In this blog post, Alium’s LatAm Managing Partner Lucrecia Fratini shares her thoughts on why the Chilean economy is in such rude health and the Latin American opportunities for interims that it presents in the region.
Chile, a long narrow strip between the Pacific Ocean and the Andes mountains, has been going through years of steady economic growth at average rate of 5.2 % during the last 20 years or 4.6 % in the last decade – impressive statistics considering the state of the global economy recently – but what is behind this economic robustness?
Latin American Opportunities for Interims- The Facts
During these last 20 years, the Private Pension Fund system AFP’s (Administradoras de Fondos de Pension) played a key role in the “funding’ of the local economy growth. The AFP’s started operation in 1980 with the Chilean Pension Funds growing (net growth) at circa 5 % per year ( same rate as GDP). Today, 33 years after, there are six main firms who manage approximately USD $160bn, (circa 70 % of the GDP), which together with the funds managed by the insurance companies (30 companies) and mutual funds (19 companies) amount to a total of around USD $250 bn. These funds fuel the local capital markets : almost 49 % of their AUM (assets under management) are invested in Local Fixed Income Instruments, 23% in Foreign Fixed Income, 16 % in Local Equities and 12% in Foreign Equity.
The local infrastructure and the construction sector as a whole benefited from this long term money influx with up to 30 years investment on the horizon including areas such as roads & highways (i.e: Mapocho River tunnel), industrial plants (including environmental facilities) and commercial and residential buildings, all driving up the standard of living and employment statistics. As a result, unemployment in Chile is at its lowest level (approximately 5.7%), with high demand for skilled workers at all levels in industries such as mining, agricultural, viticulture, technology industries, construction, transport and retail, among others.
The excess cash being generated by the economy in this way has, in turn, pushed regulators to increase Foreign Investment Limits for AFP and Insurance Companies from 60% to 80%. Additionally, Family Offices (were dividends have been parked) are expanding their investment horizon towards Peru and Colombia, allowing the Chilean economy to expand on a regional and international basis.
Despite the fact that in certain industries the cap on foreign employees is 15% of the labour force, the steady demand and the increase in real wages of around 7% during the last three years has opened up an number of excellent Latin American opportunities for interims with bilingual Spanish/English skills. They are supporting growing companies, especially multinational or international firms who have less of an entry barrier, with their regional expansion – so if you have the skills and international experience, now is the time to consider Chile.
Have you worked as an interim in Chile or the wider Latin American region? What is your experience of the economy and business environment there and the Latin American opportunities for interims? Share your thoughts with our LatAm team and wider interim community.