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Computer Software

Market overview

The Chilean software market has been growing dynamically for several years. Future annual revenue growth for locally sold software will stabilize at around 10 percent. Total Chilean imports of information technology products and related equipment totaled approximately US$1.1 billion in 1997. Sales in the Chilean software market in 1997 were about US$125 million.

Distribution channels most commonly used in Chile are importers, commission agents, direct purchases and subsidiaries of branch offices. Large purchases for important projects are usually done through open bids that are publicly announced in the local media. In addition, several large department stores in Chile have entered into joint venture agreements with computer companies for the distribution of computer hardware and software products.

Initially, the introduction of computers to local enterprises generated a demand for software products, which was initially satisfied by imports and in-house software development. In 1992, locally produced software sales totaled US$110 million, 12% of which was exported. In 1991, 57% of the known software exports were to Latin American countries, 12% to Asia, and 31% to other countries, mainly the US and Europe. Exports of Chilean-designed software came to roughly US$22 million in 1993, up 58% from 1992 (Table 2). This rate is expected to decline to 40% in the next few years.

Table 2: Chile in the international packaged software market (in US$ millions)

Item

1994

1998 (est.)

Chilean exports

38.8

170.7

World sales

77,492.0

121,489.0

Chilean share of world sales

0.05%

0.14%

Exported software products include MIS applications packages (e.g., transactional banking systems, integrated management systems, and statistical analysis), software utilities (anti-virus software, software distribution systems, text retrieval tools), and applications in which Chile has special experience (mining, forestry).

Impressive growth rates aside, the Chilean share of the world software industry is very small. Within Latin America, Chile's presence is comparatively more substantial (by a factor of almost 30), but is still small.

The Chilean Software Industry

Some of the companies mainly selling software packages or consulting services.

Other companies such as Binaria or DTS provide off-shore programming, while some foreign companies partially develop and fully support their software through local offices in Chile.

International Prospects and Problems

In Chile, the introduction of a free market economy created the need for efficient and competitive industries. With qualified manpower and capital available, and a stable economy, indigenous software houses formed.

Latin America is an obvious market for Chilean software companies. Chile has recently signed free trade agreements with several Latin American countries, which will increase trade with them. The Pacific Rim countries are an interesting market for Chilean companies to explore since most have booming economies and their growth eases entry for newcomers. On the positive side, there is an internationally-minded generation of businessmen in the country who are experienced in export ventures, and Chile has the highest per-capita level of published IT-related scientific papers in Latin-America.

On the negative side, many Chilean software companies lack the needed capital and know-how to reach mature markets. There is no strong overall technological environment to foster a large-scale internationally competitive industry. In general, the government fosters exports, but is not inclined to subsidize business and is unlikely to give special treatment to the IT industry.

Chile arguably has the most internationally successful software industry in Latin America. The industry is also relatively healthy in that most of it is based on products of domestic origin that have proven value, rather than on cheap, educated, programmers whose time is sold to European, Japanese or US companies.

Key Contacts

Agents/Distributors

Chilean Software Developers/Exporters

Publications

Government Information Technology Authorities and Research Entities