Chile Information Technology Report Q3 2015

Q3 2015
www.bmiresearch.com
CHILE
INFORMATION TECHNOLOGY REPORT
INCLUDES 5-YEAR FORECASTS TO 2019
ISSN 1756-4808
Published by:BMI Research
Chile Information Technology Report Q3

2015
INCLUDES 5-YEAR FORECASTS TO 2019
Part of BMIs Industry Report & Forecasts Series

Published by: BMI Research
Copy deadline: April 2015
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Chile Information Technology Report Q3 2015
CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 9
IT SWOT .................................................................................................................................................. 9
Wireline SWOT ....................................................................................................................................... 11
Political ................................................................................................................................................. 13
Economic ............................................................................................................................................... 15
Operational Risk ..................................................................................................................................... 16
Industry Forecast .............................................................................................................. 18

Table: IT Industry - Historical Data And Forecasts (Chile 2013-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Macroeconomic Forecasts ............................................................................................... 25

Economic Analysis ................................................................................................................................... 25
Table: Economic Activity (Chile 2010-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Industry Risk Reward Ratings .......................................................................................... 31

Industry Risk Reward Index ....................................................................................................................... 31
Table: Americas IT Risk/Reward Index, Q315 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Market Overview ............................................................................................................... 35

Hardware .............................................................................................................................................
Software ...............................................................................................................................................
Cloud Computing ...................................................................................................................................
IT Services ............................................................................................................................................
35
42
49
52
Industry Trends And Developments ................................................................................ 56

Regulatory Development .................................................................................................. 59
Table: Government Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Competitive Landscape .................................................................................................... 62

International Companies ......................................................................................................................... 62
Table: IBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Table: Samsung Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Table: Hewlett Packard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Local Companies ................................................................................................................................... 65

Table: Metric Arts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Table: Synapsis Soluciones y Servicios IT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Company Profile ................................................................................................................ 67

Sonda .................................................................................................................................................... 67
Table: Sonda Financial Performance Geographic Breakdown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Business Monitor International Ltd
Page 4
Regional Overview ............................................................................................................ 72

Americas ................................................................................................................................................ 72
Demographic Forecast ..................................................................................................... 74

Table: Population Headline Indicators (Chile 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Table: Key Population Ratios (Chile 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Table: Urban/Rural Population & Life Expectancy (Chile 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Table: Population By Age Group (Chile 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Table: Population By Age Group % (Chile 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Methodology ...................................................................................................................... 79
Industry Forecast Methodology ................................................................................................................ 79
Sources ................................................................................................................................................ 80
Risk/Reward Index Methodology ............................................................................................................... 81
Table: It Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Table: Weighting Of Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Page 5
BMI Industry View

BMI View: Although peso depreciation against the US dollar continues to weigh on the growth outlook for
Chile's IT market in 2015, particularly in the hardware market, we expect overall demand growth will
accelerate from 2014. Our strong outlook for the Chilean IT market is backed up by acceleration in real
GDP growth compared to 2014, while the government's fiscal stimulus should also have positive spill-over
effects for the IT industry, which draws a large percentage of revenues from the public sector. Meanwhile,
lower oil prices should support stronger economic activity among consumers, with potential for greater
spending on IT hardware such as tablets and laptops. In terms of IT market segments, IT services are
expected to grow the most in Chile throughout our forecast period, as businesses increasingly opt for cloud
computing solutions to cut costs.
Headline Expenditure Projections
Computer Hardware Sales: We expect sales to rise from CLP805.1bn in 2014 to CLP844.5bn in 2015,
an increase of 4.9%. Demand growth in the hardware market will be subdued by peso depreciation,
squeezing household purchasing power in global markets and thereby reducing demand for non-essential
imported hardware.
Software Sales: CLP360.2bn in 2014 to CLP393.7bn in 2015, an increase of 9.3% in local currency
terms. Growth will decelerate from 2014 when demand was boosted by operating system upgrades as
Microsoft withdrew support for XP. The fastest growth in 2015 is expected to be in more complex
enterprise software such as customer relationship management and business intelligence as demand
moves beyond basic enterprise resource planning solutions.
IT Services Sales: CLP760.8bn in 2014 to CLP835.1bn in 2015, an increase of 9.8% in local currency
terms. Cloud computing demand will be the main medium-term growth driver, but in 2015 we anticipate
e-services will drive growth through adoption of payment and digital document storage services in the
healthcare, transport, retail and finance verticals.
Key Trends And Developments
In the Q3 update BMI has introduced a medium-term household income analysis to the IT market forecast,
which we believe illustrates medium-term change, with particular relevance for hardware vendors. Our
forecast for 2015-2019 envisages the addition of around 200,000 households in Chile, as well as a migration
of households to higher income bands. The most prominent trend will be the 818,000 additional
USD25,000-50,000 income households by 2019, and over 100,000 additional households with incomes at
the USD5,000-10,000 level. In recent years the hardware market has been characterised by tablet
cannibalisation of notebook volumes, and price erosion as lower-cost tablets made headway among pricesensitive population segments. Our analysis of household income trends points to an easing of price
pressure on PC vendors, who have the potential to up-sell higher-value models as the level of price
Page 7
sensitivity eases over the medium term as households acquire additional disposable income and purchasing
power in global markets.
Another medium-term trend is the increased contribution of emerging technologies to IT market demand in
Chile - although there are potential bottlenecks to development. Major private sector investment, as well as
government programmes, are extending the reach and increasing the capacity of data networks, which will
support the adoption of emerging technologies such as cloud computing, big data and the Internet of Things
(IoT). However, research points to the need for a significant increase in investment if smart infrastructure is
to reach its potential. According to estimates from Pais Digital, a total investment of USD30bn will be
required in telecoms infrastructure - double the level of investment that occurred in the decade to 2014 - to
ensure the success of the IoT in Chile. BMI believes this figure is up for debate, but either way, telecoms
investment could prove a bottleneck to emerging technology adoption given the declining profitability for
the telecoms industry, raising serious questions about the viability of wider SmartCity deployments.
Page 8
SWOT
IT SWOT
SWOT
Strengths
Leads the Latin America region in PC and IT services penetration.
Per capita IT spending is among the highest in the region.
Strong proactive government approach to ICT development, with a series of initiatives

grouped with the ambitious Digital Agenda framework.
Early adopter of e-government, with a framework in place for continued development

of services.
Weaknesses
Small market size, which is only one-tenth the size of Brazil.
Large regional disparities, with most activity in Santiago and surrounding region and
low level of ICT development in rural areas.
Start-ups must focus regionally or internationally to attract money from investors and
thus continue to grow.
Opportunities
Resurgence in notebook demand in 2014/2015 offers greater scope for profitable

volume growth compared to highly competitive and price sensitive tablet market
(Apple's iPad aside)
Investments in wireless and wireline broadband infrastructure, supported by the

government's allocation of finance for projects to boost internet coverage, will create
new consumers for PC hardware, boosting sales.
Small- and medium-sized enterprises are a strong area of opportunity, with the use of
IT and internet rising steadily in the past few years and new government funding
helping enterprise.
The transport, healthcare, banking and retail segments are all transitioning towards epayments and digital file storage.
Page 9
SWOT - Continued
Imagine Chile Digital Agenda 2013-2020 and Start-Up Chile are two governmentdriven projects that could boost ICT sales for local companies.
Threats
The government faces a challenge to differentiate Chile from other significantly larger
markets in the region such as Brazil and Argentina.
Depreciation of peso against US dollar in 2014/2015 a squeeze on Chilean household

purchasing power in global markets.
Many government programmes are still in their early stages, with results and budgets
uncertain.
Significant increase in investment in telecoms infrastructure required to support the

Internet of Things.
Software piracy remains a drag on software market growth, despite some progress.
Page 10
Wireline SWOT
SWOT Analysis
Strengths
One of the most developed fixed-line networks in the region with the highest
penetration rate.
Competitive fixed-line and broadband markets with multiple competing operators and
technologies.
Fast growth of broadband subscriptions during 2012.
Government policy initiatives are encouraging investment in rural coverage.
Elimination of long-distance tariffs resulted in fixed-line market returning to growth in

2014.
Weaknesses
Broadband growth slowing as the penetration rate rises.
Mobile growth has lowered demand for fixed-line services, which are declining
steadily.
Opportunities
Government broadband projects open opportunities for equipment contracts to be

won.
Increasing interest in bundled services helping fixed-line market to stabilise.
Growing popularity of bundled packages will help operators decrease fixed-voice

churn.
Entel fibre-to-the-home roll-out will increase competition at the top end of the wireline
broadband market and enable new value-added service. FTTH connections
surpassed 100,000 in Q314.
Threats
Long distances to be covered to reach more remote communities mean many areas
of the country have limited coverage.
Page 11
SWOT Analysis - Continued
Changes to tariffs, introduced in October 2011, will result in national long-distance

calls made within the same region classified as local calls. As this move is
implemented across the country, it is expected to have a negative effect on revenue.
Popularity of VoIP is having a detrimental impact on the growth of the pay-TV market.
Launch of LTE will intensify competition from mobile broadband, potentially resulting
in cannibalisation of wireline services.
Page 12
Political
SWOT Analysis
Strengths
Outside of recent small-scale bombings by anarchist groups, there is little evidence of

terrorist activity in Chile.
Despite reports of increased crime levels, the occurrence of serious offences remains
relatively low. Chile - particularly the capital, Santiago - is still considered one of the
safest countries in Latin America.
Chile enjoys a stable democratic political system, with strong institutions. This is
reflected in its comprehensive legal framework and independent judiciary.
The centre-left government of President Bachelet has enjoyed rising public support
further enhanced by a weakened opposition position on the back of a campaign finance
scandal.
Weaknesses
Despite a solid fiscal position, far-reaching reforms of Chile's institutions remain

unlikely. The absence of reform could exacerbate structural imbalances in the
economy, dragging on economic growth.
Opportunities
Since the end of the Pinochet dictatorship in 1990, Chile has enjoyed an
uninterrupted period of stable democracy. Elections are held regularly, with
presidential and congressional elections held every five years. As of October 2012,
voting is no longer compulsory.
In early 2003, the government took important measures to increase the efficiency of
the public administration and to ensure a transparent government. In a parallel
initiative, congress also approved a law to regulate the financing of political parties
and election campaigns.
Threats
Growing public protests among the poorer and younger sections of society, owing to
high levels of income inequality and discontent with the cost of education, has
weakened the government's popularity and might escalate if economic conditions
deteriorate sharply as a result of an external shock.
Growing labour unrest at Chile's major ports and industrial mines.
Page 13
Unrest among the Mapuche indigenous population, Chile's largest indigenous group,
numbering 600,000, poses a potential threat to the government.
Page 14
Economic
SWOT Analysis
Strengths
Chile is rich in copper, a highly sought-after commodity and will remain the world's
largest producer of copper in the coming years.
Prudent fiscal and monetary policy execution in recent years, based upon
cooperation with international financial institutions, has contributed greatly to
macroeconomic stability.
Weaknesses
With economic growth based heavily on the export of raw materials, Chile remains
vulnerable to external demand shocks.
Chile's dependence on oil and natural gas imports exposes the economy to a higher
risk of supply shocks and higher commodity prices.
Opportunities
Strong institutions and political stability, combined with sound macroeconomic

