensive,” said miranda.

With such an incentive in place, there could be a couple of dozen funds waiting to swoop rather than just a handful. and the more angels who come down to earth, the more in-novative and strong chile’s economy will become.

SPECIAL reporT

Tom Azzopardi is a freelance journalist based in Santiago.

chilebUSiness

“Corfo is likely to continue to play a major role for at least another four to five years,”

Patricio reyes,Head of financial intermediation at CORFO

CAPACITACION

Programas de Negocios

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AVISO SHERATON


spoTliGhT

he February 27 earthquake dealt chile a heavy blow, with economic repercussions that will endure for years to come. nonetheless, many small and

mid-size chilean food producers remain well-positioned for growth, having wea-thered both the earthquake and last year’s deep recession. While domestic options for expansion certainly exist, the most exciting growth opportunities are in other markets – specifically, in the United States, a huge common market of nearly 310 million inhabitants.

With its unique and diverse climatic conditions, chile has the potential to be a major exporter of food products. in the decade previous to the recent economic crisis, efficiency improvements and trade agreements helped chile increase agri-cultural exports by 149%. a 2009 USda report ranks chile as the 17th biggest food exporter in the world with a good chance of breaking into the top 10 in the medium term.

chile may be small but it punches above its weight in exports of fruit, fish and wine. according to the USda report, it is ranked as the top Southern hemis-phere exporter of apples, peaches, nec-tarines, blueberries, raisins, nuts, prunes, and almonds, the top world exporter of plums, the second world exporter of kiwis and salmon, and fifth in the world in wine exports.

But chile could increase its competiti-veness in the more sophisticated market of processed, value-added food pro-ducts, paving the way to better returns for chilean exporters. For instance, bulk exports of chilean honey are worth US$2 per kilo in the U.S., whereas the same honey is worth up to US$40 when the honey barrels are divided up into 250-

gram, attractively-labeled packages.the implementation of the chile-U.S.

Free trade agreement in 2004 drastica-lly lowered barriers for chilean products entering the U.S. market. as a result, bet-ween 2003 and 2007 the value of non-co-pper exports surged nearly 90%, before slipping back during the 2009 recession. most of the pre-crisis growth was led by large exporters, which possessed the in-ternal resources necessary to research and respond to market opportunities in the United States. But it has been more complicated for smaller food product producers that face major hurdles such as procedural, regulatory and tax require-ments, together with changing consump-tion habits in the U.S.

these challenges can be overcome - after all, the United States generally scores at or near the top of worldwide competitiveness rankings - but without a deep understanding of the practical issues involved, many small and mid-size chilean companies find themselves at a disadvantage. however, with timely knowledge and specific guidance on key issues, these companies could achieve substantial long-term growth by tapping the unparalleled buying power of the U.S. consumer market.

Government support

in most countries, including chile, gover-nments subsidize business development

t

Working up an Appetite for food ExportsBy nora Balzarotti and robert Townsend


services and provide financial support to promote exports, create jobs and improve competitiveness among small and medium enterprises. While these interventions are often challenged on philosophical grounds, they are (usua-lly) justified not only on the grounds of enhancing income distribution, but also on mainstream economic theory: small businesses face diseconomies of scale, along with lack of information about consumers, other suppliers, production methods and new technology.

a recent study by World Bank eco-nomist hong tan shows that govern-ment programs, like the innovachile program of the chilean economic development agency (coRFo), are causally related to improvements in a range of intermediate outcomes (trai-ning, adoption of new technology and organizational practices), as well as positive gains in sales, labor produc-tivity, wages and to a lesser extent, employment.

With these benefits in mind, amcham is proud to announce the launch of a new US$230,000 program funded by coRFo’s innovachile and with the par-ticipation of Washington-based trade consulting firm allen F. Johnson & asso-ciates. the program is designed to em-power small and mid-size chilean food producers to export new value-added products into niche markets within the United States retail food industry.

this goal will be accomplished in two main stages: first, through an in-depth study to identify niche food markets in the U.S. and match them to chilean industry needs and capabilities, and then through a series of training and educational activities which will provide participating food producers with the knowledge, management techniques, marketing strategies and leverage they need to expand into the U.S. market.

