» Giving a Fresh Boost to France-Chile cooperation « 

Deepening the political dialogue between Santiago and Paris and boosting the bilateral economic exchanges will be at stake during the official visit of Chilean President Michelle Bachelet to France, in June 2015. Elected to the head of the 4th Latin American economy on 15 December 2014, she has made reducing of inequalities the priority of her term, by implementing wide-reaching reforms in favor of education and economic attractiveness. While Chile aims to become a regional hub for re-exports and innovation, H.E. Patricio Halès Dib, the Ambassador of Chile to France, discusses the broad guidelines of his country’s economic and foreign policies. He also tells us about the extensive program of upgrading infrastructure and about the potential of bilateral cooperation, particularly in the fields of environment and innovation.

The Diplomatic Letter: Mr Ambassador, President Michelle Bachelet, who was elected to a second term on 15 December 2013, will be making an official visit to Paris in June 2015. Could you please tell us what the president hopes to accomplish during her trip? Could it help boost the two countries ties’ to the level of a strategic partnership?

H.E. Patricio Hales Dib: President Michelle Bachelet’s upcoming visit to France bears witness to the excellent relations between our two countries. In this second term of Michelle Bachelet (2014-2019), opens what she calls a «new cycle». It’s a new cycle in terms of content, depth of its program and, at the political level, the magnitude of the political forces it represents to govern.
This will be her second trip to France as the president of Chile, as she already visited your country in 2009 during her first term in office. This trip also reflects the special interest President Bachelet takes in France, above and beyond her own family ties, because of its values, its Republican principles and its position on the world stage. This visit is very timely, as it will give a fresh boost to bilateral ties by deepening and widening the already numerous areas in which the two countries are working together. I am not speaking solely about their cooperation in specific arenas, such as science, technology, innovation, education and unconventional renewable energies, but also about their cooperation on the issues of security and the environment, and their work within the United Nations. We would like to forge a strategic relationship with France and are working to that end here in Paris, along with our partners at the Quai d´Orsay.
One of the areas considered a high priority in these efforts is education, as national education reform is one of the current Chilean administration’s top goals and is a pillar of the agenda being pursued by President Bachelet’s government. We have been working very hard in this arena. Our embassy organized the Chilean Minister of Education’s visit to Paris last November, during which a high-level symposium was held. We are also working on other key issues, such as fostering mutual investments, and, more broadly, on strengthening the trade and business ties between our two countries.
To give you just a few examples of our dynamic bilateral ties, there is the contract recently awarded to a consortium led by Aéroports de Paris (ADP) and Vinci for the management of the airport in Santiago, and EDF’s participation in the production of electricity, and the awarding of a contract to the French company DCNS after la Corporación de Fomento de Chile (CORFO) issued a call for tenders for the creation of a research centre specializing in tidal and wave energy, with the goal of setting up this project in southern Chile, as will be determined by the government.

T.D.L.: Chile has presided the Pilot Group on Innovative Financing for Development since 1st July 2014, working in tandem with France, the group’s Permanent Secretary. Could you outline your country’s priority goals for this group? In what areas are Chile and France working in synergy, with an eye on the upcoming COP21, to be held in Paris later this year?

H.E.P.H.D.: Chile took over the rotating presidency of the Pilot Group on Innovative Financing in July 2014, and will serve as the group’s spokesperson through the plenary meeting scheduled for October 2015. As we all know, the pilot group was created in 2006 under the leadership of France, Chile, Brazil and Spain. This informal forum brings together 64 states and 20 international organizations, NGOs, private foundations and local entities that are working together to eradicate poverty and safeguard public assets around the globe.
The myriad activities organized during the Chilean presidency have included a high-level meeting convened on the sidelines of the 69th General Assembly of the United Nations (UNGA), in late September 2014 in New York. In October 2014, the Secretariat of the Commonwealth (a pilot group member) gave Chile and France a copy of its manual on innovative development financing, a key Commonwealth toolkit. Along these same lines, in November 2014, Chile gave a speech on the added value brought by innovative financing, during the first session of informal talks organized by the moderators of the 3rd International Conference on Financing for Development.
2015 is a decisive year for development financing. At the prompting of the G77 countries, the international community has decided to convene a conference to follow up on the Monterey (2002) and Doha (2008) conferences on development financing. This follow-up conference will be held in Addis Ababa in July 2015. As president of the Pilot Group, Chile is overseeing the preparations for this summit, including the drawing up of sustainable development goals.
Innovative development financing has an extremely positive impact, because it brings in new financing sources that don’t affect budgets directly nor weigh them down excessively. What’s more, it can be used in conjunction with or in addition to ODA (official development aid) commitments, ensuring greater visibility and greater flexibility in the way these resources are invested in programs that have a direct impact. This concept is often tied to a new way of cooperating and supporting development, taking a more horizontal approach that brings together countries with different development levels and enables them to work hand in hand.
As concerns COP21, innovative financing is a relatively new concept that deserves wider reflection, as we push forward with the talks focused specifically on climate change. It would be possible, for instance, to launch pilot projects targeting climate change that are funded by innovative financing. They would have to fall in line with the solutions proposed in this arena, enabling us to combine our working methods and production volume with clean energies.