fundamentals, make Chile an attractive destination for foreign investment.
Exports are rebalancing themselves towards manufactured goods as copper prices

continue their decline.
Prudent fiscal management suggests that countercyclical spending could help prop
up economic growth at times of sluggish demand.
Threats
Income inequality is among the highest in Latin America, and if Chile is to sustain its
recovery in the long term, social progress will be essential.
Changing external demand dynamics will force a structural shift in Chile's economy, a
process that could prove destabilising.
Page 15
Operational Risk
SWOT Analysis
Strengths
High primary and secondary school enrolment rates contribute to an educated labour
pool.
A high quality transport network limits disruption to supply chains.
The low level of trade bureaucracy lessons the burden on importers and exporters.
The crime rate in Chile is much lower than in other Latin American countries,
particularly with regard to organised crime.
Weaknesses
An urbanised workforce negatively impacts the agricultural and mining sectors which
are currently experiencing a skills and labour shortage.
Overuse of the road network causes congestion and supply chain delays.
Low bank account penetration reduces the potential for and access to credit, and
therefore impedes growth in the consumer driven sectors.
Lingering territorial disputes are harming bilateral relations with the country's
neighbours.
Opportunities
The minimum wage is lower than in other major Latin American economies, such as
Brazil and Argentina, making Chile a more attractive location for labour intensive
businesses.
Expansion of ports will enable them to keep up with increased throughput without
causing significant congestion.
Chile's relatively open and expanding free trade policies gives investors access to
provisions set out in its bilateral, regional, and international trade agreements.
A resolution to the Mapuche land dispute would increase security for businesses
operating in the Araucana region in the south of Chile.
Page 16
Threats
The unionised labour force poses a risk to the disruption of business activity in the
form of strike action.
If Chile does not improve its port capacity and efficiency, it will risk its attractiveness
as a direct port of call for international shipping companies.
High costs for resolving legal disputes could deter risky investments.
The growing drug trade could lead to the formation of more powerful organised
criminal gangs.
Page 17
Industry Forecast
Table: IT Industry - Historical Data And Forecasts (Chile 2013-2019)
2013
2014e
2015f
2016f
2017f
2018f
2019f
1,811,146.2
1,926,154.0
2,073,312.1
2,220,310.0
2,406,594.0
2,565,429.2
2,747,061.6
1.3
1.3
1.3
1.3
1.3
1.3
1.3
Computer
hardware sales,
CLPmn
778,792.9
805,132.4
844,460.0
880,574.9
928,704.6
962,549.0
1,001,303.9
Personal computer
sales, CLPmn
621,866.1
640,482.8
669,234.6
695,213.9
730,426.2
754,157.2
781,517.7
Software sales,
CLPmn
320,572.9
360,190.8
393,722.0
428,075.8
470,970.4
509,494.2
553,532.9
Services sales,
CLPmn
711,780.4
760,830.8
835,130.1
911,659.3
1,006,918.9
1,093,385.9
1,192,224.7
IT market value,
CLPmn
IT market value, %
of GDP
e/f = BMI estimate/forecast. Source: BMI
Over the period to 2019, BMI forecasts Chile's IT market will grow at a compound annual growth rate
(CAGR) of 7.4% to reach a total value of CLP2.747trn in 2019. We forecast the IT market will expand by
7.6% in local currency terms in 2015 to a value of almost CLP2.100trn, a slight acceleration from 2014 as a
result of stronger domestic economic conditions. We expect market development will be underpinned by
growth across all sectors of the IT market, with IT services forecast to be the outperforming segment.
Chile's more mature market status means growth is expected to underperform emerging markets in Latin
America in percentage growth terms. However, we forecast robust growth given Chile's higher state of
development. BMI believes one factor supporting this trend is the fact Chile is a first stop for many
international players to launch in the region, as well as being a hub of Latin American development, with
some emphasis on the establishment of new data centres.
2015 Outlook
BMI expects peso weakness will weigh on demand for imported IT products and solutions in 2015, a trend
that is particularly relevant in the hardware market where imports account for a large share of products.
However, the impact will not be far-reaching and we still maintain a bullish growth outlook for 2015 across
all segments of the IT market.
Page 18
IT market growth in 2015 will be underpinned by relatively strong economic growth considering Chile's
position as the highest income Latin American market. BMI forecasts real GDP growth of 3.0% in 2015,
while private final consumption is forecast to grow by 2.7% in real terms. This represents stronger
performance than 2014, but currency depreciation will continue to act as a drag on demand for imported
products. That said, there is still strong spending power among Chilean consumers in comparison with
regional markets, and with the dollar appreciating against the majority of Latin American currencies, Chile's
performance in a regional context is unlikely to be affected.
The launch of the 2013-2020 Digital Agenda programme aims to boost technological development in Chile
through greater ICT spending per GDP and poses upside risk to our forecasts. The project remains in its
early stages and a commitment to investment from the government in to these plans will help create a
clearer view of what impact the policy is likely to have. There is also evidence to suggest that the 2010
'Start-Up Chile' is proving to be successful in encouraging local entrepreneurship, with venture capital firms
targeting Chilean firms. Although these projects may not have immediate impact, the investment in IT
development will support the market's longer-term growth.
We expect cloud computing services such as software-as-a-service and infrastructure-as-a-service to be in

demand and experience a growth rate in excess of the rest of the software and services segments. Particular
areas of opportunity for cloud computing include banking and retailing and government, with large
organisations reported to be the most enthusiastic early adopters. However, over the medium term, we
expect cloud computing to become a more important service for small- and medium-sized enterprises as
they lack the budgets and requirements for bespoke solutions for in-house deployment. This growth will be
the result of increasing awareness and trust in these new IT services as well as companies looking to keep
costs low in the face of slower economic growth.
Page 19
IT Market Value
(2013-2019)
3,000,000
2,000,000
1,000,000
0
2013
2014e
2015f
2016f
2017f
2018f
2019f
Chile - IT market value, CLPmn
Market Drivers
The computer hardware market offers medium-term opportunities for vendors, with PC penetration low
enough in Chile to generate significant first time buyer sales, albeit not at the levels seen elsewhere in Latin
America. We forecast desktop sales will remain flat, but there is a brighter outlook for notebook - and to a
lesser extent tablet - sales growth over the medium term as incomes rise and vendor competition drives
down prices. BMI expects the upgrade/personal device market to become increasingly important to PC
sales over the medium term as first time buyer opportunities diminish.
Chile's modern and vibrant retail sector, with strong credit options offered by retailers, is another bright spot
for the retail hardware market's potential. Chilean consumers frequently pay for electronics goods on credit,
an option that is often provided by retail chains which allow interest-free installments. This trend, as well as
the growing penetration of credit cards (with some offered by retail outlets such as Falabella), has helped to
boost spending.
Page 20
Central to the bullish outlook for the Chilean IT market is robust economic growth forecast by BMI's inhouse Country Risk team, particularly from 2016 as the peso strengthens. Our breakdown of income
stratification trends show spending per capita for the richest 10% in Chile to increase at a CAGR of 6.9%
2015-2019, slightly slower than the 7.2% CAGR for the middle 60% and 8.2% for the bottom 20% by
income. Nonetheless, in absolute terms, the biggest increase will accrue to the richest population segment
and it is this group that will remain the most important for IT vendors. We believe our income stratification
forecast shows that vendors have an opportunity to target volume growth right across population segments;
though the poorest 20% of the population will remain only partial participants in the IT market in absolute
terms due to income forecast at CLP1.8mn (USD3,200) in 2019.
Another metric for the deepening of opportunities in the Chilean IT market are the projected changes in
households by income level. BMI's forecast for 2015-2019 envisages the addition of around 200,000
households, as well as a migration of households to higher-income bands (see accompanying chart). The
most prominent development will be the 818,000 additional USD25,000-50,000 income households, and
over 100,000 additional households with incomes at the USD5,000-10,000 level. We expect this to translate
into an opportunity for PC vendors to up-sell higher-value models as the level of price sensitivity eases over
the medium term as households gain additional disposable income and purchasing power in global markets.
Page 21
Chile Households By Income Level, Change ('000)

2015-2019f
f = BMI forecast. Source: National sources, BMI
There are also regional disparities in Chile. For logistical and financial reasons, Chile's capital Santiago is
the centre of most of the Chilean IT market's value. The city is well connected and home to 6.3mn Chileans
- about one-third of the population - and the country's wealthiest citizens. This also means that it is the most
mature market in the country and investment in fibre-optics and new wireless technologies is concentrated
around Santiago. Government and industry campaigns tend to be most active in this area and a measure of
market expansion will be the extent to which development can be spread beyond this core region. Other
major centres include the port city of Valparaiso, where a number of relevant businesses are based.
Improvements to supporting infrastructure will be another driver of IT market demand. The falling cost of
communications services as telecoms operators compete and invest in higher-speed networks will drive
retail hardware demand as well as enabling wider uptake of cloud services. However, there is still a deficit
in supporting infrastructure when it comes to emerging technologies. According to estimates from Pais
Digital, a total investment of USD30bn will be required in Chile's telecoms infrastructure by 2024 - double
the level of investment that occurred in the decade to 2014 and at a time of reduced profitability for the
telecoms industry - in order to meet the demands of SmartCity deployments.
Page 22
As network capacity and coverage improves, BMI highlights the potential growth of cloud computing
demand in Chile. Data centre investment is continuing as local and global providers position themselves to
capture gains. For instance, Microsoft signed a deal with Orion Solutions in April 2015 for the latter to sell
cloud services in the local enterprise market. The partnership made Orion the first Microsoft Cloud Solution
Provider (CRP) in Chile offering collaboration and cloud security with Office 365, Enterprise Mobility
Suite and Dynamics CRM Online.
Segments
The public sector is of great importance to the Chilean economy, and particularly IT product and solution
vendors. Annual government ICT spending per capita is estimated to be in the USD300-400mn range, and
there is scope for growth in the years ahead through deployment of emerging technologies. In July 2014, a
group consisting of Enersis (Enel) and Cilectra launched the SmartCity Santiago project with an
investment of USD10mn, the first such smart city infrastructure project in the country. The SmartCity is
located in northern Santiago and will act as a laboratory for testing of technological solutions for regular
activities in the city, which - if successful - could result in major IT deployments in city infrastructure over
the medium term.
There are also more immediate opportunities arising in the public sector, including in the transport and
healthcare sectors. This was underlined in September 2014 when French e-payment services provider
Worldline stated it is targeting opportunities in the public transport system, with a major upgrade of the
Santiago metro planned for the coming years, and other cities in Chile also planning to modernise public
transport. Worldline is also targeting opportunities in healthcare, such as e-patient records systems, as well
as providing e-payment services to banks and retailers, including solutions to facilitate m-payments.
Chile's development as an off-shoring location will attract more investment in IT services, with sectors such
as retail, distribution, financial services, telecoms and healthcare offering opportunities. Mining is also a
sector attracting increased vendor attention. Major multinationals such as General Electric and JPMorgan
have proceeded with plans to establish service centres in Chile. While only one-tenth the size of Brazil's IT
market, Chile will remain an attractive market for vendors.
Page 23
Chile GVA By Vertical (%)