“chile has a huge potential in terms of quality and capability of production, innovation and entrepreneurship. our aim is to help companies link this po-tential with opportunities in the United States,” said eduardo Santos, a former chilean agricultural attaché in Was-hington and director of South american

markets at allen F. Johnson.during the first phase, launched in

march, amcham will coordinate three workshops. the first will help to select the product lines of greatest interest to chilean exporters; the second will identify the innovations and knowledge transfers needed for these products to be successfully exported; and the third will help design the training mecha-nisms for these transfers to occur.

phase ii of the program inclu-des seminars and training programs based on the conclusions reached in the first stage. these events will be directed at the management of parti-cipating food producers, and will pro-vide a valuable, detailed, and compre-hensive roadmap for innovative export strategies.

as a final step, amcham intends to coordinate the creation of a data-base to serve as an ongoing export platform for the food producers in-volved. chilebUSiness

spoTliGhT

AmCham’s Export Promotion Program

AmCham’s export empowerment program has the potential to help small and mid-size Chilean food producers grow into major expor-ters. The lessons learned during the first phase, and the instruction provided in the second, will offer a sustainable, long-term export boost to participating companies.Companies can join at anyti-me during the year since the program is tailored to each company’s needs. if you repre-sent a Chilean food product producer or would like more information about the program, please contact nora Balzarotti at [email protected]

Phase Iu.s. market study and Workshops (march-may, 2010)Great Expectations: Products with High Potential for Success in the U.S.Missing Links: Closing the Knowledge GapNext Steps: A Road Map to Suc-cess

Phase IIinternational seminars (June–December, 2010)New Trends in the U.S. Food Market and Opportunities for Chi-lean Food ProducersProduct Design for the Chilean Food Export IndustryInnovative Marketing in the U.S. Niche Food Market

Training Courses (July & november, 2010)Laws, Labels and LogisticsRealities of Exporting and Marketing. (Held in the U.S.).

“Chile has a huge poten-tial in terms of quality and capability of production, innovation and entrepre-neurship.”

Eduardo santos, Director of South American markets at Allen F. Johnson.

April 2010 31business ChilEAv. Presidente Kennedy 5454, 3rd Fl., Vitacura, Santiago, Chile.

Phone (56 2) 751 0360; www.boyden.com; [email protected]

Global ReachWith offices in every major business hub in the world, our reach is unequalled in the industry.As a result our global capabilities are unsurpassed.

boyden 21.5x28.indd 1 23/3/10 16:28:41


AmChAm news

Finance COMMITTEE

MEETINGin march, amcham’s fi-

nance committee heard from experts on chile’s recently signed double taxation avoi-dance agreement with the United States. these in-cluded liselott Kana, head of international taxation at chile’s national tax servi-ce, the Servicio de impues-tos internos (Sii); astrid Schudeck, tax consulting Supervisor at pricewater-housecoopers; and Joseph courand, tax & legal part-ner at deloitte.

Kana discussed the gene-ral framework of the agree-ment that will reduce the tax burden on companies and individuals required to file returns in both countries. For more information, see the article avoiding double taxation in the march issue of bUSiness chile.

Jaime Bazán, amcham; astris Schudeck, Pricewaterhousecoopers; Joseph courand, Deloitte; Liselot Kana, Servicio de impuestos internos; and arturo Platt, Finance committee.

“Security measures for the entry of people and products into the United States” was the title of a talk given by a delegation from the U.S. de-partment of homeland Security (dhS) to amcham members in march.

dhS assistant Secretaries alan Bersin and douglas Smith discussed the importance of exchanging infor-mation between the public and pri-vate sectors to expedite safe transit between countries. “the aim of our visit is to establish an on-going dia-logue and improve the exchange of information,” Bersin told members.

Smith also highlighted the work being done by dhS, in cooperation

with other U.S. federal institutions, to protect intellectual property and fight cyber-terrorism.

U.S. Department of Homeland Security Briefing

University of north carolina Visit

a delegation of mBa students from the University of north carolina visited amcham to learn about the business climate in chile, the potential for growth in key areas and the work amcham is doing to strengthen ties between the two countries.