T.D.L.: Enacting education reforms in order to reduce inequalities is a high priority on President Michelle Bachelet’s agenda. What is she doing to improve the quality of higher education in Chile, and keeps its brainpower inside the country? What can she do to improve the Chilean economy’s performance in the mid-term? A new tax law enacted on 26 September 2014 sets aside $8.3 billion every year to fund education reforms. Could this heavy outlay be a drain on Chilean companies?

H.E.P.H.D.: As regards education reform, the quality of our higher education system is steadily improving, as we push forward to build an excellent education system that is free for all and does not discriminate on a socio-economic basis, but instead ensures integration and equality.
New institutions have been created to this end, so that our higher education system can be reorganized from top to bottom. The entities the government is looking to set in place include an Education Under Secretary, which would enable us to lay out public education policy and effectively end for-profit education, as already provided for by law. There are also plans to: create a new Bureau of Higher Education; set out new more demanding quality standards; ensure that our education system is free of charge for all; guarantee that all institutions receive a minimum level of financing; strike a new deal with state universities; create a higher political education system; and last, but not least, strengthen our vocational and technical training system.
Broadly speaking, these reforms are designed to ensure that students who meet the requirements for receiving a higher education can do so, without worrying they might have to give up their studies for financial reasons, or worrying that they will never be able to get out from under the heavy debts incurred to finance their studies. The idea is to improve the quality of the education our young people receive, enabling them to successfully join the working world.
As for the brain drain to which you alluded in your question, luckily this is not a big problem for Chile. Most of the young working-age Chileans who go abroad to study, come back home and enter the Chilean labour market. Likewise, there isn’t a large outflow of Chilean university graduates who settle abroad, at least not permanently. We can hence count on a growing workforce of highly qualified young people who are making a crucial contribution to the overall development of our country.
President Bachelet’s administration has launched a series of reforms aimed, first and foremost, at reducing inequalities. The tax reform enacted in September 2014 is designed to redistribute tax revenues and generate permanent sources of funding for education reforms. The government is keenly aware that without equal access to education, new generations of Chileans will continue to have unequal opportunities. It has thus made education reform a top priority.
The tax reform will be implemented progressively, up until 2017, when it comes into full effect. Companies will thus have a reasonable amount of time to adjust their decisions accordingly. The tax reform lays out clear rules for businesses, which will be able to choose the tax system under which they pay their taxes. Several other measures are being drawn up to prevent tax fraud and tax evasion, which will be another way to increase revenues.

T.D.L.: A new fund designed to support entrepreneurs and innovation was created in January 2015 as an extension of the Start-Up Chile program, confirming your country’s determination to become a regional innovation hub. Could you summarize its main goals? What is your country doing to attract more international centres of excellence like CIRIC, a centre for innovation and research in the ICT field established in Chile by the French Institute INRIA? Bolstered by initiatives such as the EU-CELAC “Research and Innovation” cycle, in which Chile is taking part, what other kinds of joint projects could be launched?