2015f
f = BMI forecast. Source: National statistics, World Bank, UN, BMI
The adoption of more complex software and services in the enterprise segment is creating growth
opportunities for local IT companies to develop services catering to the local market. The priority in terms
of applications remains enterprise resource planning, but BMI expects growing demand for customer
relationship management and more sophisticated real-time enterprise, business intelligence and security
solutions over the duration of the forecast period.
Some sectors offer more potential than others. Despite the financial crisis, spending by banks will be
boosted by the requirement that Chilean companies switch to International Financial Reporting Standards.
This is likely to require considerable IT investment. The telecoms sector is one where more large-budget
outsourcing and managed services deals are likely. The economic slowdown in the US should increase
demand from US companies for Latin America-based outsourcing solutions.
Page 24
Macroeconomic Forecasts
Economic Analysis
BMI View: Chilean real GDP growth hit bottom in 2014, and will accelerate modestly in 2015. An
improving net exports position, combined with the government's fiscal stimulus and tailwinds from lower oil
prices will support stronger economic activity, although headline growth will remain below the historical
trend.
Real GDP growth in Chile will accelerate to 2.6% in 2015, from estimated growth of 1.5% in 2014. A
weaker exchange rate will bolster the country's net exports position, an uptick in government spending will
drive stronger growth in the construction industry, and lower oil prices will provide a tailwind for private
consumption as the year progresses. Nevertheless, headline growth will remain weak by recent historical
comparison, coming in well below the average real GDP growth rate of 5.3% recorded from 2010 through
2013 (see 'No Major Rebound In Growth In 2015', September 23 2014). Lower average copper prices will
continue to weigh on business confidence, muting gross fixed capital formation (GFCF). Moreover, high
inflation will persist through the first several months of 2015, tempering consumer confidence and
household spending in H115.
Expenditure Breakdown
Private Consumption: High inflation and weak sentiment will see household spending expand at a tepid
clip through the first half of 2015, before strengthening towards the end of the year. Indeed, consumer price
inflation will remain elevated through H115, driven by cost-push pressures associated with the Chilean
peso's 22.2% depreciation against the US dollar since May 2013. This will erode real wage growth,
negatively impacting consumer purchasing power. Moreover, high inflation will keep downward pressure
on consumer confidence in the coming months, following a substantial decline in sentiment since the
beginning of 2014 (see 'Dimming Sentiment Underpins Downbeat Growth Outlook', November 4 2014).
Page 25
Inflation Catching Up To Nominal Wage Growth

Chile - Inflation & Nominal Wages, % chg y-o-y
Source: BCC, BMI
However, we expect stronger growth in household consumption during the second half of the year, in line
with our forecast for real private consumption growth to increase from an estimated 1.0% in 2014 to 2.0%
in 2015. Structurally lower oil prices - we forecast Brent crude oil to average USD75.0/bbl in 2015,
compared with USD103.4/bbl in 2014 - will put downward pressure on price growth over the course of
2015, given that Chile is a net oil importer (see 'Inflation Will Ease To Central Bank Target By End-2015',
November 12 2014). Lower prices will feed through to a drop in domestic transportation and electricity
costs, providing Chilean households with extra disposable income (see 'Oil Price Drop A Big Positive For
Global Economy', December 4 2014). Moreover, a low interest rate environment following substantial
easing by the Banco Central de Chile since October 2013 will also provide support for consumer credit
growth.
Government Consumption: The Chilean government's fiscal stimulus will also support stronger economic
growth in 2015 (see 'Modest Fiscal Slippage On The Cards', September 25 2014). The administration of
President Michelle Bachelet will use new revenue generated by Chile's 2014 tax reform to increase public
Page 26
spending. As a result, we expect government consumption to expand by 5.5% in 2015, up from an estimated
growth rate of 3.0% in 2014.
Gross Fixed Capital Formation: Real fixed investment will expand by 0.3% in 2015, which, while tepid,
will mark an improvement over the estimated contraction of 1.5% in 2014. The ongoing, multiyear drop in
the price of copper, Chile's chief export, will continue to weigh on both foreign and domestic investor
sentiment, precluding a more substantial recovery in GFCF in 2015. This is reflected in the continued
decline in business confidence across a number of sectors (see chart below).
Deteriorating Business Confidence Bodes Poorly For GFCF

Chile - Business Confidence Index
Source: BCC, BMI
That said, favourable base effects, as well as lower borrowing costs as the central bank's monetary easing
cycle continues to feed through, will cushion fixed investment in 2015. Moreover, our Infrastructure team
believes that lower energy costs will increase investment in the infrastructure sector in the coming quarters
(see 'Falling Oil Prices: Infrastructure Winners And Losers', December 17 2014).
Page 27
Drop In Oil Prices A Boon For The Construction Sector

Chile - Construction Industry Value
12
30
10
8
25
6
4
20
2
0
15
-2
-4
2019f
2018f
2017f
2016f
2015f
2014e
2013
2012
2011
2010
-6
2009
10
Construction Industry Value, USDbn (LHS)

Construction Industry Value, % chg (RHS)
e/f=BMI estimate/forecast; Source: BCC, BMI
Net Exports: Chile's net exports position will improve in 2015, as a weaker average peso leads to negative
import growth while bolstering the performance of agricultural and industrial exports (see 'External Account
Rebalancing Well Under Way', October 1 2014). We forecast real exports of goods and services to add 6.8
percentage points (pp) to headline growth in 2015, up from 5.3pp in 2104. Meanwhile, real imports will
subtract 6.1pp in 2015, compared with -4.5pp in 2014.
Page 28
Net Exports Picking Up Some Of The Slack

Chile - Contribution Of Domestic Demand & Net Exports To Real GDP Growth, pp
Note: Domestic demand is equal to the sum of private consumption, government consumption, and fixed investment; Source:
BCC, BMI
Risks To Outlook
Risks to our forecasts stem primarily from global commodity markets. On the upside, lower oil prices may
bolster real GDP growth by more than we currently anticipate, particularly if inflation begins to head
rapidly lower in the early months of the year. However, on the downside, a sharper drop in copper prices
could drive a substantial deterioration in investor sentiment, leading real fixed investment to contract for the
second consecutive year. Moreover, lower copper prices would weigh on the country's export performance,
dampening the positive contribution of net exports to headline growth.
Page 29
Table: Economic Activity (Chile 2010-2019)
Nominal GDP, USDbn

Real GDP growth, % y-o-y
GDP per capita, USD
2010
2011
2012
2013e
2014e
2015f
2016f
2017f
2018f
2019f
217.6
251.2
268.4
278.9
255.4
252.8
273.4
302.8
340.7
371.3
5.8
5.8
5.4
4.1
1.5
2.6
4.1
4.1
4.1
4.2
12,688 14,512 15,369 15,828 14,371 14,101 15,125 16,618 18,550 20,061
Population, mn
17.2
17.3
17.5
17.6
17.8
17.9
18.1
18.2
18.4
18.5
Industrial production, % y-o-y,

ave
3.3
8.3
2.2
-0.3
1.0
4.0
4.8
4.7
4.8
4.8
Unemployment, % of labour
force, eop
7.5
6.6
6.1
5.7
6.9
6.5
6.3
6.3
5.9
6.9
National Sources/BMI
Page 30
Industry Risk Reward Ratings

Industry Risk Reward Index
BMI View: The medium-term outlook for the Americas' IT market has stabilised in wake of telecoms and
business environment reforms that benefit Mexico and Argentina, in particular. These two countries rapidly
ascended our IT Risk/Reward Index for Q315, overtaking politically- and economically-challenged Brazil.
The bigger picture reveals similar headwinds that will further separate the highest and lowest scoring
markets.
Strong GDP and GDP growth support the USA and Canada's leadership positions and the 10 points between
these markets and third-ranked Mexico highlight the distinction between IT prospects across the Americas
region. Although Mexico's position has improved, its businesses and households are less likely to be
connected or make regular use of technology than seen in the developed IT markets in North America.
These two markets pull up the regional average for the IT Index. The average for the Latin American
markets alone is 55.5, a full 4.3 points below the total region.
The US and Canadian markets are particularly reliant on the services industries to drive economic growth.
These industries are increasingly reliant on IT services and platforms to improve efficiencies and will
continue to generate strong opportunities. Economic and political turmoil arguably has less of an influence
in these developed markets as services are already online and used by the majority of the population.
Mexico has always outperformed the Latin America Risk/Reward Index (RRI) average principally due to its
size. Its greatest weakness has been the dominance of a few players in the telecoms market that have made
online access very difficult. However, reforms offer long term potential as connectivity is fundamental to
the expansion of the IT market. As it pushes above the regional average and overtakes Brazil and Chile previously the top markets in the region - the opportunities in Mexico are highlighted, particularly as it
catches up to its more developed rivals. While we do not expect Mexico to match the scores of the top two
markets, wider improvements across the region will result in a narrowing of the divide.
Page 31
Mexico Pulling Ahead

