The role of CORFO in Chile s development: Achievements...
Transcript of The role of CORFO in Chile s development: Achievements...
The role of CORFO in Chile´s development:
Achievements & Challenges
STEPHANY GRIFFITH-JONES, MARIA LUZ MARTINEZ SOLA
19TH April 2017
BNDES-CAF-IPD CONFERENCE, WASHINGTON DC
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OUTLINE
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1. CORFO IN A COMPARATIVE PERSPECTIVE
2. CORFO IN CHILE’S ECONOMY
3. CORFO TODAY
4. CORFO’S FOCUS AREAS (GUARANTEES, START-UP, SOLAR
ENERGY)
5. COUNTERCYCLICAL ROLE
6. CONCLUSIONS
CORFO in a comparative
perspective
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CHILE´S FINANCIAL MARKETCOMPARATIVE PERSPECTIVE
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Source: own elaboration, based on WDI
111%
78%79%
51%
0%
20%
40%
60%
80%
100%
120%
Chile Germany
Credit and Capital Market Size - 2015
(% GDP)
Domestic Credit to Private Sector (% GDP) Market Capitalization (% GDP)
CORFO – Comparative Perspectivestock 2015
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4%3%
4%3% 3% 3%
17% 17%
19% 19%
17%
15%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2010 2011 2012 2013 2014 2015
Assets/GDP - CORFO vs KfW
CORFO KfWSource: own elaboration, based on CORFO, KfW and BNDES reports.
CORFO in
Chile´s economy
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CHILE´S economy
complexity index
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-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
19951996199719981999200020012002200320042005200620072008200920102011201220132014
Economic Complexity Index
Country Ranking
SOURCE: Own elaboration, base on The Atlas of Economic Complexity, Harvard
The Economic Complexity
ranking of Chile has decreased 22
places over the past 51 years
(from 38 in 1964 to 60 in 2015)
High Vulnerability and Exposure
to Commodities Prices Volatility
Chile’s economy
Copper price volatility, DECREASING tfp
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Source: own elaboration, based on Bitran, 2016
Período TFP Chile
1990 - 1999 2,4
1993 - 1999 1,7
2000 - 2009 0,6
2010 - 2014 0,4
RATE OF GROWTH
TOTAL FACTOR PRODUCTIVITY
SOURCE: IMF Working Paper, 2016
URGENT NEED TO DIVERSIFY CHILE’S PRODUCTIVE STRUCTURE
CORFO TODAY
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CORFO TODAY:
FINANCIAL SUPPORT
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Subsidies
Guarantees
Loans
-
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
2010 2011 2012 2013 2014 2015 2016
In 2015 the financial support deployed by CORFO amounted to USD 2,863 million Only 1% of Chile’s GDP
SUFFICIENT SCALE CONSIDERING THE URGENT NEED FOR STRUCTURAL DIVERSIFICATION ?
CORFO TODAY:
FUNDING SOURCES
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CORFO RELIES ON FISCAL RESOURCES
FISCAL RESOURCES LIMITED; PRIORITY TO MEET SOCIAL
DEMANDS
CORFO LIMITED SCALE
BOND
ISSUING AT
CAPITAL
MARKETS ?
BRIEF HISTORY
CORFO
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1939 1940s -1970s 1973 – 1990 1990
CREATION
Chillán earthquake
STATE-OWNED FIRMS: Steel Company – CAP
Electricity – ENDESA
Oil - ENAP
Airline - LAN
PRIVATIZATIONS Non-performing loans: 54%
From first to second-tier bank
Focus on SMEs
2000s 2008/9 Currently
Innovation
Enterpreneurship
2005 - CNIC
Focus on Structural Transformation
Selected 10 strategic sectors
COUNTERCYCLICAL
ROLE
CORFO´SFocus areas
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DEVELOPMENT STRATEGY & CORFO’S ROLE
´chile transforms´
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Source: prepared by the author, based on Bitran, 2016
GUARANTEE SCHEME
CHILE
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0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2010 2011 2012 2013
OPERATIONS NUMBER (%)
FOGAPE
IGR
CORFO
Guarantees
2010: 82,177
2013: 144,815
76%
increase
MORE CREDITS, but
NOT BETTER COSTS
THE STATE ASSUMES
MORE RISKS
START-UP CHILE
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The grants reached up to USD 40,000 USD for Seed Capital and a year work visa
Chile included 1 unicorn (Start up of at least USD 1 billion), 4 centaurs (with a valuation of
between USD 100 million and USD 1 billion), and 31 little ponies (with a valuation of between
USD 10 and USD 100 million
CAVEATS: not statistically meaningful impact for the projects in term of: continuity of the
start-up, sales (total value and growth), profits, exports, level of employment, later support
from business incubators and accelerators and number of subsequent entrepreneurships from
the project leader.
SOLAR INDUSTRY
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ACHIEVEMENTS
2008 - Chile Renewable Energy Policy to gain more
self-sufficiency and stability in energy provision
2012 – Solar Energy Program
More 10% NCRE generation
40% price drop (2016 – 2015 tender)
CHALLENGES
8-9 years payback periods
ONLY 17% firms local in SOLAR ENERGY projects
ENERGY 2050 – 55% local firms target
Local Firms – NO TRACK RECORD, real collateral
PRICE VOLATILITY --> UNCERTAIN CASHFLOWS
PRIVATE FI withdraw financing support
CORFO --> PV Solar Energy for Desert Weather and High Radiation
NEED STEEP INCREASE IN CORFO’S ROLE – PATIENT PUBLIC
CAPITAL TO MEET DEVELOPMENT STRATEGY TARGETS
COUNTERCYCLICAL
ROLE
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COUNTERCYCLICAL ROLE
2008 FINANCIAL CRISIS
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CORFO
Injected additional USD 850m, to
leverage USD 1,800m
Increased flexibility in guarantees’
requirements
Increased financing limits
-7.6
-6.3
-0.2
-1.8
-3.3
-4.1
-3.8
-2.3
2.2
20
1.5
17.1
18.6
7.7
0.7
7.4
-10 -5 0 5 10 15 20 25
LoansPrivateandPublicBanks(%var.i.a.2008-2009)
PublicBanks
PrivateBanks
Perú
México
CostaRica
Colombia
Brasil
Argentina
Chile
Uruguay
SOURCE: OwnelaborationbasedonALIDE,2010
CONCLUSIONS
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Innovative in several of its instruments: START-UP, SOLAR POWER, etc
CORFO has undertaken a Structural Transformation Approach with ´Chile Transforms´, but
still need to be fully deployed in practice
Active COUNTER-CYCLICAL role, but still small scale to have significant impact
Need to increase its scale, especially in times of low commodities prices, as diversification
essential
Many programs and sectors; possible need for greater focus
Focus on Guarantees, taking much risk, but not direct lending
STEPHANY GRIFFITH-JONES AND MARIA LUZ MARTINEZ SOLA
19TH April 2017
BNDES-CAF-IPD CONFERENCE, WASHINGTON DC
THANKS!
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