Chile could – and should – be called the Switzerland of South America, for good reason. Laws matter here. Everything is strictly above board. And the Chileans work hard – so much so that it makes the occasional visitor wonder if they ever rest!
The Chilean industriousness shows in its GEDI ranking. In the 2014 GEDI index, Chile was ranked as 15th among 120 countries ranked – just behind Norway and just ahead of Germany (of all countries). This feat is all the more impressive when you consider Chile’s GDP per capita (ppp). Whereas Norway boasts a GDP (ppp) per capita of 47,547 USD and Germany one of 34,766 USD, Chile’s per-capita GDP (ppp) is 15,848 USD. This is the lowest per-capita GDP among the top 20 countries in the GEDI ranking – by some margin relative to most countries.
This is impressive performance: the more wealth the country has, the more it can invest in innovation, and this should show in the quality of its entrepreneurship ecosystem. This is what the GEDI index measures. Yet, Chile outperforms the more than twice as rich Germany and is neck and neck with the almost thrice as rich Norway. Clearly, Chile is doing something right.
But what is it? A closer look at the entrepreneurship ecosystem profiles of Chile, USA, and Brazil provides interesting insight. Note that USA is the leading GEDI country globally, whereas Brazil only ranks 100th in the GEDI ranking. This comparison is shown in the Figure below.
Remember that this is an unfair comparison. USA is one of the richest countries on the planet, with a strong entrepreneurial culture. Yet, as we compare the profiles of the two countries, we see that Chile is on par with the US in terms of Entrepreneurial Attitudes (pillars 1 to 5). Chileans are actually ahead of the US in terms of risk acceptance. However, where Chile falls behind is the Attitude pillars (pillars 6 to 10) and Aspiration pillars (pillars 11 to 15).
Thus, Chilean attitudes are world class. It is this attitude drive that actually pulls Chile on par with Germany and Norway. However, where the gap relative to the most entrepreneurial (and in many cases, richest) countries starts to show is in converting these attitudes into high-quality, high-impact entrepreneurial activity. This is where Chile falls behind the US. And the biggest reason for this is infrastructure: infrastructure for business, and also, infrastructure for innovation. There is great potential in Chile, but to realize this potential, a fertile ground for growth and innovation is needed. This is where Chile needs to invest.
In summary, Chile’s entrepreneurship ecosystem offers great potential. Chile could easily be the Switzerland of South America. But to realize this potential, more investment is needed: in human capital and in an infrastructure to support innovation. Much of Chilean wealth is derived from raw materials and from natural riches. This wealth should be invested wisely to support innovation-driven growth to unleash Chile’s potential for entrepreneurial wealth creation.
I have a lot of experience with this, and have some criticisms to offer.
First, Chilean attitudes are certainly not more risk-oriented than in the US. The Chilean mindset is usually extremely risk averse. Start-up Chile was conceived as a way of throwing money at trying to get people in the country who have a different attitude. And as grateful as I am for the benefits of having participated in the program, laden with bureaucracy and stress-inducing details though it was, it seemed to be something of a cargo cult relative to environments like the SF Bay Area, where I have also worked. It’s like, if you just put up enough posters…
What happened to most of that Start-up Chile capital? Well, some fraction of those companies went on to raise further funds. Some of them became modestly cashflow-positive lifestyle businesses. I have not seen any major hits. Most of that money went to non-Chilean developers contracted to build whatever product the entrepreneurs wanted to try product-market fit; good luck hiring a decent Chilean developer, the best you get are mediocre rich kids who went to Catholica so they could be groomed to be functionaries at Oracle or MSFT, or maybe they manage to get in as a proper lumpen programmer working for a bank, keeping their $1700 a month salary while they maintain but never truly fix the broken UX of the bank’s 1998-esque website. Chile’s biggest weakness is human capital, which has to do with this bizarre self-hatred. I bought a shawarma one day and the guy asked where I’m from, “USA”, “ah bien, mejorando la raza, mejorando el actitude” I was like “uhh, not sure about mejorando la raza pero el mentalidad, si.” Tons of internalized racism and gringo-worship.
I struggled to get a business bank account only to find the payments portal made receiving small-scale (<$50 USD) orders unprofitable due to fixed min. fees. There are tons of struggling small businesses in Chile who generally can take a card and pay 2.9% to the monopoly conglomerate that made former President Pinera wealthy, working as unpaid tax collectors for the IVA, their own cashflow be damned. There has been a flourishing of consumer credit as uncompetitive, oligarchic interest rates. Then Bachelet got elected, hoo boy. Reforma Tributaria here we go, just in time for the dollar bull/a
Conformity reigns.
It's a testament to the power of capital that even with all these self-imposed gimps in the national gait, having a clean system that works as advertised (often mind-numbingly) has enabled the highest per-capita GDP on the continent, albeit slightly lower than funny little Uruguay when adjusted for GINI.
Many thanks for these insights!
Thanks for the insightful writeup, I made to say that small businesses suffers a lot of setbacks locally and internationally which is an unhealthy factor limiting entrepreneurial expansion, May I humbly request here that I am looking for for a scholarship to finance my master degree program in Finance and Entrepreneurship Development. my contact Charlesukome@gmail.com, +2348063314308. If I can be considered for a one year scholarship.
I am black, from West Africa Nigeria. I am from a poor family background the first among the 3rd generation to seek University Education, I speak English Language Fluently, America and British. I am 33years with a Second Class Upper Division Bachelor Degree in Finance From Delta State University. I am a Member of People Democratic Party PDP, I am a member of Redeemed Christian Church Of God, Youth and Young Adult Fellowship.