INTERNATIONAL BUSINESS : Chile Foundation Joins Alliances to Expand, Develop Exports

ISSUE: Among the many schemes for fostering economic development in Latin America, perhaps none has been more imaginative--or practical--than Fundacion Chile (Chile Foundation). It isn’t the Peace Corps, it isn’t a government subsidy program, it isn’t foreign aid.

It is a nonprofit corporation known for its success in pioneering business ventures aimed at transferring technology and diversifying the country’s exports.

Since it was formed 17 years ago, the foundation has started 31 businesses and helped stimulate Chile’s growing entrepreneurial prowess through the examples of those companies.

Chilean capitalists have become so aggressively competitive that the need for Fundacion Chile as a creator of companies is diminishing. As a result, the foundation is now helping with risk assessment, management training, consulting services, technical assistance and technological research and development.

BACKGROUND: Chile’s economy was a mess in 1973, when the military seized power in a violent coup against an elected government led by Socialists and Communists. The overthrown government had expropriated the Chilean Telephone Co. from ITT Corp., and the new government paid ITT more than $100 million in compensation for the nationalized company.

In 1976, the government and ITT joined forces to start Fundacion Chile, each contributing half of a $50-million endowment. ITT managed the foundation for its first 10 years.

The 31 businesses that Fundacion Chile has started since 1976 are mostly in agriculture, seafood production, forestry and wood products.

Some of the ventures have been remarkably successful at transferring productive technology to Chile and developing new export lines. In salmon farming, for example, Fundacion Chile helped pioneer an industry that has made Chile the world’s No. 2 exporter of the fish, after Norway. It has also contributed to expansion of Chilean berry exports.

Equally important have been the foundation’s services to the private sector in areas such as quality control and certification, technical research and marketing studies.

Fundacion Chile’s success is widely recognized in Latin America. The group is often contracted for consultations, project planning and training. “We are providing help to almost all countries in Latin America,” said Juan Eduardo Prado, the foundation’s corporate affairs manager. In neighboring Bolivia, Fundacion Chile helped plan Fundacion Bolivia Exporta, a similar foundation that is supported by the World Bank and the Netherlands.

OUTLOOK: Companies created by the foundation that have served their demonstration purposes are sold off to private investors. A dozen have already been sold. One of them, a salmon farm and processing operation, went to Nippon Suisan Kaisha of Tokyo for $22 million.

More foundation companies in seafood and agribusiness are being offered for sale.

“We have a salmon company that is ready to go,” said Anthony Wylie, Fundacion Chile’s director general.

At midyear, after the harvest season, the foundation hopes to sell a 200-acre farm with drip irrigation and sprinkler systems. The farm produces raspberries, blackberries, currants and asparagus. Also for sale will be a produce export company with freezing and cold-storage plants.

Meanwhile, although the foundation plans to put less emphasis on starting new companies, Wylie said it will still be looking for good joint ventures.

STRATEGY: Fundacion Chile seeks to make alliances designed for technology transfer and marketing. The idea is to join forces with businesses abroad that already have experience in market niches that can be supplied by Chilean producers.

The foundation can provide some investment capital and local technical knowledge, especially in forestry, marine resources and agribusiness. It also offers contacts and experience in the Chilean business environment. In return, it is looking for technology with an assured foreign market that can be assimilated and adapted to Chilean production conditions.

“We’re not looking for wacky inventions. We’re looking for things that have been proven . . . to be commercially viable,” said Wylie, an Anglo Chilean with a doctorate in plant physiology from University of California, Davis.

He said the foundation’s strategy is to seek ways of adding value to Chilean products before they are exported, such as making furniture parts from wood or processing fish, fruits and vegetables. “It could be juices; it could be different ways of packaging fresh products,” he said.

If the foundation is not the right partner for a project, it could help find a Chilean company that would be, Wylie said.

For some investment projects, touching base with Fundacion Chile could be a worthwhile step. The sectors in which the group specializes are among the most dynamic and promising in the Chilean economy--but also among the most competitive.

The foundation offers a range of options for collaboration and service designed to reduce investment risk.