Our Policy and Public Affairs Manager, Alessandro Pecorari attended the London chapter of Chile Day, the annual two-day event in London spotlighting the emerging Latin American market for investors across the Atlantic. It is organised by InBest Chile, a private corporation tasked with promoting investment in Chile, and the Ministry of Finance of Chile.
It was an exciting couple of days, bringing together high-level government officials, academics, journalists, and private investors from across the two geographies to discuss foreign investment opportunities in the Latin American country.
Chilean Finance Minister, Mario Marcel, kicked off the proceedings by providing an economic overview, describing how the country successfully overcame economic as well as political challenges including the December 2023 constitutional referendum. Marcel then pointed towards how global developments in the green and technological transitions are enhancing and developing the comparative advantage of the Chilean economy, which is set to broaden its productive base across various sectors including: renewables, lithium, green hydrogen, and the digital economy.
In 2023, 2% of Chilean electricity generation came from renewable sources, and current investments are expected to raise this proportion to 85% by 2030.
On hydrogen, Chile’s Green Hydrogen Action Plan 2023-2030 has enabled 72 projects across the country to enter a ‘study phase’, several pilot initiatives to begin operating, and two hydrogen plants to be established.
Chile’s appetite for data centres will be of particular interest to investors. There are currently 22 operational data centres across the country, and this figure is expected to nearly double, as more projects get under way – this will be equivalent to US$4 billion. The government is leaving no stone unturned in their strategic bet on the digital economy, with a key consideration being the density and quality of fibre-optic connectivity for data centres. To this end, the state-owned agency Desarrollo País is in the process of developing the ‘Humboldt Project’ in partnership with Google. This will be the first trans-Pacific fibre-optic subsea cable between South America and the Asia-Pacific region. The project’s groundbreaking initiative is set to grow Chile’s capacity to provide digital services not only to its citizens, but also position itself as a leader and exporter of advanced digital services to the rest of South America and beyond.
A particular panel of interest across the two days was the infrastructure-focused ‘Investing in Alternatives’, which explored trends, challenges and opportunities for infrastructure investors:
Key takeaways:
- Asset classes are shifting from private equity to infrastructure funds, with more sources of capital flowing into the Chilean market.
- The Chilean infrastructure market stands at US$13.1 trillion (2022) and infrastructure funds and energy funds have significantly increased their presence over the years.
- Infrastructure investment funds — of which insurance companies and pension funds are the largest components — currently manage US$ 2.1 billion. These funds have grown at a 29% compound annual growth rate since 2017.
- Chilean infrastructure is set to grow significantly in the renewables and energy sector. Most notably in 2024, hydrogen and its derivatives are set to lead the energy sector – surpassing solar and wind projects – with 29 projects totaling US$ 4.7 billion.
Key needs include:
- According to InBest Chile, the country needs US$178 billion investment between now and 2031.
- Public-private partnerships (PPPs) are key in bridging this gap. InBest Chile estimates that 27% of investments in Chilean infrastructure should be carried out with this model.
- Significant permitting reform is needed to speed up projects such as grids that can take up to seven years to get up and running, for PPPs to become a reality. This is a critical need for a country that spans over 4,000 km.
Marcel and several managing partners underlined permitting as a central issue that needs to be tackled to attract more international capital. Steps have been taken by the government to reform the process of investment permits through two major legal reforms: Evaluación Ambiental 2.0 and the Sistema Inteligente de Permisos. These two reforms designed to speed up permitting are making progress through the National Congress, and are expected to be approved by the end of the year. Other reforms in the pipeline include a law on maritime and coastal borders to reduce processing times at ports.
During a panel on Chilean politics, guests discussed the movers and shakers ahead of the next elections expected in 2025, and what this might mean for investors. The current president Gabriel Boric, is constitutionally unable to run for a second term, opening the race for new candidates to set out their visions and policy agendas. The vastly popular Evelyn Matthei of the conservative Independent Democrats, and Antonio Kast of the left-wing Republicans are considered as the two frontrunners. Michelle Bachelet, the UN High Commissioner for Human Rights and former President of Chile, comes in as a third-choice candidate at the time of writing.
Find out more about Chile Day here.