University of north carolina Students

Jaime Bazán, amcham; alan Bersin, Department of Homeland Security (DHS); Grace choi, US embassy; and Douglas Smith, DHS.

amcham’s Research department has created a new guide to doing business in the United States aimed at chilean executives. chi-lean companies often waste valua-ble time and resources trying to find tax and other information about the U.S. market, but this guide aims to correct this information deficit, not by giving details about all the regu-lations that could affect a business venture, but by providing a basic

overview of the United States at a national and state by state level.

the guide also includes a politi-cal overview of the federal gover-nment system, demographic and economic information by state, and a chapter on keys to starting a successful business from the different legal requirements to the steps required to hire workers, pay taxes, and how to find more information.

amcham’s Guide to Doing Business in the U.S.


new membersiGTManagement and innovation consultantiván Vera / General Manager olivos del surProduction and export of extra virgin olive oil Tomás eguiguren, General Manager Consultora DalbergconsultantsMiguel Soto / General Manager sCiP, llCWholesale Distributor Ramón Vergara / Managing Partner GeoPark Chile limitedOil & gas producerSalvador Harambour / Director

Wardrope Communication DevelopmentTraining and consulting servicesWilliam Wardrope / General Manager schweitzer & Compañia, AbogadosLegal ServicesMiguel Schweitzer / Partner Employee mobility solutionsimmigration and relocation servicesana Gazarian / President ingeniería y montajes ferrovialFreight forwarderscarlos Wilson / General Manager silent viewSecurity for high value targetsFrancisco Pérez / ceO, founder

ArtemedRental of surgical equuipment and materials enrique Lee / Medical Director

Cf Partnersexecutive recruitment and training servicescarla Fuenzalida / executive Director

Easy informatic Eirl computer and related servicescarlos González / General Manager

Prodalamarexporter of seafood productsRené Piantini / General Manager

Actuarial vBA nYFinancial consultant and international representation Mauricio Vergara / consultant, owner

considering the tragic consequences of February’s earthquake, amcham is disappointed that the U.S. government rejected a request by chile to extend the time period in which chilean table grapes may be imported to the United States. after the earthquake, large shi-pments of grapes and other fruit had to be stored while authorities worked to get port facilities operating again. Shi-pping times from chile to the United States vary from 10 to 14 days, so chi-lean authorities asked the U.S. to extend the import period from april 10 to april

20, but the request was denied.We understand the United States

has norms and laws that must be res-pected but chile’s circumstances, in our opinion, warrant a more coope-rative and supportive approach from one of chile’s closest friends and tra-ding partners. the approval of chile’s request would have shown that the outpouring of support shown by presi-dent obama, Secretary of State hilary clinton and congress translated into concrete action in a sector that is im-portant for chile’s economic recovery.

amcham Sour on U.S. Grapes Decision

amcham has launched a new website for the magazine Business chile (www.businesschile.cl) with an attractive, user friendly design that uses new technology to provide more information and inte-raction with our members. the articles, written by our team of regular contribu-tors, include interviews with top businesspeople and politicians, providing unparalleled insight into important issues affecting business between chile and the U.S.

the new website inclu-des videos and podcasts of amcham’s events, re-

new bUSiness cHiLe Website

the debating team from the Universidad de los andes, which won the chilean classifier for the international philip c. Jessup debating tournament organized by amcham, reached the quarterfinals of the international stage held in Was-hington in march. the chilean team of law students was the only latin american team to place amongst the top eight teams in the world (out of 105 participating teams), after beating teams from Spain, new Zealand, ghana and poland.

Universidad de los andes Debate Team Shines in Washington

lated links and offers readers the chance to join the discussion by commenting on arti-cles. amcham invites

members to check our website often since it is updated monthly with new articles and spe-cial content.


AmChAm members news

execUTiVe APPoinTmEnTs

anglo american Digs Deep for ReconstructionMining firm anglo american chile has donated US$10 million to reconstruc-

tion projects including housing, schools and emergency water and electricity services. anglo american is also working with chilean authorities on plans for more relief and reconstruction efforts.

“anglo american’s support is especially aimed at financing emergency so-lutions for housing and schools in the areas of concepción and Talcahuano, as well as helping people in communities nearby our mining operations in the central part of the country who have also been affected by the earthquake,” said Miguel Ángel Durán, president of anglo american chile.

Days after the earthquake, global courier firm DHL sent its Disaster Res-ponse Team (DRT) to help local autho-rities in the central-southern part of the country deliver humanitarian supplies to the most affected areas.