Mexico Vs. Americas Average IT Risk/Reward Index Score
Note: Scores out of 100. Source: BMI IT Risk/Reward Index
Opportunities for companies across the IT industry in Latin America will rely on greater spending by
companies. Key industries include financial service providers, health services and manufacturing. The
opportunities by country differ greatly. Argentina and Mexico count manufacturing as a major contributor
to economic performance and supporting growth. Increasing access to financial services will provide new
opportunities although these will not use traditional platforms. We maintain a positive outlook for the
growth of mobile financial services (MFS) that will bring more consumers into a formalised financial
sector. Peru and Colombia, in particular, have strong opportunities in this sector as a result of multiple
product launches across a diverse set of mass-market platforms.
Page 32
Opportunities In Automation
Manufacturing Nominal GVA, % of Total
25
20
15
10
5
2013
2014
Argentina
Venezuela
2015f
Brazil
Canada
2016f
2017f
Chile
Colombia
United States
2018f
Mexico
2019f
Peru
f = BMI forecast. Source: National sources, BMI
Greater access to financial tools will also encourage greater spending and we expect platforms for ecommerce and m-commerce to provide a small, but increasingly significant, boost to growth over our longterm outlook. In this area Chile and Argentina stand out, with consumer and household spending remaining
strong over our forecast period. Chile in particular is a key market for developments as many companies
launch services first to the Chilean market before expanding elsewhere in the region. Coupled with higher
PC penetration than the regional average, Chile punches above its weight with its more tech-savvy
population. As more consumers gain access to internet services over PCs or mobile devices, online spending
will increase and companies will need to invest in the online platforms to support this growth.
While Brazil faces both economic and political turmoil, its position as a regional powerhouse cannot be
underestimated. Although we have lowered our IT and economic outlook for Brazil, it remains the largest
IT market in value outside of the two developed states in our Index, almost twice the size of Mexico, the
nearest rival. While we see a rocky road in the medium term, our forecasts show faster growth from
2017-2019, which will keep Brazil pulling ahead of its larger rivals. Lower oil prices have offered some
respite, but greenfield oil production opportunities are diminished, clouding the overall picture.
Page 33
IT spending across all countries will continue to grow although at differing rates. The head start held by the
US and Canada will be insurmountable for Latin American markets even though growth rates may be faster.
We expect Latin American markets to leapfrog certain developments, moving to the cloud more quickly and
key industries such as finance and healthcare to adopt IT-based solutions more quickly than their developed
neighbours.
Table: Americas IT Risk/Reward Index, Q315
Rewards
Risks
Industry
Rewards
Country
Rewards
Industry
Risks
Country
Risks
IT Index
Rank
Previous
Rank
USA
82.5
90.0
55.0
66.8
78.2
Canada
65.8
90.0
65.0
66.7
71.8
Mexico
67.5
60.0
52.5
48.1
60.4
Chile
54.2
70.0
50.0
68.2
60.1
Argentina
56.7
75.0
40.0
52.1
58.3
Brazil
63.3
60.0
45.0
50.8
58.1
Peru
53.3
55.0
45.0
55.1
53.1
Colombia
50.0
55.0
47.5
46.8
50.3
Venezuela
45.0
70.0
35.0
34.6
48.1
Average
59.8
69.4
48.3
54.3
59.8
Country
Scores out of 100, with 100 the best. Scores are weighted as follows: 'Rewards' at 70%, of which Industry Rewards 65%
and Country Rewards 35%; 'Risks' at 30%, of which Industry Risks 40% and Country Risks 60%. The 'Rewards' score
evaluates the size and growth potential of the IT market in any given state, and broader economic/socio-demographic
characteristics that affect the industry's development. The 'Risks' score evaluates industry-specific dangers and those
emanating from the state's political/economic profile, based on BMI's proprietary Country Risk Indices. Source: BMI
Page 34
Market Overview
Hardware
BMI forecasts spending in the computer hardware market will reach CLP844.5bn in 2015, an increase of
4.9% from 2014. We expect the growth rate will accelerate slightly in 2015 due to a stronger economic
backdrop, including stronger GDP and consumption growth. However, the depreciation of the peso against
the US dollar will continue to be a squeeze on Chilean household purchasing power in global markets,
translating into weaker demand for imported computer hardware.
Over the medium term to 2015, we expect economic conditions to strengthen and the peso to stabilise,
easing the squeeze on demand growth. However, opportunities will diminish over this period as the Chilean
notebook and tablet markets progress towards maturity - a trend associated with slower volume growth due
to fewer numbers of first-time buyers and a greater reliance on upgrade/replacement sales. We forecast the
hardware market will pass the CLP1trn mark in 2019, with growth forecast at a compound annual growth
rate (CAGR) of 4.5% to 2019, and total spending is expected to reach CLP1.001trn in 2019.
Government Push
A wide-ranging government plan to increase ICT utilisation in government and other sectors such as
healthcare and education will encourage computer hardware spending. Calls for educational parity are being
addressed by projects such as Yo Elijo mi PC and driving investment into the sector to reach traditionally
disadvantaged sections. This will expand the size of this vertical's IT investments considerably over the
medium term.
In 2010, the government launched a programme called Yo Elijo mi PC ('I choose my PC'). The earlier My
First PC programme launched in August 2005 ran into criticism over the high cost of embedded software
relative to equivalent programmes in other countries. A greater variety of payment options should facilitate
market expansion. In 2014, Yo Elijo mi PC aimed to give 60,000 new computers to schoolchildren in
Chile's seventh grade that belonged to the 'most vulnerable' 40% of the population.
Meanwhile, in terms of investment for supporting infrastructure such as wireless and wireline data
networks, the Chilean government adopted the public-private participation route. Accordingly, Chilean
public telecoms company Entel partnered Ericsson to expand the coverage and capacity of its data services.
Chile boasted a wireless broadband penetration of 24% as of January 2013 and has one of the highest rates
of broadband growth in the OECD. The increase in internet coverage has helped stimulate the PC market,
Page 35
with broadband and triple-play service providers bundling their offerings with PC vendors helping to spread
the cost of acquiring PCs and bringing more users into the market by removing the bottleneck of the large
upfront cost of PCs for a significant portion of Chilean households.
The latest ICT development plan is the Imagine Chile Digital Agenda programme for 2013-2020. The
project establishes five strategic areas: Connectivity and Digital Inclusion, Innovation and Entrepreneurship,
Education and Training, Services and Applications and Environment for Digital Development, with 14 lines
of action and 30 different initiatives. BMI believes this is a good sign for ICT development in Chile, with
many companies likely to benefit.
The new Digital Agenda has lofty ambitions, as it seeks to double internet penetration from 40.7% in 2013
to 80% in 2020, while lowering the average price of ICT services. Other important goals include providing
free public Wi-Fi to 100% of communities, increasing high-speed connections, lowering piracy, increasing
ICT sales as a proportion of GDP, integrating ICT technology in all areas of education and encouraging the
digitisation of public services as well as e-commerce in small- and medium-sized enterprises (SMEs). No
budget for the project has been indicated, however.
Hardware Market
(2013-2019)
1,000,000
750,000
500,000
250,000
0
2013
2014e
2015f
Personal computer sales, CLPmn
2016f
2017f
2018f
2019f
Servers sales, CLPmn
Page 36
Servers
Scientific research programmes have provided a boost to the Chilean server market. Chile is the site of the
Atacama Large Millimeter/submillimeter Array (ALMA) project, which features a radio telescope with top
of the line resolution and sensitivity. ALMA was developed by several institutions spanning all continents.
In March 2013, Fujitsu and the National Astronomical Observatory of Japan (NAOJ) put in to operation the
purpose-built Atacama Compact Array (ACA) Correlator supercomputer system. This includes 35
PRIMERGY x86 servers from Fujitsu and a specialised computational unit that can perform real-time
processing of 512 billion samples of telescope radio signal data per second. The ACA operates at an altitude
of 5,000 metres and a pressure of 0.5 atmospheres.
Chile also has the potential to emerge as a regional data centre hub for cloud services after confidence in
US-hosted services was eroded by the revelations around the overreach of the NSA in Latin America,
including tapping the communications of political leaders and surveillance of the tender process for a major
offshore drilling concession. Therefore, concerns about communications and data storage infrastructure
being used by the US government for spying and industrial espionage are very real in the region. Chile has a
strong legal environment and a degree of regulatory certainty that has already encouraged major inward
investment from global leaders such as IBM and Google, a trend BMI believes will be maintained over the
medium term.
SMEs
SMEs form an important component of the Chilean hardware market. OECD asserts that SMEs account for
99% of the registered firms in the country and provide employment to 57% of its workforce. The OECD has
also reported a considerable decrease in the non-performing assets among loans granted to SMEs, indicating
sounder financial health. Their collective strength and improved finances make SMEs an extremely
attractive market for IT hardware vendors.
PC Market
Chile is one of the regional leaders in terms of the development of the retail hardware market; the result of
high incomes and relative economic and political stability over the past two decades. Data show Chile has
the second highest household PC penetration rate in the region, which BMI estimates to have reached 57%
by the end of 2013. It is second only to Argentina, where state PC distribution schemes have had a
significant impact, and was eight percentage points (pp) ahead of Brazil at YE2013. This high PC
Page 37
penetration rate in Chile also reflects in the fact that around 60% of Chilean households had internet access
in 2014.
The boom in tablet volumes in recent years has grabbed the headlines, but in Chile it is notebooks that were
the key driver of the growth in PC ownership in the past decade as prices declined and desktops diminished
in importance. Chile was the fastest-growing market for notebooks in the Latin American region as
consumers opted for mobile form factors as prices declined markedly 2005-2010. Notebooks have
undoubtedly played a key role in Chile's high PC penetration. In this respect, Chile emulates most mature
markets. Meanwhile, it should be noted that an important reason for the success of notebooks in Chile were
higher incomes that support the second device market for consumers choosing a mobile device to
supplement household desktop devices.
Latin America Household PC Penetration (%)

2013
Source: National sources, CETIC, WEF, BMI
Since 2012, it is tablet demand that has driven the market, with notebook sales estimated to have declined
by nearly 16% in 2013. However, it is netbooks (low-powered, low-cost notebooks) that were hit hardest by
tablets. As a result, vendors have largely turned away from the device category, with no significant product
Page 38
launch reported throughout 2012-2013. The advent of Windows 8 could be the end for the netbook market
in the country as Microsoft partner vendors turn to tablets, hybrids and ultrabooks. Netbooks are still
significant in terms of the installed base of devices in Chile, but almost irrelevant in terms of sales, and as a
result the installed base will diminish in the coming years as consumers move to tablets and notebooks.
A new breed of notebook could yet meet the demand for low-cost limited functionality notebooks and
replace the position of netbooks in the market where consumers want a keyboard not available for tablets.
For instance, Hewlett-Packard (HP) launched its first notebook running the Chrome operating system (OS)
in Chile in June 2014. The Chromebook is powered by an Intel 1.4GHz dual core processor, 2GB of RAM
and 16GB hard drive. The notebook primarily works in the cloud with Google apps (Gmail, Google+,
Chrome browser, etc).
In the premium notebook segment, Ultrabooks failed to make an impact in the Chilean market; yet vendors
continue to launch them regularly and there are signs of prices coming down towards mass market levels.
However, prices of Ultrabooks are not expected to fall sufficiently to have a major impact in 2015, and
there is only limited potential in 2016. Nonetheless, devices from vendors are showing the sort of
innovation we can expect over the medium term.
BMI believes there are other opportunities for Windows partner vendors in the higher value segments of the
market as notebook design evolves. The launch of Microsoft's Windows 8 in October 2012 was crucial in
that it introduced touch functionality, alongside the productivity tools of a keyboard and its Office suite,
giving birth to the hybrid notebook device category. The potential for innovation and blurring of form
factors has already been demonstrated by Microsoft's own Surface tablet, HP's Envy, Dell's Idea Pro Range
and the Lenovo Yoga and Helix.
These are premium level devices, with limited appeal to Chile's mass market in the short term, but they
demonstrate the potential for intense competition among vendors using Windows 8 in the laptop-hybrid
market, as well as Google Android tablets. The marriage of Microsoft's strength in productivity software
with hybrids/convertibles should be an avenue for strong growth.
Page 39
PC Volume Forecast
(2013-2019)
1,500
1,000
500
0
2013
2014e
2015f
Chile - Desktop sales, '000

