Industrial Policy in Chile

66 Pages Posted: 21 Apr 2011

See all articles by Manuel R. Agosin

Manuel R. Agosin

University of Chile - Department of Economics

Christian Larrain

affiliation not provided to SSRN

Nicolas Grau

University of Pennsylvania - Department of Economics

Date Written: December 2010

Abstract

This paper studies three horizontal policy instruments and two vertical ones in Chilean industrial policy, particularly regarding small and medium enterprises (SMEs). The horizontal instruments are (1) a guarantee program for borrowing by SMEs (FOGAPE), (2) a small subsidy to new exports that was applied from 1985 through 2003, and (3) the innovation subsidies provided by the Corporación de Fomento de la Producción (CORFO). The vertical policy instruments are the activities of Fundación Chile (FCh), a semi-public entrepreneur cum venture capitalist, and a CORFO program to attract foreign direct investment in information technology. Although most programs are well designed, they are numerous and insufficiently funded; Chile could benefit from a prioritization of needs and consolidation of these programs. Moreover, the instruments for making strategic bets on new sectors are particularly weak. In particular, FCh needs to refocus its activities on high-risk projects with long payoffs, something it cannot do with its small endowment.

Suggested Citation

Agosin, Manuel R. and Larrain, Christian and Grau, Nicolas, Industrial Policy in Chile (December 2010). IDB Working Paper No. 52, Available at SSRN: https://ssrn.com/abstract=1817286 or http://dx.doi.org/10.2139/ssrn.1817286

Manuel R. Agosin (Contact Author)

University of Chile - Department of Economics ( email )

Diagonal Paraguay 257
Torre 26, Of. 1801 Rm. 1506
Santiago
Chile
+56 2 678-3445 (Phone)
+56 2 678-3413 (Fax)

Christian Larrain

affiliation not provided to SSRN

No Address Available

Nicolas Grau

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

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