alliances with commercial banks and private technical assistance agents. Nevertheless, there are serious questions about the value added of the instruments provided by CORFO.<sup>44</sup> CORFO’s activities are based on market demand and market imperfections. For example, CORFO’s governing principles include the notion that the State should only intervene when there are clear market failures. In addition CORFO does not discriminate between economic sectors or geographical regions in the allocation of its resources. Finally, according to CORFO’s principles, all programs should be demand driven, as demonstrated by private sector ownership and co-financing. Within these governing principles, CORFO has emphasized three programmatic areas—innovation, business networking, and managerial skils training.

To carry out this strategy, CORFO designed and implemented a series of private sector development programs and outsourced delivery to public agencies and private partners (agents). However, CORFO directly manages a set of instruments dedicated to innovation promotion and regional development, through a network of regional offices.

CORFO’s services cover most sectors of the economy, all sizes of firms, and all regions of the country. In 2000, CORFO spent a total of 43,753 million pesos (US$72.9 million)—of which 14,346 million pesos (US$ 23.9 million) were spent on administrative expenses. In other words, for every peso of administrative expenses, just over three pesos of services were provided the beneficiaries.<sup>45</sup> This level of efficiency is partially attributable to the use of private technical assistance agents and commercial banks to deliver services. Unfortunately, it is difficult to compare this cost-to-benefit relationship to similar institutions in the region, because many of CORFO’s products are not offered in other countries.

In 2000, CORFO launched the High Technology Investment Promotion Program to attract foreign direct investment (FDI) in the technology sectors. The program is designed to portray Chile as a strong market for investments in biotechnology and information and communication technologies (ICT), among others. Chile seeks to attract FDI and maximize local linkages by supporting local businesses. Although there have been some successes in software development, call centers and shared services centers have received the most investment. These types of activity develop qualified employees and use intensively the facilities provided by the country’s telecommunications infrastructure.<sup>46</sup> In addition, CORFO has sought to improve the competitiveness of the mining, wine, fruit and salmon clusters and promote foreign direct in investment in renewable energy. This effort, named the Investment Attraction Program, was combined with an existing program to promote investment in specific regions.<sup>47</sup> Despite its pro-market principles, CORFO officials have recognized a number of obstacles to the efficient delivery of its products. For example, CORFO’s use of agents, has generated savings and led to innovative approaches, but has important limitations. The current system of incentives is not enough to engage agents strategically—making interventions more _ad hoc_ than systematic. CORFO’s actions seem to value the participation of agents more than the solutions to the business problems of the client firms. Agents tend to limit their work to more standardized functions, and do not contribute to the strategic side of operations.

> 44 See: <u>http://www.corfo.cl/.</u>

> 45 Annual Peso/USD average exchange rate stood at 540 pesos in 2000 and 635 pesos in 2001 (according to data series posted in the website for the Banco Central - www.bcentral.cl)

> 46 See: <u>http://www.corfo.cl/biotechnology/index.html. See also: Nelson, Roy C.</u> _Transnational Strategic Networks and Policymaking in Chile: CORFO's High Technology Investment Promotion Program_ Latin American Politics & Society - Volume 49, Number 2, Summer 2007, pp. 149-181

> 47 Nelson (2007) fn. 4.

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