Chile - Tablet sales, '000
2016f
2017f
2018f
2019f
Chile - Notebook sales, '000
Tablets
Tablet sales in Chile have boomed since 2012, with growth of 28.1% in unit terms estimated in 2014. BMI
estimates tablet sales surpassed notebooks in 2013 to become the largest device category by volume - and
we expect strong growth to continue through 2015. However, we forecast tablet volumes will peak at
around 1.2mn in 2015 before declining to a plateau of around 1mn units a year for the rest of our forecast
period.
We expect the slowdown in tablet volumes for several reasons including market saturation, with penetration
forecast to reach 24.5% by the end of 2015, and a slowdown in innovation by vendors. This will result in
fewer first time buyers entering the market due to saturation among the core user group of affluent, young
and urban consumers, and a lower replacement rate as consumers become less willing to upgrade devices
based on iterative improvements. This is a trend in the tablet market observed in high-income markets at the
global level in 2014, and we believe it will impact Chile from 2015.
Page 40
After initially trailing developed markets in terms of tablet penetration rates, there has been strong growth in
Chile. The introduction of lower-cost Android-based tablets was important in pushing tablet volumes
higher, however with Latin American tablet markets relatively late developers compared to East Asia, it
may be that tablet growth is less explosive as vendors face competition from notebook vendors innovating
in design and cutting costs.
Tablet Top 5
Chile Tablet Browsing Traffic By Vendor (%), March 2015
Source: StatCounter
A study by chip manufacturer Intel in 2013 highlighted that the majority of tablet owners in Chile
considered the device a secondary device, a complement to existing desktops or notebooks. The study
concentrated on Chile, Peru and Brazil, with 83% of respondents owning a tablet and a notebook. This
supports the lower usage rate from StatCounter, which sees consumers only using their tablet device for
lower bandwidth content but not substituting it for a PC. Tablet penetration in 2013 was estimated to be 6%,
according to IDC.
As a result of these trends, BMI believes Android is emerging as the preferred platform in Chile. Android's
ascendancy is not surprising given the close affinity of smartphone to tablet architecture and the lower price
Page 41
of devices, even after Apple's introduction of the iPad Mini. The tablet market has also attracted the
attention of newer vendors from East Asia. For instance, Alcatel One Touch announced a new range of
smartphones in June 2014, as well as adding tablets to its range to tap into the growth trend.
Software
BMI expects the Chilean software market will be worth CLP393.7bn in 2015, an increase of 9.3% from
2014. We expect growth to decelerate slightly from 2014, when OS upgrade demand was boosted by the
withdrawal of Microsoft support for the legacy XP OS in April 2014. By 2019, we forecast the Chilean
software market will reach a value of CLP553.5bn, and account for 20.2% of the IT market. BMI forecasts
a CAGR of 9.0% as software increases as a proportion of the overall market's total due to trends of
enterprise and public service modernisation which will create demand for cost-saving software
implementations.
Market Trends
The software market is however forecast to experience slowing growth over the latter years of the forecast.
Chile's software market is already relatively mature in comparison with regional peers, and as such we do
not expect the period of rapid catch-up growth to be maintained through to 2018. Growth will not return to
the level observed in 2012 and 2013 was in no small measure attributable to the boost received by the
software market in September 2012, when the Chilean government decided to exempt imported software
from a 15% tax, as part of its tax reform programme.
The technological expertise of Chilean financial institutions, including banks, will continue to provide
regular upgrade and other allied revenue opportunities for software vendors. A particular source of
opportunity in the next few years is likely to be the introduction of International Financial Reporting
Standards in Chile as of January 1 2009. The Chilean government's securities and insurance regulator SVS
and other institutions have developed a plan to streamline Chilean standards with international ones. This
will create a need to update IT to achieve compliance. Companies such as SAP are moving proactively into
the market with products to help companies do this.
The Chilean mining industry also has the capacity to develop as a formidable market on a global scale, but a
looming energy crisis poses problems to this. In January 2013, Codelco, the copper mining company owned
by the Chilean government, asserted that energy availability is the mining industry's single most formidable
challenge.
Page 42
Enterprise Software
Chile is a promising market for customer relationship management (CRM). Its ascent as a back-office
destination, as well as the general opening up of different sectors of its economy, makes relationship
management of internal and external stakeholders vitally important. Microsoft reports it has a client base in
the automotive, mining and education sectors for its Dynamix CRM in Chile.
Chile is home to business intelligence solutions companies such as Bitam, Bigroup and Datamart, among
others. This can be attributed to the Chilean economy working closely with its global counterparts, and
increased interest among local as well multinational companies working in Chile in developing
sophisticated databases to support local and global expansion plans.
In 2015, US solutions provider Ingram Micro increased its Chile exposure with the acquisition of Tech
Data's Peruvian and Chilean businesses on March 16 2015. The move is expected to boost Ingram Micro's
revenue by over USD270mn annually. The acquisition complements the American firm's existing
operations in Peru and Chile and enhances its reach and scale in the Latin America region.
SMEs
In terms of the SME sector, an important factor will be the effectiveness of initiatives such as new funding
announced by the government to support smaller company ICT implementation projects. In August 2010,
Banco de Chile launched a credit package for SMEs in alliance with Microsoft, HP and Entel PCS. Given
the improved NPA performance of SMEs, this sector is bound to be lucrative for software vendors.
Page 43
Software Market
(2013-2019)
600,000
400,000
200,000
0
2013
2014e
2015f
2016f
2017f
2018f
2019f
Software sales, CLPmn
E-Governance
In the UN 2012 global e-government survey, Chile was ranked as the top country in the Latin American and
Caribbean (LAC) region and number 39 worldwide. Chile was one of the earliest adopters of e-governance,
started during the administration of President Eduardo Frei (1994-2000). The government issued documents
on the use of ICT to improve the competitiveness of the country and the functioning of the Chilean public
administration in particular. For example, Chile's Internal Revenue System was one of the first public
institutions in Latin America to have an interactive presence on the internet in 1999, and reported that year
that 5% of its tax returns were filed online. However, Chile discovered during its early e-government
efforts that merely making modern e-government solutions available to citizens does not guarantee citizens
will use them. As a result, the Chilean government continues to invest in improving ChileAtiendes, open
government portals and integrated platforms for government services, and plans for public software, digital
guides, digitalisation campaigns and technological communities are in the pipeline.
Page 44
Operating Systems
Windows 8 was launched in Chile towards the end of October 2012, and in 2014 Microsoft announced the
launch of its next major OS launch - Windows 10 - for 2015. The boost to sales from Windows 8 was less
pronounced than with previous launches of Windows operating systems, matching our view that adoption
would occur as a medium-term trend rather than a short-term bump after launch. Data from StatCounter
support this view, with Windows 8/8.1 increasing as a share of PC browsing traffic to 24.7% by April 2015;
this makes it the second largest OS by browsing traffic in Chile, with its share of traffic up by almost
7.2pp year-on-year (y-o-y).
However, Windows 8/8.1 is likely to be approaching its peak in terms of share of devices in 2015. In
January 2015, Microsoft unveiled details about the forthcoming Windows 10 OS, which will be available
for free for the first year to users of Windows 7 and 8/8.1, and become a single platform across PCs, tablets,
smartphones and the Xbox. BMI believes the offer of a free first year could see a significant migration
momentum when Windows 10 is released, expected later in 2015. The fact the new OS is being given away
for free for the first year also reflects Microsoft's decreased focus on monetising its Windows OS product,
moving it closer to the strategies of Google (Android, Chrome) and Apple (iOS and MacOSX) that use their
OSs to respectively generate revenue from advertising and hardware sales. We believe Microsoft will
increasingly use Windows OS as a means of maximising Microsoft's device penetration, with sales
generated from additional products and solutions.
In mid-December 2013, Microsoft reported that 20% of Windows users in Latin America were yet to
migrate from Windows XP, which lost technical support from April 8 2014. The software manufacturer's
director for Latin America, Andrs Rengifo, said that SMEs in the retail and manufacturing segments are
the most likely to have not yet upgraded to the new software. BMI believes the migration will serve as a
boost to software sales as companies seek to avoid putting their IT systems at risk. StatCounter data show
XP still accounted for 8.2% of PC browsing traffic in Chile in April 2015, a figure that was down 6.0pp y-oy. From this we infer that XP migration is well underway in Chile, but there is still OS upgrade potential in
2015; although vendors should note that the remaining XP users are likely to be lower value and more
difficult to reach.
As an incentive to encourage growth, Microsoft offers a trade-in service for older devices that gives up to
USD350 off any new Windows 8 smartphone, tablet or computer. Such incentives will be particularly
appealing to SMEs that have delayed software upgrades because their existing hardware may not run the
Page 45
newer Windows platforms. This will support hardware and software growth in 2015 and is already factored
into our market assessment and forecasts.
Chile PC Browsing Traffic By OS (%) And y-o-y Change (pp)

April 2015
Source: StatCounter
Open Source
There is support for open source software in some quarters, particularly in the public sector. In 2012, Linux
specialist Red Hat reported that the public sector accounted for 50% of its client base in the Chilean
market. In April 2013, 90% of Red Hat's sales in Chile were made by channel partners, with 88% for the
Latin America region as a whole. This figure is higher in Latin America than its worldwide average, where
the company's goal is 70%. Red Hat has therefore had to establish good relationships with these partners
and distributors in the region. In Chile, Red Hat works with hardware vendors, systems integrators and
dedicated channels.
Page 46
Piracy Remains A Problem
One drag on an otherwise positive outlook for software growth in Chile is the continued prevalence of
pirated software, despite a gradual decline in the incidence of software piracy between 2007 and 2013.
According to data from industry association the Business Software Alliance (BSA), software piracy was
estimated to account for 59% of software in 2013, down from 61% in 2011 and 66% in 2007. This shows
progress is being made, but there is still much more progress required to bring piracy rates down to the
levels seen in North American markets.
The government is making efforts to reduce the level of software piracy, although it is challenged by
widespread use of illegal software. Software piracy in Chile has been estimated as the highest among OECD
countries, although it is one of the lowest levels in Latin America.
In 2013, the International Intellectual Property Alliance (IIPA) recommended that Chile remain on the
Priority Watch List. Reasons included compliance with the US-Chile FTA remaining outstanding and
government software legalisation has not been adopted. The IIPA also reported that enterprise end-user
software piracy existed across a number of industries as well as public agencies.
Page 47
Americas Piracy Rate (%)*