DRT is comprised of 140 volunteers from DHL chile led by chris Weeks, Di-rector of Humanitarian affairs for DHL. The team, based in Santiago’s airport, helped pack 4,000 bags with first-aid kits, water, food and cleaning supplies

for areas in and around the city of con-cepción. DHL volunteers also drove 40 trucks to concepción and other areas with 25 tons of materials donated by the humanitarian organization, Hogar de cristo.

“as a company that operates around the world, we are committed to brin-ging our experience in logistical su-pport to chile to help coordinate relief efforts,” said Frank appel, chief exe-cutive Officer of Deutsche Post DHL.

DHL Disaster Response Team Swings into Action

DHL’s DRT team packs bags with water and food supplies for earthquake victims.

andrés Barrios has been made Manager of corporate and Legal affairs at General Motors chile, adding to his responsibilities in the company which include managing GM’s media relations in chile.

carolina Lucaroni has been appointed Mana-ger of corporate affairs at BHP Billiton’s Base Metals division. She has a degree in Social com-munication from the Uni-versidad of Buenos aires and a Diploma in Mar-keting from the adolfo ibáñez University Busi-ness School. She has previously worked for Shell and MetLife new

Felipe Bahamondes has been appointed interim general manager of engineering firm Dictuc. He holds a Masters in Business administration from the Pontificia Universidad católica de chile and has been with Dictuc since 2005.

Medical Students Rescue Abandoned Animals

Felipe Bahamondes, interim General Manager of Dictuc.

Carolina Lucaroni, Manager of Corporate Affairs at BHP Billiton’s Base Metals Division.

a team from the veterinary program of the Universidad Mayor’s Medical School treated over 500 abandoned and injured animals in the Maule Region hit hard by the earthquake and subsequent tsunami.

The group of 34 students and teachers led by the school’s director, Dr. Macarena Vidal, treated dogs, cats, horses and farm animals,

travelling in the university’s Mobile Veterinary clinic. The team also provided around 2,500 kilograms of dog and cat food.

“even though the disaster has been terrible for the people and animals living in the Maule Region, it has been very satisfying for us as professionals and a great learning experien-ce,” said Dr. Vidal.

The Universidad Mayor veterinary team works to help animals in the Maule Region.

Andrés Barrios Manager ofCorporate and Legal Affairs at General Motors Chile.


endesa contributes US$10 Million to earthquake Fund

chilean recruitment firm Laborum Selección has selected 42 people out of 4,500 applicants to work as hosts in the chile Pavilion at expo Shangai 2010 from May to October 2010.

The successful applicants have learned about chinese and chilean history as well as taking classes in customer service, teamwork and in-terpersonal communication. They also received english language trai-ning, learned key phrases in chinese

and studied the country’s social pro-tocol to answer questions from visi-tors to the pavilion.

“We chose those who matched the profile needed to represent chile abroad, but they must also have the knowledge and abilities to play an im-portant role during this extraordinary event,” said Birgit nevermann, Ma-nager of Laborum Selección, the re-cruitment division of Laborum.com.

Laborum Recruits Pavilion Hosts for expo Shangai 2010

Laborum: Future chile Pavilion Hosts at expo Shanghai 2010

The University for Development and in-novation (UDi) of Santa cruz, Bolivia, has signed an agreement to implement the chilean DuocUc Professional institute’s education model through academic ex-change programs and technical assistan-ce. Fundación edace is sponsoring the initiative and UDi students will be able to obtain a dual degree once they have met the chilean institute’s requirements.

Bolivia Implements DUOC Education Model

Disney Aims to Animate Quake Victims

Disney has announced it will contribute US$50,000 to provide humanitarian assis-tance to earthquake victims. The donation will be made through the american Red cross and a chilean nGO yet to be chosen.

“Disney is deeply saddened by this disas-ter, and is committed to helping the home-less as well its employees and their families,” said Javier irarrázaval, Vice-President and General Manager of The Walt Disney com-pany chile.

Disney channel and Disney xD Latin ame-rica have produced short segments, starring local actors, which invite children to explore and communicate their feelings generated by the earthquake.

Marcelo von chrismar, Rector of DuocUc, and the president of Fundación edace, Víctor Hugo Jiménez, sign the agreement.