H.E.P.H.D.: Indeed, the goal of the «Start-Up Chile» initiative is to make Chile a key regional hub for innovation and business, working through this program and with our neighbours. The main goal of this program is to catch the attention of high-potential entrepreneurs on the verge of launching projects, and convince them to come do business in Chile. With this type of initiative we are trying to improve our country’s business culture, by connecting it to the rest of the world. We are pursuing this same goal through other complementary programs, such as the «Global Connection» initiative, which supports Chilean entrepreneurs looking to break into global markets.
In 2010, the first 22 «Start-Up» projects were brought to Chile, from 14 different countries. Overall, this program has been a success. The 13th call for Start-Up Chile projects is currently underway. Incentives will be offered to at least 50% of the entrepreneurs chosen to participate in the program that go into business in large regional cities. We are trying to foster a greater number of partnerships between local and international entrepreneurs. A platform will also be created for attracting talented companies that start doing business in Chile then expand their activities to other countries in the region.
With regard to the program to create and/or set up “International Centres of Excellence” in Chile, in 2009 InnovaChile CORFO launched the “Program to Attract International Centres of Excellence to Chile”, as part of the “National Innovation Strategy for Competitiveness.” The primary goal of this initiative was to convince world-class centres of excellence and research to come to Chile and develop RDI (Research, Development and Innovation) activities there. We are trying to get these international centres to join forces with Chilean entities, first and foremost academic, in order to conduct research that will boost Chile to the new technology frontier, through innovations with strong sectorial impact in both the national and international arenas.
As an example of the program’s success stories, four centres were chosen and funded in 2009 (pilot stage). In light of the success of these centres, CORFO created a second program in which eight additional centres were selected (4 private and 4 institutional).
The selected centres include Fraunhofer (Germany), INRIA (France), CSIRO (Australia), Wageningen University (Holland), Pfizer (USA), GDF Suez-Laborelec (France), Emerson (USA), LEITAT Chile (Spain), and in 2014, DCNS (France) for tidal power research.
These centres’ work in Chile is focused primarily on biotechnology, nano-biology, energy, mining, technology and computer science platforms (software), agriculture, and the food market.
There are myriad opportunities for building synergies between CELAC and the European Union in the fields of science, technology, and innovation. This can be done not only through EU framework programs, but also by bolstering the energetic efforts that Chile and other Latin American countries are making in these arenas. More concretely, President Bachelet recently created the “Science for the Development of Chile” advisory commission, which will put forward a proposal for creating a Ministry of Science and Technology. It will also lay out a scientific development policy to help the country meet its needs in human capital, technologies, knowledge and information. Synergies with the EU could take the form of jointly developed projects in areas such as unconventional renewable energy, mining operations, the agri-food sector, high-tech industries, or even highly complex areas such as astronomy programs.

T.D.L.: Chile is the fourth largest economy in Latin America, thanks to a strong primary sector bolstered by vast mineral resources. What new projects is Codelco undertaking, to reach its goal of increasing production 40% over a 10-year period? What other activity sectors could help pump up the Chilean economy?

H.E.P.H.D.: In 2014, Codelco produced nearly 1.84 million tons of copper, including 1.67 million tons of clean copper, which is needed to boost our production capacity in order to carry out “structural projects” that benefit all Chileans. These projects include new levels of the El Teniente, Chuquicamata Subterránea, and Radomiro Tomic Sulfuros Fase mines. Work to expand the Andina mine and the Ministro Hales site is also underway.
The law for the capitalization of Codelco now ensures that there are adequate resources to carry out these investments, thanks to a historic outlay from the Chilean government. Codelco is also issuing corporate bonds. These projects require an investment of $23.5 billion, of which $4 billion will be funded directly by the State and $5.4 billion through a debt issuance program. The remaining portion will be self-funded.
As for new sectors that can help boost the economy – given that the Chilean mining industry is a world leader both in terms of size and competitiveness, and accounts for nearly 50% of the country’s total exports – the government has begun bolstering other strategic sectors. These strategic clusters include services tied to the mining industry, tourism, the agri-food industry, wood-based construction, the creative economy, fishing and aquaculture, and manufacturing industries with high added value.

T.D.L.: On 3rd July 2014, President Bachelet presented a vast infrastructure program that calls for creating new dams, building a new international airport, and expanding the country’s road and rail networks, for a total outlay of $28.7 billion. How is Chile planning to fund this program? Given its electric power shortfalls and the high cost of energy, what is Chile doing to tap a wider range of alternative energy resources? France is already involved in this sector. What other areas of activity could offer French companies good opportunities and help our two countries boost their relatively modest bilateral trade ?

