Chile’s Supplier Development
Program
Irani Arráiz
May 2015
What is the program’s objective?
• Promote commercial linkages between potential exporters
and their SME suppliers to increase competitiveness
• The program recognized that linkages and spillovers depend
on capabilities and absorptive capacity of local suppliers
What is the rationale of the program?
• Commercial relationships are perceived as short-term,
unstable, and adversarial.
• Buyers have no incentives to invest in long-term supplier
capabilities
• Suppliers have no guarantee that they can profit in the long
term from these investments
How does the program work?
Sponsor firm prepares proposal together with intermediary agent
Sponsor presents proposal to CORFO regional office
Diagnostic and design (up to 6 months)
Implementation of working plan (up to 3 years)
CORFO covers up to 50% of the diagnostic and design phase and
up to 50% of annual implementation
What type of firms participate in the
program?
Sector
Size
Suppliers
Buyers (Sponsors)
1.9% 1.9% 2.3%
1.9%
Agriculture and Forestry
2.7%
8%
Manufacturing
Wholesale
Medium
Large
92%
17.5%
46.7%
Mining
Electricity
Construction
24.9%
Transportation and Communication
Others
2.6% 1.5%
3.0%
6.1%
6%
43%
50%
3.9%
Agriculture and Forestry
Micro
Manufacturing
Small
Transportation and Communication
Medium
Construction
82.8%
Wholesale
Others
What are the impacts of the program?
Increase in sales for sponsors and SME suppliers
18.5% and 25.5% at t+2 and t+3 for sponsors
16.0%, 11.2% and 8.5% at t+1, t+2 and t+3 for suppliers
Increase in employment for SME suppliers
8.0%, 9.3% and 9.6% at t+1, t+2 and t+3 for suppliers
Increase in salaries for SME suppliers
8.8%, 16.2% and 7.7% at t+1, t+2 and t+3 for suppliers
Increase in firm sustainability for SME suppliers
2.6, 2.6 and 2.1 pp at t+1, t+2 and t+3 for suppliers
Increase in ability of becoming an exporter for sponsors
4.6 and 3.7 pp at t+2 and t+3 for suppliers
What have we learned?
• Program benefits both suppliers and sponsor firms.
Cooperation pays off
• Results suggest program achieved objective of improving and
stabilizing commercial linkages
• Cost-effective
• Does the program have the potential to impact Chile’s product
space via knowledge spillovers (to produce “complex” goods
intensive in skill and technology)?