Javier irarrázaval, Vice-President and General Manager of The Walt Disney company chile

after meeting with President Se-bastian Piñera, the president of Spa-nish power generation firm endesa, Borja Prado, announced the company would contribute US$10 million to a fund to help rebuild the country after the earthquake.

although the fund is for general re-construction, part of the money will be used for rebuilding schools damaged by the quake and for implementing a plan to improve the quality of educa-

tion. “We want to support schools in the most vulnerable areas of the coun-try, which are areas where our energy companies play an important role within the community,” said Prado.

endesa’s Latin american holding, Grupo enersis, donated US$1 million in the telethon chile Helps chile and sent 22 tons of food and other pro-ducts to coronel city where endesa chile is building the 370 MW Bocami-na ii project.


maximiliano Santa cruz, director of the chilean national institute of industrial property (inapi), was the guest speaker at amcham’s ceo lunch, held on march 9 at the Radisson hotel. Santa cruz, who also chairs the Standing committee on the law of patents at the World intellectual property organization, discussed inapi’s plans for 2010 (see interview with Santa cruz p.40).

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ceO Lunch with inaPi Head AmChAm people

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AmChAm people

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1 Jaime Bazán, AmCham, Arturo Alessandri Besa, Alessandri y Cía and max villaseca, Estudio federico villaseca Gerardo otero, Estudio Jurídico otero; felipe Claro, Claro y Cía and Carmen Paz Álvarez, inAP Timothy Goodman, Pfizer Chile and valeria Taborga, sateler y Cía Ernesto Byrne, radisson; Jaime silva, silva y Cía., maximiliano santa Cruz, inAPi; ricardo García, AmCham and michael Grasty, Grasty, Quintana, majlis y Cía.

Charles Kimber, Celulosa Arauco y Constitución; ricardo García, AmCham; félix de vicente, ProChile; fernando schmidt, foreign Affairs ministry; and mateo Budinich, insape Cristóbal Barros, foreign Affairs ministry, with Drew Curiel, u.s. Embassy Patricia o’shea, AmCham with Jorge ortúzar, sofofa Executives and government officials at AmCham’s business lunch in march.

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a Foreign affairamcham held a business lunch in march in honor of the new Undersecretary of Foreign affairs, Fernando Schmidt, with the participation of prochile, chile’s manufacturers’ association Sofofa, and the U.S. embassy. discussion focused on the trade mission to california that amcham will help organize in october amongst other topics.

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1 santiago fernández, Crystalis Consulting and Pablo Cortés, GEQ Chile rodrigo Gallardo and José luis Elgueta, international Center Carla fuenzalida, Cf Partners, laura leyton, Engintel and rachel Conning, Cf Partners roque Cañete and francisco Pérez, silent view ramón vergara, market link Chile and Aldo vera, Te Pillé.

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2amcham is always happy to welcome new members and, on march 26, it hosted an event introducing members to the many services and bene-fits available to them through the chamber.

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amcham Welcomes new Members

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navegando por aguas turbulentascadenas de abastecimiento post crisis:

Durante las últimas semanas hemos visto como muchas de las empresas han tenido que lidiar no tan sólo con el terremoto y tsunami, sino que también con los desastres que éstos han dejado en sus negocios.

como consumidores todos hemos notado en mayor o menor medida, cómo las góndo-las y locales comerciales del país han que-dado dañados o sin algunos productos. Sin embargo, lo que no se ve a simple vista, es la fuerte lucha y el nivel de esfuerzo que están realizando las empresas para solucionar cuanto antes estos problemas.

Tras la catástrofe, muchas compañías se enfrentaron a un sinnúmero de problemas, siendo uno de los más sensibles el relacio-nado con el personal. en este sentido, el tra-bajo partió haciendo un levantamiento de la situación en que se encontraba cada uno de los colaboradores, con el fin de apoyarlos y reunirlos para trabajar en el levantamiento de las operaciones, debiendo evaluar y luchar con diversos daños.

Según la Gerente Senior de consultoría de Pricewaterhousecoopers (Pwc), Lydia Saetto-ne, estos daños se pueden dividir en dos cate-gorías: los controlables y los incontrolables.

entre los primeros encontramos los daños

de infraestructuras (galpones y oficinas), in-ventarios, líneas productivas, sistemas infor-máticos y RR.HH., entre otros, y en los se-gundos se destaca la infraestructura vial y aéreo portuaria, los cortes de energía, agua, luz y telecomunicaciones, además de la reali-dad propia en que se encuentran los provee-dores y clientes.