H.E.P.H.D.: The Infrastructure Investment Plan reflects the work we intend to carry out to build a modern, well adapted country, with the aim of spurring a stronger flow of trade, business ventures, and political and cultural exchanges. We are undertaking this project to ensure that we have the infrastructure needed to heighten our growth standards, competitiveness, inclusion level, and our citizens’ well-being.
This plan will include direct investment by the State in the form of public expenditures. It will be a partnership between the State and the private sector and will operate as a concession system. An estimated $18 billion in public direct investment will be meted out from 2014-2021 to fund work such as the Austral Connectivity Plan, the Arica y Parinacota project, plans to build both large and small water reservoirs, and a wide-scale project to pave rural roads. Some of the most important concessions involve road infrastructure work designed to improve our existing roads and upgrade highways, such as Puerto Montt, Farellones, La Fruta and La Serena-Vallenar, for a total estimated outlay of $9.9 billion.
The average annual investment in this program will be roughly 1.7% of GDP. When we add in investments made in other sectors, such as housing, healthcare and transportation, 3.5% of Chilean GDP will be invested in infrastructure enhancement over the next eight years.
Energy will indeed be a great challenge for Chile in the coming years, as the country continues to develop. The economic growth the country is expected to experience through 2020 will cause its electricity demands to rise 5% every year. Studies are already being carried out with that in mind, and investments are being made to equip Chile with a new energy matrix.
Our country is taking advantage of its favourable geographic conditions by focusing heavily on clean and renewable unconventional energy sources, which currently provide 5% of its electricity. Meanwhile, it is working to diversify its energy matrix.
Chile is very open to foreign investment. France and its corporate sector can help Chile produce renewable energies by participating in the calls for tender to upgrade the country’s infrastructures.

T.D.L.: Bolstered by 24 free trade agreements with 63 countries, Chile has become a re-export hub. Could you summarize your country’s strategy for fostering bilateral partnerships? What specific incentives is Chile offering foreign firms, to convince them to channel their exports through your country?

H.E.P.H.D.: With Chile’s economic stability, strong rule of law, and wide trade agreements, our country can become a key platform for exporting to countries throughout the region. Chile has established 24 trade agreements with 63 countries, giving it preferential access to more than 85% of world GDP. In light of this, Chile is actively fostering a program to open new negotiations and improve our treaties, in order to open up promising export destinations. Strengthening our ties with Latin America is also a top priority, which is why we are working to spur greater convergence between our region and the Pacific Alliance and Mercosur, in just one example of Chile’s ongoing efforts to enhance trade integration. At the same time, we want to create the conditions needed to attract new investments to Chile.
As for the debate over incentive measures, let me mention the principles Chile set out in its “Agenda for Productivity Innovation and Growth,” which lays the foundation for the next stage in our economy’s development. This does not entail simply exploiting and exporting natural resources, but also creating a space that can foster sectors capable of producing new goods and services, developing industries, and generating innovation poles.
To meet that goal, the Agenda fosters, in a strategic and selective manner, economic sectors in Chile that have strong growth potential but haven’t managed to tap it yet. It also seeks to increase the productivity of Chilean companies, especially small- and mid-sized businesses, by giving them support so they can grow, internationalize their operations, increase their earnings, and offer high-quality jobs.
In order to ensure success, the State will have to play a more active role: supplying infrastructures and public assets that can generate new investments; coordinating efforts among the various actors; and eliminating obstacles that dampen the entrepreneurial spirit.
In this scenario, Chile can step up to become a key exporting platform, taking advantage of its proximity to other economies in the region and its preferential access to a large swath of world trade via its manifold agreements. Another possibility could be opened up by creating production chains and participating in global value chains. We could take advantage of our access to preferential tariffs to acquire inputs, or shares, or parts from all around the globe, and then export goods to markets where we enjoy tariff preferences, while still respecting the initial terms of our agreements.
We could also come up with new ways to participate more widely in world trade by getting more actively involved in the trade in services, both inside and outside the manufacturing sector. To do this, the key is to bolster specific areas of knowledge, such as I+D+I (investigation, development and innovation), ICTs (information and communication technologies), and biotechnology.
One of the big challenges facing Chile is the need to closely examine all the policies being implemented to achieve decentralized development. This is a fundamental issue for APIC, because the essential sources of our country’s continued growth are spread throughout its different regions. It is thus essential to strengthen production chains, promote tourism, and bolster small- and mid-sized businesses at the regional level, so that our country can continue to grow.
What’s more, we have established an agreement with France that prevents double taxation. This has made our country more attractive for French foreign investment, making it easier for your country to participate in our production chains.

T.D.L.: Chile and the United States celebrated the 10th anniversary of their free trade agreement (FTA) in 2014. One year after Chile became the only Latin American country welcomed into the Visa Waiver Program, how would you describe your country’s ties with its top foreign investor? In light of the expansion of the China-Chile FTA on 10 November 2014, what is your country’s current strategy toward Asia?

