Fondo Esperanza SpA (Fondo Esperanza) is an institution that promotes enterprises in vulnerable areas of the Chilean population. With a 13-year track record, it has shared the dreams of over 100,000 entrepreneurs in 240 different districts, through its 52 branch offices spread over the country from the north (Arica) to the south (Chiloé), supporting them as they set up and expand their productive activities.
The institution reinforces the importance of entrepreneurialism as a driver of development, providing microfinance services (microcredits and microinsurance), training (at its School of Entrepreneurs) and by promoting support networks for its clients.
The experience, quality and commitment of the over 500 professionals who work to help overcome poverty are an essential feature of Fondo Esperanza. It is an institution which provides opportunities for entrepreneurs who are excluded from the formal banking system and offers them a personalized, local service, reaching out to the places where they live.
Fondo Esperanza’s help reaches population groups which are socially excluded and which have higher levels of vulnerability. Over two years ago now, it offered its products and services to a group of prisoners so that they could make their own futures (after they complete their sentences) by creating craft products. A similar project has made it possible to create support groups with homeless people.
In 2015 Fondo Esperanza improved its product and services portfolio by introducing the micro-insurance service “My family protected” through all its branch offices. This reaffirms the institution’s commitment to help vulnerable groups who need a safeguard in the event of adverse events having an impact on their incomes.
National Office Manager
Administration & Finance Manager
Operations & Systems Manager
Development & Services Manager
Fondo Esperanza reaches highly vulnerable, socially excluded groups of the population. It supports homeless people and the prison population so that by starting productive activities they can forge a future for themselves.
Empowering entrepreneurs and facilitating the training they need for their activity and reality are the goals of the School for Entrepreneurs.
The Chilean economy grew by 1.8% in 2015, showing for the second year in a row the lowest growth rates of the last 15 years, except for the 2008-2009 global financial crisis. In the last few years, activity and demand have increased only sluggishly. This is partly a result of external shocks, particularly the moderating growth in China, responsible for nearly half of global copper demand, which has caused a 25% fall in the price of this raw material, Chile’s main export product.
This has caused a greater deterioration than expected in the natural resources sector, especially in mining, as a result of the production cuts that mining companies have implemented in response to the fall in price. Performance in other sectors was somewhat more favorable, particularly in construction and some service sectors.
Domestic demand rallied by 2.0%; in this figure, consumption expanded by 2.3%, demonstrating the marked downward trend since 2011, when it surged to over 5%, the result of a prolonged lower growth rate, both in employment and in real wages, which were reflected in lower consumer expectations of future performance and, as a result, the adjustment in consumption. Personal spending grew by only 1.8%, driven by expenditure in services, mainly health care and communications, and followed by consumption in non-durable consumer goods. Public consumption, however, accelerated in the second half of the year, as a result of greater budgetary execution, making it the mainstay of consumption, taken as a whole.
After falling 2.7% in the first half of the year, investment jumped 7.1% in the third quarter, bringing accumulated growth over the year to 0.5%. The result was driven by good one-off results in machinery and equipment, which expanded by 12.2%, as well as in construction and other building, which grew by 5% in all, driven by higher investment in the sector. In the year as a whole, investment edged up by around 0.8%.
Expectations on the part of both consumers and investors as reported by the central bank were at their lowest since 2008, at 25 and 12 points below the neutral zone, suggesting that weak growth will continue in both consumption and investment.
The external situation is to a large degree the cause of this perception. Global growth expectations have softened, the expected Federal Reserve rate adjustment occurred without provoking significant changes in global financial markets, with the widespread conclusion being that growth will adjust, becoming much flatter than forecasted.
All these factors are having an impact both on agents’ expectations and on the result in the external sector, which continues to be poor, even though the adjustment has been significant, going from a current account deficit of 3.7% of GDP in 2013 to an estimated percentage of 1.2% of GDP in 2015, because of a deficit in both the balance of trade and income.
Exports have shrunk by around 17%, while imports have decreased by 9%. Financial account transactions resulted in Chile’s indebtedness with the rest of the world coming in at USD 4.5 billion. These revenue resources to the Chilean economy came mainly from pension funds and the government.
This persistent deterioration in the external sector since 2013 has caused an accumulated depreciation in the exchange rate of 25% over the period, with a real adjustment of the exchange rate since 2013 of 16%, which has made it possible to mitigate in part the deterioration in the terms of exchange.
The pressure on the exchange rate has discounted significant inflationary tensions, mainly a result of the Chilean economy’s high import ratios, in particular the increase in inflation on goods. Annual inflation closed the year around 4%, breaching the upper limit established by the central bank. Core inflation closed at around 5% per annum, demonstrating the real tension on prices, inasmuch as it isolated the effect of lower oil prices on the Chilean economy.
Chile’s Central Bank Committee responded to the higher inflation by raising the Monetary Policy Rate at the end of the year by 25 base points to 3.5% after a long period of stability. In real terms, despite this increase the real rate is negative, with a clear expansionary risk for monetary policy. The cost of credit is still low in historical terms; nevertheless, with the exception of mortgage loans, real annual growth in credit is low, stuck at around 5%.
In order to support an economy showing lower growth rates, the Chilean government pushed through expansionary fiscal policy, with a 10% real increase in spending over 2014 execution, which together with lower growth in fiscal income resulted in the central government’s public deficit representing 3.2% of GDP in 2015, double the deficit for 2014.
Unlike other economies in the region, Chile has margin for maneuver in the deterioration of public finances, since the public sector had financial assets of around USD 26 billion at year end, allowing it to partly buffer the impact of lower revenues as a result of the fall in the copper price: these revenues account for 50% of the country’s exports and a major proportion of fiscal income.
In the labor market, the unemployment rate remained fairly stable, with the last figure available for 2015 standing at 6.3%, similar to 2014, with a slight fall in the labor force and the numbers in employment sliding a little. The reduction in real estate and rental activities was 4.5%, while retail slipped 1.4%. This was offset by the 2.2% growth in employment in the Public Administration.
7.9 million people work in Chile. Around 13% of the population works in agriculture, over 23% in industry and 64% in services. Of the total working population, 59% are men and 41% women. 55.6% of workers are between 35 and 59 years old. 44% have received secondary education and most work in retail and industry, although in the last year most of the new jobs created were in the public sector. Over 70% have a fixed term contract and more than 80% work in an SME.
32% of the labor force works in the informal sector, while the self-employed and/or micro-entrepreneurs make up 21% of those working.
Chile has the highest level of financial inclusion in the region, with 63% of adults having some kind of account in the system. Nevertheless the particular needs of an economy in which small companies provide such a high proportion of jobs should be supported and understood.