2013
*those responding that they always, mostly, occasionally or rarely pirate software. Source: BSA Global Survey 2013
Page 48
Cloud Computing
Cloud computing is a small but rapidly growing market in Chile, estimated at a value of CLP60.87bn in
2014 - up by 42.5% y-o-y. The growth rate is forecast to slow over the medium term as the market matures,
but growth will remain robust with a CAGR of 23.0% forecast for 2015-2019. This growth rate will include
both cannibalisation of some traditional IT revenues, as well as a deepening of the software and
infrastructure markets due to the fact cloud delivery opens the potential for lower cost solutions and
services.
Major cloud computing companies like IBM maintain a presence in Chile. Chile's profile as an outsourcing
destination, as well as the high availability of wireless and wireline broadband, make it an ideal market for
cloud computing. Telecoms companies such as Movistar offer online storage of up to 50GB space. In
January 2013, Sonda, a Chilean IT company, identified mobile cloud, public-private cloud and cloud
security among the top five trends in cloud computing for the year 2013.
Given its strengths in outsourcing, as well as the high penetration of broadband, it is not surprising that
Chile has emerged as a favoured data centre location. In September 2012, Google announced plans to build
a data centre in the municipality of Quilicura, near Santiago, which was completed by the end of 2013.
Google invested up to USD150mn in the facility. One potential bottleneck to further growth of the cloud
services market in Chile is the downside risk of cybersecurity incidents, which have the potential to
undermine confidence in the technology. Chile has been slow in making progress on the issue, although
BMI believes this is in part the result of it being in a relatively low-risk region. The most at risk regions for
cybercrime are APAC and Central and Eastern Europe, while geopolitical cyber risks are greater in the
Middle East and South Korea.
In August 2014, Andrs Arellano, director of digital government in the legislative affairs ministry, stated
that the Chilean government expected to have a cybersecurity plan in place by the end of 2014. He stated
the government was compiling a list of projects for national information security, with the responsibility for
policy formulation and implementation set to be shared by the legislative affairs, economy, and transport
and telecommunications ministries. Meanwhile, the interior ministry will be responsible for statistical
information security. BMI welcomes the initiative by the Chilean government, but cautions against slow
progress in the face of escalating threats, as well as eroding public confidence in the wake of private data
leaks and state spying in 2014.
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Cloud Computing Market

(2013-2019)
200,000
150,000
100,000
50,000
0
2013
2014e
2015f
2016f
2017f
2018f
2019f
Chile - Cloud computing spending, CLPmn
SaaS
Software-as-a-service (SaaS) adoption accelerated in 2013 and 2014 as network infrastructure, education/
awareness and local supply of solutions increased - with a number of contracts and completions announced.
BBVA Seguros, a Chilean financial company, completed the SaaS implementation of its new sales for
personal accidents and group credit life business modules. Meanwhile, SSRI, a metal trading company with
Chilean operations, selected the SaaS-based HR solutions from Meta4 for employee management in
February 2013. Chile has a healthy presence of local development talent. The Chilean company Novis
offers enterprise resource planning (ERP) as a service in the cloud.
Global SaaS leaders are also increasing their presence in the Chilean market. For instance, Microsoft signed
a deal with Orion Solutions in April 2015 for the latter to sell cloud services in the local enterprise market.
The partnership made Orion the first Microsoft Cloud Solution Provider (CSP) in Chile offering
collaboration and cloud security with Office 365, Enterprise Mobility Suite, Dynamics CRM Online. Orion
also offers migration services including change management support, training, process transformation,
Page 50
managed administration and consulting. The initial deal covers Chile, but is expected to be extended to
Peru, Mexico, Colombia, Ecuador in the short to medium term.
IaaS/PaaS
The infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) markets have been slower to
develop in value terms compared to the SaaS opportunity, a trend observed across the region and globally.
However, due to relatively low penetration of on-premises hardware and a large volume of investment in
local data centre capacity, BMI believes IaaS/PaaS markets are positioned to grow rapidly over the medium
term.
Data centre investment is a foundation for the IaaS market and Chile is attracting the attention of both
global and local vendors. In April 2013, IBM launched a USD22mn data centre in San Bernado, south of
the Chilean capital of Santiago, in order to expand the company's IT services. Specifically, it will increase
the scope of its target markets in banking, telecoms and retail by increasing the capacity for analytics, big
data and cloud services. The company already owns an existing data centre in Santiago's Providencia
municipality. The new centre in San Bernado has a storage capacity of 22.8 petabytes and, combined with
the Providencia centre, the company has about 3,800km of fibre-optics installed.
Local IT firm Synapsis launched its third Chilean data centre in November 2013, adding 400 square metres
and 160 new racks to its footprint. The project was worth USD26mn. Synapsis was subsequently acquired
by Brazilian IT services provider TIVIT, with the deal completed in October 2014. The acquisition
positions TIVIT as a regional provider by expanding its operations in six markets in Latin America under
the TIVIT/Synapsis brand: Chile, Colombia, Argentina, Peru, Panama and Ecuador. TIVIT also increased
its Latin America data centre footprint to nine with the acquisition: four in Brazil (one in Fortaleza, two in
So Paulo and one in Rio de Janeiro), three in Chile, one in Colombia and one in Argentina.
In December 2013, South Africa-based ICT services provider Dimension Data announced that following the
opening of its data centre in Brazil in January 2014, it planned to open further data centres in Latin
America. Dimension Data Brasil Business Development Manager Augusto Panacho could not provide an
exact date or location for the new centres, but expected them in the 'medium term' as part of the company's
expansion of its regional cloud strategy. BMI expects Dimension Data will target Mexico and Chile for its
new data centres, as it already has operations - and therefore client bases - in these two markets. In April
2014, telecoms operator Entel announced plans to target Chile's mining sector, one of the country's most
important contributors to GDP, with a new data centre in the Antofagasta region. The data centre will be
Entel's first outside Santiago. Mining accounts for 11% of Chile's GDP and almost two-thirds of
Page 51
Antofagasta's GDP. Entel reports that only 12-14% of its corporate IT services revenues come from mining
sector clients.
IT Services
BMI expects Chile's IT services market will be the outperforming segment of the IT market in 2015 and
over the medium term. In 2014, we estimate total IT services sales were worth CLP760.8bn, and we
forecast the total will increase by 9.8% in 2015 to reach CLP835.1bn.
Over the 2015-2019 forecast period, we expect IT services sales will increase as a share of the overall
market, and account for 43.4% of the IT market by 2019 - passing hardware as the greatest contributor to
services in 2016. BMI forecasts a CAGR of 9.4% 2015-2019 as cloud computing, outsourcing and smart
services sales grow rapidly, with total IT services sales expected to reach CLP1.192trn in 2019.
Several sectors in the Chilean economy have proven fertile ground for IT services vendors. Major spending
verticals include government, financial services, telecoms, mining, retail and distribution. More recently,
additional growth momentum has come from healthcare and universities.
Chilean banks were some of the leaders in the region in embracing core banking. In 2006, i-Flex (now part
of Oracle) reported the adoption of its core banking solution by three Chilean banks: Banco del
Desarrollo, Banco Security and Banco Internacional. These and other similar banks have now become a
steady and lucrative market for IT services such as maintenance and management. In October 2012, BBVA,
for example, signed a four-year contract with Accenture for maintenance and enhancement of core banking
applications. Regulatory compliance will continue to drive IT spending. There have been an increasing
number of support and maintenance outsourcing contracts in the region.
The opportunity in Chile has led to the formation of partnerships between global hardware, software and
service providers with local services companies. For instance, Chile-based systems integrator Adexus
entered a deal with China-based telecoms equipment supplier Huawei in April 2015. As per the partnership
deal, Adexus will distribute and integrate platforms, servers, storage, security and related Huawei ICT
solutions in Chile and other Latin American countries. Meanwhile, US-based online payment service
PayPal entered an agreement with Chilean digital transactional services company Multicaja in February
2015, through which users will be able to top up their PayPal accounts with US dollars by paying with
pesos transferred from their Chilean bank accounts. The service targets those Chileans who do not have an
international credit card.
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Offshore Location
Chile's evolution as an off-shoring location will attract more investment in IT services, with sectors such as
retail, distribution, financial services, telecoms and healthcare offering opportunities. Chile is favoured as an
off-shoring destination, especially for the US, due to the following:
Same time zone as the US
Low taxation rates
Friendly immigration processes
Political stability
Fiscal conservativism leading to sound economic conditions
Relatively high proportion of talent availability for high-end off-shoring requirements
Although off-shoring provides services to other markets and is therefore not factored into BMI's forecasts
for the IT services market, the development of such services for international clients does aid the overall
development of IT services in the market and suggest potential for growth in the longer term. A WTO report
suggests that ICT exports from Chile accounted for USD718mn in 2009, with 42.3% exported to Latin
American markets and 29.2% to the USA. BMI believes this figure will increasingly trend toward the latter
as IT services build in Chile. Over the longer term, Chile-based companies may also look to outsource
certain business processes and will be increasingly likely to use local companies to meet these needs,
building the demand for BPO within the Chilean IT market.
French e-payment services provider Worldline stated in September 2014 that it planned to increase its
presence in Chile to take advantage of the growth opportunities in the transport and healthcare sectors. In
the short term, it expects e-payment demand to be greatest in the public transport system, with a major
upgrade of the Santiago metro planned for the coming years and other cities in Chile also planning to
modernise public transport. Worldline is also targeting opportunities in healthcare, such as e-patient records
systems, as well as providing e-payment services to banks and retailers, including solutions to facilitate mpayments.
Page 53
IT Services Market
(2013-2019)
1,500,000
1,000,000
500,000
0
2013
2014e
2015f
2016f
2017f
2018f
2019f
Chile - Services sales, CLPmn
Page 54
Smart City Services - Challenges And Opportunities
The Internet of Things (IoT) encompasses smart services and machine-to-machine (M2M) communications
and is forecast to grow rapidly over the medium term as an increasing number of sensors are connected to
networks. The range of applications is wide, and in Chile the latest IDC survey of CIOs indicates strong
interest. The survey found that 66% of Chilean CIOs saw 'third platform' investments (convergence of
social, mobile, cloud and information) a priority in 2015, an increase from 37% in 2014. These results fit
with BMI's analysis that IoT deployments will accelerate in the short-to-medium term, and by the latter
years of our forecast period make a meaningful contribution to overall IT service revenues.
In July 2014, a group consisting of Enersis (Enel) and Cilectra launched the SmartCity Santiago project
with an investment of USD10mn, the first such smart city infrastructure project in the country. The
SmartCity is located in northern Santiago, and will act as a laboratory for testing of technological solutions
for regular activities in the city. Areas identified for testing include public transport, automated utilities and
street lighting, telemonitoring and smart automation/control systems. The project is proposed to last three
years, acting as a reference for wider smart infrastructure deployment.
BMI considers the SmartCity project positively; however, we caution that a considerable volume of
investment will be required before the deployment of smart infrastructure can take place across a wider
area. According to estimates from Pais Digital, a total investment of USD30bn will be required for
telecoms infrastructure; double the level of investment that occurred in the decade to 2014 and at a time of
reduced profitability for the telecoms industry, raising serious questions about the viability of wider
SmartCity deployments.
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Industry Trends And Developments