H.E.P.H.D.: Of course, on bilateral relations of Chile with the United States and China, the Ambassadors of Chile in those capitals, as well as the authorities of the Ministry of Foreign Affairs, may give a more complete view on bilateral relations with more authority than me. Chile’s inclusion in the Visa Waiver Program is an important sign of confidence in our country. We recognize how important it is to strengthen the two countries’ ties across the board, building on the various treaties and agreements we have ratified, starting with our free trade agreement. As our second trading partner, the United States is a crucial trading partner for our country. The United States is also our number-one foreign investor, supplying 24.5% of direct investments made in Chile between 1974 and June 2014. The U.S. is also the 5th highest receiver of Chilean direct investments.
Our relationship with the Asia-Pacific countries is very dynamic and holds great promise for improvement. We have privileged trade ties with this region, where China has become Chile’s top regional trading partner. We have set up a large work program designed to boost our exchanges. We have a long-term cooperation. Chile, as a country on the shores of the Pacific Ocean, is convinced that its vast size is a natural connection tool.
This vision is official government policy. Building closer ties with the Asia-Pacific region is a pillar of our foreign policy. Thanks to its wide network of trade accords in Asia, Chile can serve as a “bridge country” in helping improve ties between Latin America and Asia-Pacific.
As regards our involvement with the People’s Republic of China, this year we will celebrate the 45th anniversary of the opening of bilateral diplomatic ties.
In the political arena, President Michelle Bachelet held two bilateral meetings of the highest importance with President Xi Jinping and other Chinese government officials, first in Brasilia and then in Beijing after the APEC Leaders Summit (Asia-Pacific Economic Cooperation).

T.D.L: During the high level meeting held at ECLAC headquarters in Santiago on 12 March 2014, President Michelle Bachelet said: “Latin America is at the core of our foreign policy”. As a member of both UNASUR and ECLAC, what would your country like to see done to enhance regional integration? What do you think of the resumption of talks between Cuba and the United States?  As a non permanent member of the UN Security Council until the close of 2015, which issues would Chile like to see at the top of this body’s agenda?

H.E.P.H.D.: President Michelle Bachelet’s government is indeed trying to heighten Chile’s profile in the region, taking a leading role on issues in which our country can make a difference, thanks to its proactive and cooperative actions. One of Chile’s top goals is to confirm its status as a “port country” and a “bridge country,” serving as a point of entry and exit for goods and services in the region.
Latin America is a diverse region, with different development paths and differing political opinions on the best way to move forward. We realize that we cannot let our differences stop us from reaching agreements or gradually and pragmatically carving out ways to achieve closer integration between the countries in this region.
In light of this, Chile supports the strategy of building convergence through diversity. One example of this is the “short agenda” approved in Santiago during the meeting between the foreign affairs ministers of the Pacific Alliance and Mercosur, convened by Chile in late November 2014. At this meeting, it was agreed that special focus would be laid on issues such as physical integration, trade assistance, the circulation of persons, and ways to promote the creation of regional-scale production chains.
UNASUR offers another scenario conducive to converging ideas. It is an excellent space for getting to know the region’s problems and gaining a better understanding of the conflicts affecting each country.
As concerns the rekindling of the Cuba-U.S. dialogue, Chile warmly welcomed the announcement by these countries’ presidents. It believes this is a historic step forward in relations between the two countries, and that this move will also help foster greater understanding within our hemisphere. We believe that the announced measures to improve strained bilateral relations will help eventually end the blockade against Cuba, which has weighed heavily upon this country and its people for decades.
With regard to the United Nations, as a permanent member of the Security Council for the 2014-15 term, Chile favours finding consensual solutions to this crisis and fostering political dialogue within the framework of a multidimensional agenda for peace and security. Chile’s top concerns include promoting effective and inclusive multilateralism, respect for the rule of law at both the national and international levels, human rights, democracy, and international penal responsibility, as well as helping support regional, sub-regional and civil society organizations. Along with this, there is the battle to wipe out terrorism and the various reconstruction efforts in countries in post-conflict situations.
Among the initiatives taken by the Security Council, three ongoing debates stand out: fostering inclusive development in order to ensure global peace and security; the Middle East; and protecting civilian populations. We are committed to raising a stronger voice in the region after 2015, so that we are not excluded from the agenda over the next 20 years.