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LatAm Chile Local Market Overview

Three years ago, Chile underwent another major change. For the first time since the return of democracy, there were massive marches protesting against the country's economic system and demanding structural changes. Students were the most visible participants, but there were also important provincial regionalist movements and mobilization on the part of ecologists and copper workers. It was called the ‘social movement’; civic participation motivated by specific issues beyond the traditional political parties. Leadership structures were non-hierarchical as protesters took to the streets and social media.

The movement had extremely high levels of support amongst citizens, and opposing political parties seized the opportunity to take up their demands and propose a platform for a new government, which then won the elections and was inaugurated in March of 2014. The new government's program focuses on three main structural reforms: tax, educational and constitutional, as a response to social demands for greater equality.

In 2011, Chile was growing by 5.8%, thanks to an increase in the price of copper driven by growth in China. It was this scenario that saw the growth in social movements and citizen support of changes. But today the scene is entirely different. China stopped growing by 10% annually and the price of copper dropped to its lowest in seven years. Banco Central de Chile has decreased growth estimates for 2014 from 4% to 2.5%, and parliament is discussing the largest tax reform in 50 years.

  2009     2010     2011      2012     2013     2014*  
PIB Growth China (%)    9.2   10.4    9.3   7.7    7.7    7.5
World PIB Growth (%)   -2.1     4.1    2.8   2.4    2.2
PIB Growth Chile (%)    -1     5.8    5.8   5.4    4.1   2.5
Price of copper (USD/per lb   2.72   3.74  4.03  3.61  3.30  3.07


Sources: World Bank, Banco Central de Chile, Corporación Chilena del Cobre.

Three years ago, front pages and broadcast news covered the different social movements. Today it’s economic deceleration that is in the headlines. Almost all analysts agree that this is mostly a result of slowed growth in China, but they also argue that uncertainty about tax reforms is responsible for significant reductions in investment by corporations and consumption of durable goods by consumers. Chile is fundamentally an importer of consumer goods and an exporter of commodities, so the low price of copper has raised the dollar, making imports more expensive.

So, what is the scenario for consumers and brands? A slower economy and uncertainty about the future. While corporations decrease investments, and brands advertise less, consumers feel less confident about their economic future and buy fewer durable goods. Apparently, consumers also become more critical of the system and reduce their support of educational and tax reforms.

Mar-13 Jun-13 Sep-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14
Anticipated PIB %   5.0   4.7   4.5   4.0   4.0   3.8   3.7   3.4   3.2   3   2.9
Monthly IMACEC %   4.9   4.5   4.4   2.2   1.0   2.9   1.8   2.7   2.9   0.8
Quarterly PIB %   4.9   3.8   5.0   2.7   2.4   1.9
Advertising Spend %  11.4   0.3   8.2   3.3  -0.4  -3.5   2.9  -1.6   6.7  -3.8  -10.5
Consumer Perception of Economy Index  56.8  53.0  54.6  56.6  54.6  54.3  53.4  52.6  50.3  49.2   47.5

Sources: Banco Central de Chile, Asociación de Agencias de Publicidad, Megatime, GFK Adimark.

What have marketers done in response to this context? Besides adjustments in advertising spend, with a focus on digital media, communication with consumers does not yet show adaptive changes except in the traditional savings campaigns by financial services companies. It appears that Chileans continue to be very conservative in brand communication, especially when issues are deemed "political." So far no brand has seized the chance to empathize with consumers in its communication.

Claudio Apablaza

Business Development Director, Millward Brown Chile