Telefnica Opens New R&D Centre
In December 2014, Spanish broadband and telecommunications provider Telefnica opened a new research
and development (R&D) centre in Chile's capital Santiago. The R&D centre will focus on the development
of Internet of Things technologies for smart cities and smart industries (mining and agriculture) projects.
The new facility was partially funded by Corfo, Chile's state development agency.
SmartCity Santiago - Challenges And Opportunities
In July 2014, a group consisting of Enersis (Enel) and Cilectra launched the SmartCity Santiago project
with an investment of USD10mn, the first such smart city infrastructure project in the country. The
SmartCity is located in northern Santiago, and will act as a laboratory for testing of technological solutions
for regular activities in the city. Areas identified for testing include public transport, automated utilities and
street lighting, telemonitoring and smart automation/control systems. The project is proposed to last three
years, acting as a reference for wider smart infrastructure deployment.
BMI considers the SmartCity project positively, however we caution that a considerable volume of
investment will be required before the deployment of smart infrastructure can take place across a wider
area. According to estimates from Pais Digital, a total of USD30bn of investment will be required in
telecoms infrastructure; double the level of investment that occurred in the decade to 2014 and at a time of
reduced profitability for the telecoms industry, raising serious questions about the viability of wider
SmartCity deployments.
Council Of Ministers For Digital Development
In March 2014, a decree was published in Chile's Official Gazette creating a presidential advisory
commission called 'Council of Ministers for Digital Development and Space'. The Council will have the
task of developing public policies, plans, programmes and specific actions to contribute to the promotion
and development of information technology and communications in the country, as well as dissemination,
promotion and development of space activity and the use of space technologies and applications. In
addition, an executive secretariat will be based in the Department of Telecommunications, which will act as
the technical and operational instance of Council decisions
Page 56
Sonda Acquires CTIS IT Services
In March 2014, Chilean information technology firm Sonda announced that it agreed to acquire the IT
services unit of Brazil's CTIS for an initial USD170mn. The Chilean company may have to pay another
USD36mn if the acquired firm meets certain revenue targets. So Paulo-based CTIS posted USD358mn in
annual revenue last year.
Dimension Data Sees Potential In Chile
Dimension Data says Chile is one of its significant markets in Latin America and highlights its intention to
expand across the region. Chilean clients are served from Dimension Data's So Paulo data centre, but the
company has medium-term plans to expand its data centre footprint across Latin America.
Third Data Centre For Synapsis
Local IT company Synapsis launched its third data centre in Chile in November 2013, boosting its coverage
in the country to 1,100 square metres and increasing the number of racks from 340 to 500. The company
invested USD26mn in the Tier 3 data centre. The data centre has also been built to 'anti-seismic'
specifications and includes sustainable energy sources.
IBM Opens Santiago Data Centre
IBM has launched a USD22mn data centre in San Bernado, in the south of Chilean capital Santiago, in
order to expand the company's IT services. Specifically, it will increase the scope of its target markets in
banking, telecoms and retail by increasing the capacity for analytics, big data and cloud services. The
company already owns an existing data centre in Santiago's Providencia municipality. The new centre in
San Bernado has a storage capacity of 22.8 petabytes, and, combined with the Providencia centre, the
company has about 3,800km of fibre optics installed.
Adexus Moves Into IT Consulting
Adexus has established a new specialised consulting division to become one of the top five local IT
consulting firms in Chile. It has provided consulting services as part of its systems integration but by
creating a new division for it, clients can contract Adexus specifically for this role, even if they are not
undertaking projects with the firm. It will offer: ICT strategy, ICT operations, mentoring and guidance,
control and auditing and specialist consulting.
Page 57
Start-Up Chile
Start-Up Chile is a prominent start-up accelerator based in Santiago, Chile, that provides equity-free
investment for start-ups. The programme was launched by the government via the InnovaChile programme
and receives financial input from the Ministry of the Economy, Ministry of Foreign Relations and Ministry
of the Interior. Start-Up Chile was first launched in 2010, hosting 22 start-ups from 14 countries in a 24week programme in Santiago where they receive mentoring, office space and introductions to investors.
Most recently, Start-Up Chile held its first English language weekend, with 11 businesses created in a 54hour period of pitches and meetings.
Google Partners With Ministry For Transport And Communications
In February 2013, it was announced that Google and the Ministry of Transport and Communications had
partnered to provide transit information to Google Maps. The partnership will enable Google users in
Santiago to access information about public transport, as well as the already available timing information
for driving and walking. The service will be available for those using PCs and mobile devices.
Page 58
Regulatory Development
Table: Government Authority
Government Authority
Ministry of Transport And Telecommunications
Minister
Andrs Gmez-Lobo
Source: BMI
Chilean President Sebastin Piera presented the Imagine Chile Digital Agenda programme for 2013-2020
in May 2013, to boost ICT technological developments in the country. The project establishes five strategic
areas: Connectivity and Digital Inclusion, Innovation and Entrepreneurship, Education and Training,
Services and Applications, and Environment for Digital Development, with 14 lines of action and 30
different initiatives.
The Digital Agenda will act as a replacement for Chile's Digital Strategy 2007-2012, which looked to
provide ICT infrastructure expansion in the underserved territories at high speeds and reasonable prices.
The new Digital Agenda has similar ambitions, seeking to double internet penetration from 40.7% in 2013
to 80% in 2020, while lowering the average price of ICT services. Other important goals include providing
free public Wi-Fi to 100% of communities, increasing high-speed connections, lowering piracy, increasing
ICT sales as a proportion of GDP, integrating ICT technology in all areas of education and encouraging the
digitisation of public services as well as e-commerce in small- and medium-sized enterprises (SMEs). No
budget for the project has been indicated, however.
Chile's already advanced telecoms market, in relation to the rest of the region, suggests that its Digital
Agenda strategy will achieve its goals. Chile's greatest challenge is reaching more rural communities in
southern regions of the country, which have less established infrastructure and more complicated
topography. Nevertheless, the potential for cost savings by making more public services available online as
well as providing healthcare and education via technology will be strong incentives to meet the Digital
Agenda goals.
The economic development agency CORFO is also involved with various initiatives, such as the
development of Chile as an offshoring location and support for SME informatisation. Leading IT
association ACTI often cooperates with government bodies on relevant initiatives.
Page 59
The ICT sector in Chile represents 3% of the national GDP, according to a study undertaken by Pais Digital
Foundation. The report states that the telecommunication sector accounts for 56.1% of the ICT sector,
followed by the IT sector (23.5%), media and content (13.6%) and IT manufacturing (6.8%). Nearly 2.5%
of the total workforce in Chile is currently employed in the ICT sector.
Background
Chile's per capita IT expenditure is estimated to be the highest in Latin America at about USD192 in 2015,
although this is still far below US expenditure of about USD1,930 estimated for the year.
PC penetration, at about 48% in 2011, is one of the highest in the region.
On some indicators, Chile has one of the most developed IT markets in Latin America, partly as a result of
government policies through the years.
In the 1990s, Chile was a leader in South America in liberalising its telecoms sector, offering subsidies to
telecoms firms that provided rural coverage. Other government initiatives have also recognised the
importance of ICT. Low or non-existent tariffs on computers resulted in low PC prices, at about the
USD400 mark, while market penetration has been helped by programmes such as the 'My First PC'
initiative launched in 2005. The country's relative political stability has also supported market development.
The vast majority of IT infrastructure and market activity is concentrated in Santiago and the surrounding
region. Investment by companies is also surprisingly low, despite targeted government programmes to
encourage the use of IT in areas ranging from education to business and government.
In 1998, the government established an ICT unit with the mandate of advising the Chilean government on
IT development. The overall framework for information society development is known as the Digital
Agenda and was also established in that year. The plan aimed to make Chile a digital nation by 2010 and
comprised initiatives across various areas including e-government, education and training, business, law,
and regulation.
Government policy currently focuses on improving computer literacy and facilitating access to the internet
and making use of the internet to provide government services. Digital Agenda 2.0 covered the 2007-2010
period and was the initiative of former president Michelle Bachelet, continuing the first plan that was
implemented under the administration of predecessor president Ricardo Lagos. In November 2010, the
government unveiled a successor plan for the period through 2014.
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The tax authority Servicio de Impuestos Internos (SII) has been at the centre of e-government efforts,
including companies to make tax declarations through SII's website. Partly as a result, more than 50% of
company invoices are now processed electronically.
Cybersecurity
In August 2014, Andrs Arellano, director of digital government in the legislative affairs ministry, stated
that the Chilean government expects to have in place a cybersecurity plan by the end of 2014. He stated the
government is compiling a list of projects for national information security, with the responsibility for
policy formulation and implementation set to be shared by the legislative affairs, economy, and transport
and telecommunications ministries. Meanwhile, the interior ministry will be responsible for stat information
security. BMI welcomes the initiative by the Chilean government, but cautions against slow progress in the
face of escalating threats, as well as eroding public confidence in the wake of private data leaks and state
spying in 2014.
The scale of the challenge was illustrated in September 2012 when Kaspersky Labs named Chile as one of
the three worst affected countries for online attacks in Latin America, together with Panama and Colombia.
The security firm estimated that nearly 40% of machines had been attacked while online in these three
markets, compared with 35% across the rest of the region. Kaspersky reported that the majority of attacks
were attempts to capture credit card and bank account details.
Page 61
Competitive Landscape
International Companies
Table: IBM
Address
Avda. Providencia 655, Providencia, Regin Metropolitana, Santiago, Chile
Company History
IBM has been present in Chile since 1929 and was the fourth Latin American country
in which it established operations. It has longstanding relationships with both the
public and private sectors in Chile. In 2009, it modernised its Providencia
headquarters, introducing new technology and increasing the number of
workstations. Chile is one of 20 emerging markets targeted by IBM to drive growth
and in which it would increase investment.
Services And Products
IBM Chile offers hardware, including mainframes - servers and storage systems software and a range of IT services such as consulting, applications development
and outsourcing services. It has a long history of working with large enterprises in
Chile, as well as the public sector. It has also been tailoring its product range to
increase its market share in the small- and medium-sized enterprise (SME) market. In
recent years IBM Chile has shifted its focus to growth areas including cloud
computing services and big data analytics.
Company Developments
IBM won a 10-year USD28mn contract from Hites in March 2015, under which IBM
will provide a private cloud solution for a highly virtualised technological
environment including task automation. Hites cited the deal as a platform for its
nationwide growth plan in the long run.
In May 2014, IBM obtained an IT outsourcing contract with Chilean health
insurance payment service provider PreviRed. Under the eight-year contract, IBM
will provide cloud computing and application management and infrastructure-as-aservice.
In April 2013, IBM opened a USD22mn data centre in San Bernado, in the south of
Chilean capital Santiago, in order to expand the company's IT services.
Specifically, it will broaden the scope of its target markets in banking, telecoms
and retail by increasing the capacity for analytics, big data and cloud services. The
company already owns an existing data centre in Santiago's Providencia
municipality. The new centre in San Bernado has a storage capacity of 22.8
petabytes, and combined with the Providencia centre, the company has about
3,800km of fibre optics installed.
In December 2012, Valparaso was selected by IBM Smart Cities Challenge 2013
to receive consulting services to implement software tools to improve the quality of
transports services in the city.
Source: BMI
Page 62
Table: Samsung Electronics
Address
Avda. Americo Vespucio Sur 100, Oficina 102 Las Condes, Santiago
Company History
Samsung Electronics is part of the South Korea-based industrial conglomerate the