Otra de las secuelas tras la crisis son las pérdidas en el stock de productos, ya sea por destrucción, vencimiento y/o descomposi-ción de la mercadería. Según Saettone, estas bajas se deben a “factores como la imposibi-lidad de despachar o vender productos por no encontrarse disponibles las instalaciones de los clientes para recibir mercadería al estar cerradas, con daños y/o simplemente sin las condiciones de almacenamientos requeridas”. Para mitigar estas consecuencias en futuras contingencias, el Gerente de Pwc, Sebastián Goycoolea, identificó lecciones claves que pueden extraerse tras el terremoto:

articular una estrategia de manejo de crisis que se aplique desde el momento cero, forman-do dos equipos que trabajan en paralelo, uno a cargo de la contingencia inmediata y otro res-ponsable de preparar la cadena logística y pro-ductiva para la demanda futura que en algunos

casos puede aumentar sobre lo normal.Manejo adecuado de las comunicaciones

tanto internas como externas con los medios, proveedores y clientes.

aumento de la comunicación, cooperación y coordinación entre los proveedores y clien-tes, de manera de tener planes de trabajo co-ordinados y en conjunto.

continuar con los proyectos de inversión planificados antes de la contingencia, ade-cuándolos cuando corresponde a realidad actual, pero sin detrimento de la estrategia inicial diseñada para el negocio.

aDVeRTiSinG

Lydia Saettone y Sebastián Goycoolea


as the days pass, we are learning more about the terrible consequences of the earthquake, both human and economic. But amongst all the bad news, we have been witness to heroic actions by our countrymen and women, reflecting the solidarity and cooperation shown by all sectors of society. this positive respon-se can also be seen in the economic arena. although reconstruction opportunities will not compensate for the loss of national wealth, they could become the starting point of a more just and prosperous society with increased employment, productivity and better quality infrastructure.

the government has estimated the total cost of the earthquake to reach about US$30 billion including US$21 billion in reconstruction costs and US$7.6 billion in losses associated with lower production in the next four years. the costs are split roughly half and half between the pri-vate and public sectors, leaving the state with commitments for recons-truction of US$10.6 billion of which US$1.2 billion will come from insuran-ce. With these figures in mind, we can now explore the consequences and economic challenges.

clearly, the earthquake will have a short-term negative impact on growth. in the first quarter we will see a sharp drop in activity (we expect chile’s monthly economic activity index, imacec, to have fallen 5.0% in march year-on-year, after rising 2.7% in February), but this should give way to a strong rebound later in the year followed by higher growth in 2011 than was projected prior to the ear-thquake. Reconstruction will drive growth, create jobs and result in increased investment.

private consumption will be weakened this year by the loss of wealth and the diversion of resources to carry out repairs, but it should bounce back in 2011 as unemployment falls. Finally, we will likely see a mode-rate increase in inflation this year and next. this sce-nario will compel the central Bank to start increasing

the benchmark interest rate probably in June 2010. We expect the rate will rise from 0.5% to at least 2.0% later this year and 5.0% in 2011.

in fiscal matters, the consequences of the ear-thquake and the challenges posed by reconstruction are great. First, the efficiency and productivity of the new government will be put to the test and its per-formance could define the political future of the go-verning center-right coalition for decades to come. in addition, reconstruction requires fresh financing which in itself should not be difficult to find given the financial strength of the state, but it could still have serious economic consequences.

in 2010, we expect that the bulk of the burden will be financed by domestic debt issuance, fiscal sti-mulus from sovereign wealth funds and, to a lesser

extent, by budgetary reallocation, higher taxes, donations and pos-sible sales of state assets. this would lead to moderate increases in long term interest rates (the private sector is also seeking financing) and an implicit ceiling for the U.S. dollar exchange rate of 550 chilean pesos or less. in the next three years, we expect the reallocation of resources will play a more prominent role but the deficit will persist, leading to the continuing need for the govern-ment to sell dollars from its copper funds.

a final challenge for the govern-ment, and perhaps the most impor-

tant, is to show chileans that the needs of the poorest sectors of society are high on its agenda and that pri-vate enterprise is a means not only to generate wealth but also ensure more equitable income distribution. an increase in taxes on big business and a reduction in personal taxes would be a mechanism to achieve most of these challenges.

