OECD Reviews of Innovation Policy: Chile

G. HUTSCHENREITER, P. VELASCO, G. ROZENWURCEL Y J. GUINET

OECD Publication

Lugar: París; Año: 2007 p. 223

978-92-64-03752-6

Over the last two decades Chile – a small, open economy with a traditionally strong resource-based production – has recorded an impressive economic performance. It has succeeded to achieve a remarkable "growth acceleration" with GDP per capita growing at 5-6 per cent per year in the 1990s, more than twice the long-term trend of 2.4% of the preceding 40 years. After a short-lived stagnation at the end of the 1990s, growth performance picked up again sharply in 2004 and 2005, partly due to favourable conditions in its main export markets. As a result, Chile has succeeded to reduce the gap in income per capita vis-à-vis the advanced countries by a significant margin. From this perspective, it stands out as the top performer in the Latin American region over the last two decades. At a GDP per capita of about 11,000 PPP US$ Chile is ranked today among the high middle-income countries. The remaining income differential is to some extent accounted for by a lower utilisation of labour, but its main source by far is a gap in productivity. While Chile has succeeded in translating income gains into considerably alleviated poverty, the distribution of income has remained exceptionally unequal. Chile´s strong economic performance of the past two decades has been underpinned by the country´s effort in economic reform and in building modern and stable institutions following best international practices regarding macro-economic management and the development of market-mechanisms. Chile has achieved monetary and fiscal stability, reflected in a steady reduction of the rate of inflation towards the level of the developed countries as well as sound public finances. Openness to international trade and foreign direct investment has featured prominently among the factors explaining Chile´s success in deriving increasing income from its comparative advantages. International openness has also contributed to the development of well-functioning markets and allowed a boom in exports by industries exploiting Chile´s comparative advantages. The emergence of dynamic export-oriented activities have tested the capability of the Chilean innovation support system, revealing that it was largely unable to deliver relevant services and knowledge. Partly as a response to new, more sophisticated demand from some firms, but also in response to other needs of the society and economy, Chile has started to build a more comprehensive innovation system, although at a slower pace than it put in place the other institutional pillars of an efficient, market-oriented economy. A growing political awareness of the importance of innovation for the country´s future has translated recently in two bold decisions: the creation of an Innovation Council for Competitiveness entrusted with the mission of proposing guidelines for a long term national innovation strategy; the introduction of a specific mining tax to increase resources available to implement this strategy. This report assesses the current status of Chile´s innovation system and policies with a view to determine in which areas improvements are most needed in order to make the most efficient use of this additional public investment.