Chile, the longest country in the world, has a unique combination of European and Latin American culture. Their relationship with global players in politics and economics, such as U.S., Europe, and China, are equally excellent on all sides. As such, one can learn a lot by studying the business environment in Chile.
I would like to thank the Wisconsin MBA for arranging an educational trip to Chile, called the Global Business Program. Combining classroom work and an international trip helped emphasize course deliverables. It was a great chance for me to think about the business and economic environment in Chile, especially in today’s global economy. This article will include my reflections about the companies we visited, the favorable economic environment, and the culture difference in Chile. Enjoy!
The business visits of Wacker Neuson and Joy Global in Santiago were impactful for me. The finance manager from Wacker Neuson introduced us to the Chilean culture and its influence in how business is conducted in this country. In Chile, establishing trust and connecting with people are fundamental to successful business relationships, and initial visits should always be used to build a rapport and show who you are. Unlike in some nations, the relationship takes precedent over business matters in Chile. It is important for foreign companies that aim to explore the Chilean market to be aware of the cultural quirks. To better understand and serve the local market, some big American international companies in Chile try to develop and employ local executives. The general manager we met in Joy Global is from Chile. Before he became the general manager for Chile office, he had taken the overseas assignments in some other countries outside of Chile, including the U.S. headquarters office. These overseas assignments prepared him to take up the leadership role at an internal office in Chile. This approach of leadership development is not universal and did not succeed in China. The business leader in the China office of Joy Global is still from a western country and I am very curious about the reasons. Understanding the culture of Chile was a great experience and has got me thinking about the difference between other markets, such as my home country of China.
Both Wacker Neuson and Joy Global are mining equipment manufacturers. Through introductions by the executives each company, we learned that the mining sector is the highest-earning industrial sector in Chile with nearly $18 billion in net profits in 2010. Chile can be thankful for its underground wealth, mining is growing in size and exports of minerals grew almost four-fold in the past ten years reaching more than $38 billion by 2010. However, Chile’s export of minerals is facing challenges. Issues Chile faces include lower import requests from important end-user markets such as China and India, the copper price has dropped from US$4.0 to US$1.9, and the Chilean government is implementing a new tax policy, which cuts down corporate profits. To adapt to the tough market situations, the international companies adopt new business strategies to face the challenges. For example, Wacker Neuson started to rent out more mining equipment rather than selling the equipment to their clients; Joy Global believes that the potential growth exists in technology innovation, developing better technology for mining, and training the technical professionals.
Moreover, Chile’s economic, political and institutional stability help to create a transparent and optimum business environment. The favorable conditions contribute to the organic growth of international companies as well as start up companies. During the trip, we visited the Start-Up Chile Office, which is an entrepreneurship and innovation promotion organization sponsored by Chilean government. According to the speaker, the process for setting up a business in Chile is becoming one of the simplest in Latin America. Start-Up generates a favorable environment with real business opportunities for entrepreneurs. Many young, talented entrepreneurs are attracted here from all over the world and they are driving the technology innovations and business developments which contribute to Chile’s international competitiveness.
While Chile’s sound economic environment has made Chile one of the most attractive locations in South America for foreign investment, having a comprehensive understanding of Chilean traditions and underlying influences on business culture is essential for business success in Chile. First, Chileans have a complex attitude towards time. While punctuality is appreciated and even expected in business culture, their attitude towards time is generally flexible. We found that it is normal to expect the business meetings start 10 to 15 minutes later than scheduled when we worked with our Chilean partners. Being patient and including extra time to our schedule can help business relationships with Chilean partners, since again, relationship takes precedent over business. Second, the majority of Chileans are Roman Catholic and respect for these religious values are expected. Their religious beliefs directly influence the mentality of Chileans as well as Chilean society, such as its economy and politics. Third, business organizations in Chile tend to be hierarchical and decisions and ideas are generated at the top. When we sought information or provide consultation to our Chilean partners, we needed to be aware of their team structure and respect their decision making process.
Overall, this was an incredible trip because of the huge impact I felt and the cultural intricacies I learned. Upon completion of the expedition, I now have a better understanding of the country and its economy which were unknown to me before. Trying to describe the trip, I really can’t say it was anything but incredible. I will always remember the experiences. Although the overseas trip to Chile is over, my learning journey continues…
Vickie’s post is in response to the 2015 Global Business Program trip to Chile. All Wisconsin MBA students are eligible to apply for this 3-credit course and international immersion experience.