Piñera’s ChallengeBy Cristián Gardeweg, Celfin Capital

Cristián Gardeweg is an economist at Santiago brokerage firm Celfin Capital.

chilebUSiness

economic snapshot


head of the celebration of World intellectual property day on april 26, bUSiness chile talked to maximi-liano Santa cruz, director of chile’s national indus-trial property institute (inapi), about chile’s achie-vements in this field, its pending challenges and the

contribution made by inapi since its launch in January 2009 to replace the economy ministry’s department of industrial property.

a lawyer who holds a master’s degree from the University of San Francisco, Santa cruz has vast experience in intellec-tual property protection. Before joining inapi, he served for almost five years as a member of chile’s mission to the World trade organization where the issues he was responsible for included, precisely, intellectual property. and, before that, he covered the same issue at the Foreign ministry’s directora-te of international economic Relations (diRecon) where he was part of the team that negotiated the chile-U.S. Free trade agreement (Fta).

What exactly is inAPi’s role? is it responsible for intellec-tual property in general or just industrial property?

Just the latter. in other words, we manage things like pa-tents, trademarks, denomination of origin and industrial de-signs. matters like copyright are out of our scope.

one of inAPi’s strategic objectives is to promote innova-tion. how do you do that?

inapi plays a key role because one of the aims of the system of protection of intellectual property and, principally, patents is to foster innovation. We do this by granting exclu-sive rights to their holder who must, in exchange, share the knowledge and, eventually, this falls into the public domain and can be used by everyone.

how has inAPi performed in its first year? What results has it delivered?

We spent most of the first year simply getting the new orga-nization up and running. We had to select and hire around 100 people and create new areas to handle things like legal affairs and administration. Under the former system with the de-partment of industrial property, these matters were managed by the undersecretariat of the economy ministry. and we also had to develop processes for all our different areas of activity.

But we also created a very important new area for the transfer of knowledge. its job is to detect and publicize inven-tions that are already in the public domain as well as techno-logies that can be useful for the high-potential clusters defi-ned by the national council for innovation like, for example, the mining and fish-farming clusters.

more recently, we’ve also launched a newsletter through which we hope to contribute to reconstruction after the ear-thquake. it includes information, for example, about techno-logies for treating and storing water, building techniques and different ways of processing rubble.

What budget does inAPi have as compared to the former Department of industrial Property? is it sufficient for all you have to do?

For this year, we have a budget of just over 5.3 billion pesos (around US$10 million). it’s difficult to compare with the department of industrial property because it was part of the economy ministry but you’ll get some idea of the scale of the change if i tell you that we have twice as many staff.

the budget isn’t optimum. in 2009, it was actually around 150 million pesos more but we understand that, in a year of reconstruction, we had to be realistic and reduce our expec-tations.

how does inAPi relate to the private sector? although we also work with other government agencies,

our principal client is precisely the private sector. it’s the pri-vate sector that applies for patents and to register trademarks and is a player in those cases in which inapi acts as a tribu-nal.

in fact, we have very good relations with the private sector. We do a lot to provide information to law firms, universities and researchers as well as companies.

more recently, in addition to our other joint activities, we have launched a new process of open and frank dialogue with private-sector experts in which we’ll be working together to draw up proposals for improving chile’s regulation of intellec-tual property rights.

You mentioned universities, but in general these don’t have policies on the protection of intellectual property…

Fortunately, we see that they’re showing ever greater in-

Maximiliano Santa Cruz, INAPI

Protecting Intellectual PropertyBy ruth Bradley

inTerview

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ruth Bradley is the Santiago correspondent of The Economist.

terest in the issue. inapi has a very important role to play in increasing understanding of the system of intellectual pro-perty protection and helping universities to develop their own policies. We’re preparing what we call ip toolkits that help universities to make the best use of the system, protecting and marketing their intellectual property and also respecting that of others. another good example of what we’re doing is an agreement we signed recently with the ReUna corpo-ration, which will allow us to use its networks to inform the scientific community outside Santiago about issues relating to intellectual property.

