Diagnostic of Chile's Engagement in Global Value Chains - OECD.org

List of international investment agreements signed by Chile, 1991-2015 .............................. ... FDI positions, at-end 2014 or latest available year . ..... OECD wireless broadband subscriptions per 100 inhabitants, by technology, June 2014 ........
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Di a gnos t i cofC hi l e ’ s E nga ge me nti n Gl oba l Va l ueC ha i ns

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One year ago, when reflecting on trade policies that can address productivity challenges of Chile and help the country progress towards a higher level of economic development, we decided to approach the Organisation for Economic Co-operation and Development (OECD) requesting an evaluation of Chile´s integration into Global Value Chains (GVCs). Upon an extensive data analysis exercise and consultations with major stakeholders, the OECD issued the report that is presented here. Several agencies were involved in the process from the side of the Chilean government: the National Statistics Institute (INE), the Chilean Economic Development Agency (CORFO), the Ministry of Finance, the Foreign Investment Committee (CIE), the National Council of Innovation for Development (CNID), the Internal Revenue Service (SII), the Mining Ministry, and the Manufacturer´s Association (SOFOFA). The results of the study show that Chile is indeed highly engaged in GVCs, but primarily as a producer of inputs that other economies use in their production, which is mainly attributable to the high importance of copper and other natural resources in Chile´s exports. In addition, the role of research and development (R&D) and innovation more broadly is limited in the economy, and the country continues to specialize in the basic commodities and relatively unsophisticated mining-related products. The study´s conclusions, therefore, point to the policy challenge that underpins the trade policy strategy of DIRECON that aims to increase Chile’s export diversification. The study’s results also leave us with a vital challenge of promoting public policies that help firms innovate and add value to products and services in which the country cherishes a comparative advantage through increasing the efficiency of programmes that support the development of science, technology and innovation. If our efforts are successful, Chile could participate in GVCs in a more sophisticated manner not only as a producer of natural resources, but also as supplier of higher value-added activities, both in manufacturing and services, in which a more extensive application of specialised know-how and knowledge is required. Building on our extensive expertise in the mining, engineering, agricultural and chemical sectors can provide a basis for such a strategy. In this regard, the recent negotiated Transpacific Partnership Agreement (TPP) constitutes a great opportunity to overcome the challenges we face today. Today, we are convinced that requesting this study from the OECD has not only helped us identify important challenges to the GVC participation and economic development of our own country, but also has made an important public contribution to the wider international community interested in the dynamics and policy challenges associated with GVCs.

Andrés Rebolledo Smitmans Director General for International Economics Relations Ministry of Foreign Affairs of Chile Santiago, January 2016

DIAGNOSTIC OF CHILE’S ENGAGEMENT IN GLOBAL VALUE CHAINS

FOREWORD

The global value chain (GVC) revolution that began in the early 1990s has been characterised by unprecedented geographical sepa