A new government took office in march; does that mean new policies on intellectual property?

For the moment, there isn’t any change. the new government’s decisions on the national innovation strategy will, however, be very important.

What do you see as Chile’s weaknesses on intellectual property?

in recent years, it’s made enormous progress in different areas but, in my view, there’s still a lot to do in strengthening the institutional framework and in developing modern and harmonic legislation that really fosters creativity and innova-tion. this would also help to avoid market confusion.

in your view, is Chile in compliance with its free Trade Agreement with the united states as regards protection of intellectual property?

i think that’s a question for the Foreign affairs ministry.

if the usTr keeps Chile on its Priority Watch list of countries that have not adequately protected intellec-tual property for another year, what impact would that have on its country image?

We have to wait until the end of the month to know whe-ther that will be the case but, of course, it isn’t good to be on the list. there can, however, be no doubt that chile has made a great deal of progress in recent years and the creation of inapi is a clear sign of the importance that it gives to the issue. chilebUSiness


By santiago Eneldo

s we all know, there is absolutely nothing funny about an earthquake or a tsunami; they are dangerous and deadly – as we have unfortunately witnessed so very recently.

all the same, there is a humorous side to most situations – even tragic ones. i survived to tell the tale, but my story could have ended very differently....

the evening of February 26th had been long and the festivities much enjoyed. however, at about 3:25am the next morning something we had eaten was not sitting well with me and i went to the bathroom. i was sat comfortably upon the porcelain throne, very much minding my own business, when everything started to shake followed by the lights going out. my predicament had become extremely precarious. now, we are talking the 21st floor of an apartment building for which i had never seen any piece of paper assuring me the builders guaranteed swaying but no collapse during a severe tremor or even a quake.

to make matters worse i was entirely naked. and then the water pipe burst. So, there i am sitting terrified in the dark, naked, soaking wet, feeling rotten inside and now outside, when suddenly the porcelain toilet bowl comes off its bolts and we slid together towards the window and then back towards the bathtub. i screamed. cowardly, i know, but it came from deep within and made me feel oh so much better – for one very short second.

i believe myself to be a “man of action” but in this predicament my lively brain froze on me and i simply couldn’t react. i clung to the porcelain seat as if my life depended on it (i believed it did!) as we moved rapidly from window to bathtub and back again with water spraying all around. i made a grab for the towel as we sped past the rail but failed on the first two attempts. Finally i succeeded and grasped a towel which i then held firmly between my teeth. the towel did at least stop my pathetic screaming.

all this took place between 3:34am and 3:35am. Just one minute! there seemed to be a brief pause and then the swaying continued. For some reason of which i am not sure, my subconscious decided i would be safer in the bathtub and so on one of the swings away from the window i abandoned the porcelain for the tub, clinging to its side with the towel still in mouth.

in all this time i had not given a thought for mrs. eneldo nor had i heard her, but this did not seem important to me just then. Finally the swaying of the building slowed and my common sense returned – in stages. i shouted out for the love of my life, partly out of genuine concern for her and partly because i hoped she would come to my rescue. and she did

come, bless her cotton socks! She appeared in the doorway, flashlight in hand and said:

“What the heck do you think you are doing?” i should point out that the swaying had now stopped

completely and all she could see was a pathetic, naked figure sitting sideways in the bathtub, dripping wet and with a towel clutched between gnashing teeth.

i removed the towel and replied: “For goodness sake, there has been an earthquake, or something very like one.”

our building had not collapsed and i convinced mrs. e that the damage to the bathroom was not the doings of a madman and so we joined our neighbours in the hallway. Still soaked, but with the towel now wrapped around me, we listened as people told their stories amidst the wandering beams of flashlights. however, when asked for my story i lied: “oh, mrs. e and i were fast asleep, hardly felt a thing. Was it a big one?” i yawned and said casually that i thought i would go back to bed as there didn’t seem much point in wasting sleep over a little tremor and strode boldly back into the apartment, with a bemused mrs e close behind. then i dashed for the visitor’s bathroom where i was violently ill!

pathetically yours and living in denial,

Santiago eneldo(Abuse and other appropriate comments to [email protected])

life in the slow lane

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February 27th, 2010 – A Night to Remember

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