Samsung Group and is one of the leading consumer electronics brands in the world.
The company operates three divisions: Consumer Electronics (visual display, digital
appliances, printing solutions, health & medical equipment); IT & Mobile (mobile
communications, network equipment, digital imaging); and Device Solutions (Memory,
System LSI and LED).
Samsung is not in the top five PC vendors in many markets, but in Latin America it has a
strong position. In Chile, it has been the largest vendor of notebooks by shipments since
2010 (with the exception of a few quarters where it fell behind HP). Samsung has
achieved this success in the notebook market by supplying the full line-up of devices
from distribution models to premium, and achieved particular success through to 2011
with its netbooks. It is also a leading vendor in the tablet market, helping to compensate
for the decline in netbook volumes, through its Galaxy and Note devices that hit a
number of price points and come in a variety of screen sizes. Samsung also provides
services and repairs for a range of its products in Chile.
Samsung launched the Galaxy S6 and Galaxy S6 Edge smartphones in Chile on April
10 2015, making Chile the first Latin American country in which the latest flagships
were launched. However, Samsung Pay will be launched only in the US and South
Korean markets, followed by Europe and China later in 2015.
Comex Strategy reported Samsung imported the largest volume of PCs into Chile in
2014 at 408,700, but it trailed Apple and Hewlett-Packard (HP) in terms of value,
from which we infer Samsung products were weighted more towards relatively
cheaper tablets.
In October 2013, Samsung officially launched the Galaxy Smart Watch for
CLP249,000. Samsung's first wearable computing product will be able to be
connected to the Galaxy range of devices.
In January 2013, Samsung partnered with Bazooka, a leading Chilean internet movie
streaming service, to provide the streaming service on Samsung devices including
tablets, smartphones and smart TVs.
In December 2012, Samsung launched the TIVA Smart PC hybrid/convertible devices,
which run Windows 8. The devices include a detachable keyboard to expand use
cases to productivity and gain traction in the first-time buyer market.
Source: BMI
Page 63
Table: Hewlett Packard
Address
Mariano Sanchez Fontecilla Av No. 310, 13th Floor Las Condes, Santiago
Company History
HP has been a leading PC vendor in Chile for over a decade, and had been the number
one vendor by shipments prior to 2010 when it was overtaken by Samsung. HP lost
ground on its South Korean rival due to a greater focus on the slower growth desktop
and enterprise market, as opposed to a focus on notebooks. HP has also been
expanding the range of enterprise services it offers in Chile, including the construction
of a data centre for the provision of cloud computing services. In H214, HP announced
it would split its business into a consumer-facing division for its PC and printer
business, HP, and for its enterprise services, which will be named Hewlett-Packard
Enterprises.
The Chilean subsidiary of HP is a technology products and solutions provider for

consumers, businesses (large and SME) and the public sector. HP sells devices through
local electronics companies and directly through its online portal. Devices include
printers, all-in-one desktops, monitors, tablets and notebooks. Servers are offered as
well as server management. HP offers wireless LAN and data centre capacity, network
management software and switches. HP also directly offers IT services including IT
infrastructure outsourcing, business process outsourcing (BPO), application support
and technology consultancy. Solutions include big data, cloud, security and application
transformation.
According to estimates from Comex Strategy, imports of HP notebooks to Chile

increased 15% to USD89.8mn in 2014.
In June 2014, HP launched its first notebook running the Chrome operating system in
Chile. The Chromebook is powered by an Intel 1.4GHz dual core processor, 2GB of
RAM and 16 GB hard drive. The notebook primarily works in the cloud with Google
apps (GMail, Google+, Chrome browser, etc). The Chromebook retail price at launch
was CLP249,990 (USD445).
In April 2012, HP opened a 1,000-square metre (sq m) 'next generation' (based on
efficiency and physical and IT security) data centre facility outside Santiago. It was
one of HP's 10 next generation data centres globally at the time of service launch. HP
built the data centre to tap growing demand from enterprises in Chile for services,
with financial services firms Transbank, Redbanc and Nexus among the first clients.
HP also hopes to service other markets in Latin America from the centre in Chile, but
the regulatory barriers to doing so remain significant.
Source: BMI
Page 64
Local Companies
Table: Metric Arts
Address
New Tajamar 555 1501 Office, Las Condes, Santiago, Chile
Company History
Metric Arts was founded in Santiago in 2007 and has grown to have 50 employees. It
was founded by two engineers and lecturers at the Pontifical Catholic University of
Chile. In 2012, Metric Arts, in partnership with the Pontifical University, founded the
Chilean Business Intelligence Community. It has had success within Chile, including
with large enterprises, and is now expanding internationally.
Metric Arts provides business intelligence solutions including analytics and decision
making consultancy services, with its product offering clients increased value and
reduced risk. Its largest clients are large enterprises in verticals of banking, insurance,
industrial process and retail. Major customers include Santander, BBVA, CapGemini,
Telefnica and Larrain Vial. The services offered include data mining, diagnostics and
data cleaning, data warehousing, strategy analytics consulting, training services and
reporting systems for campaigns.
Metric Arts was selected by the Chilean government for support in developing its
internationalisation roadmap for the Latin American region. This followed the award
from Banco de Chile and Endeavor in 2012 for internationalisation.
In 2012, Metric Arts created Metric Learning, a division that provides training
services in data science.
In 2013, Process Arts was created to provide business process management
services.
Metric Arts achieved MongoDB (open source cross-platform document oriented
database system) service partner status in 2013.
Source: BMI
Page 65
Table: Synapsis Soluciones y Servicios IT
Address
Miraflores 383,
Piso 27,
Santiago Centro,
Santiago,Regin Metropolitana,
Chile
Company History
Synapsis was created in 1988 as a subsidiary of Chilectra, a Chilean power company,

as an IT company for the requirements of Chilectra's business units. The company was
later spun off and US-based Riverwood Capital acquired Synapsis in 2010 for
USD52mn. At the time of the acquisition, Synapsis also had offices in Argentina, Brazil,
Colombia and Peru. This has since expanded to Ecuador and Panama. The company
reported USD169mn in revenues in 2012. In August 2014, TIVIT, a leader in integrated
technology, agreed to acquire Synapsis for an initial BRL330mn, a figure that could rise
to BRL450mn depending on Synapsis' 2014 results.
Synapsis offers IT outsourcing, smart energy systems, enterprise applications and SAP
integration products. The company also has 12 data centres across Latin America. Over
half of Synapsis' business is made up of its IT outsourcing products including security,
storage, cloud services, infrastructure management, data centres and distribution
resource planning.
Enterprise applications include big data, billing systems, software development and
mobile.
Smart energy systems focus on smart grids and telecontrol, fleet management,
machine-to-machine solutions, telemetrics, EMS and networking.
Synapsis' SAP Integration products are Enterprise Resource Planning, Enterprise
Demand Sensing, Customer Relationship Management, Utility Solutions, SAP Basis and
Human Capital Management.
The company's customer base includes utilities, oil & gas and the government sector
with an expansion into mining and some healthcare and financial services provision.
Brazilian company TIVIT agreed to acquire Synapsis in August 2014 for USD150mn,
with the acquisition completed in October 2014. The acquisition enables TIVIT to
expand its operations in seven markets in Latin America: Chile, Colombia, Argentina,
Peru, Panama and Ecuador, where it will operate under the TIVIT/Synapsis brand.
TIVIT also increased its Latin America data centre footprint to nine with the
acquisition: four in Brazil (one in Fortaleza, two in So Paulo and one in Rio de
Janeiro), three in Chile, one in Colombia and one in Argentina.
In July 2014, Synapsis finalised a deal with mobile payment facilitator Kuapay
Technologies to promote end-to-end payment solutions targeted at enterprises in the
retail, utilities and energy sectors.
Synapsis said in December 2013 that the company intended to reach revenues of
USD250mn by 2015 and USD300mn by 2017, with a focus on big data and cloud
services.
The company ended its initial USD100mn investment following the acquisition by
Riverwood in November 2013 and announced plans to invest USD150mn over
2014-2018.
In November 2013, Synapsis opened its 13th data centre in the region, the third in
Chile.
In October 2013, Synapsis Colombia announced investments of USD3mn for the
expansion of its data centre in Fontibn, making it a Tier 3 data centre at 450sq m.
In June 2013, Synapsis launched software-as-a-service product ServiceNow.
Source: BMI
Page 66
Company Profile
Sonda
SWOT Analysis
Strengths
Strong track record with 37 years of growth and profitability, alongside solid financials
with low levels of financial debt.
Leading position in the IT services industry in Chile and relevant player in the largest
Latin American markets.
Weaknesses
Established partnerships with major IT companies.
Expanding presence across the region.
70% of recurring revenues are from long-term contracts.
Lost major contract to develop Chile's national ID system in August 2011 due to lack
of necessary experience.
Corruption scandal in 2006 in relation to the Transantiago tender damaged Sonda's

reputation in its domestic market.
Opportunities
Revenues affected by depreciating currencies in Latin America.
In Latin America IT is outpacing global growth and increasing IT awareness and

access to hardware is generating new opportunities
Sonda's expertise and foothold in the region bodes well for its future.
Acquisition of CTIS in Brazil removed competitor and expanded supply portfolio,

geographic coverage and exposure to different sectors of the economy.
Threats
The company's portfolio of services is wide and there are risks on non-specialisation.
At risk from currency depreciation of Latin American countries against the Chilean
peso and dollar, which negatively impacted financial performance in 2014.
Page 67
Company Overview
Founded in 1974, Sonda is Chile's largest information technology company and its
largest markets are Brazil, Chile and Mexico. It specialises in three main areas:
platforms, IT services and applications. It has a presence in nine countries in Latin
America, with more than 1,000 cities covered. It has close to 11,000 employees in the
region, half of whom work in Brazil.
Platforms
Sonda is a multi-brand integrator, working in partnership with global IT manufacturers
such as Cisco, Autodesk and EMC. It offers value solutions combining hardware,
software and services. These provide end-to-end solutions, alongside infrastructure and
services related to this infrastructure.
IT Services
IT services are the key driver of Sonda's revenues. IT services cover cloud computing,
outsourcing, systems integration, infrastructure support and datacentre services such
as hosting and site operation, among others. It developed an Enterprise Cloud
Computing unit called Qumulos. This is aimed at large and mid-sized companies and
has four service categories - virtual servers, virtual desktops, recovery in case of
disasters and software-as-a-service (SaaS).
Through its business processes outsourcing (BPO) services, Sonda takes over the
provision and operation of certain IT-heavy business processes.
In February 2011, Sonda was awarded a major IT outsourcing contract to modernise
Panama's public transportation payment system. On the country's Metrobs service,
clients were able to pay with a rechargeable card from February 2012. Sonda was
responsible for the financial administration and the delivery of the service to the enduser.
Applications
Applications cover three main areas: vertical market solutions, management solutions
and applications services. Sonda is SAP's main business partner in Latin America and
many of the management solutions Sonda offers are complementary solutions to SAP
services.
The company made five acquisitions in 2010. These included Softeam, Telsinc and
Kaizen in Brazil, Nextira One in Mexico and Ceitech in Argentina.
Strategy
The company's investment plan for 2013-2015 continues to involve taking advantage of
the growth opportunities in Latin America, with a particular focus on consolidating
operations in Brazil, Mexico and Colombia. Sonda has earmarked USD500mn for
acquisitions and USD200mn in investments for organic growth. The company's 2010
acquisitions as well as Procwork (acquired in 2007) have been operating as Sonda
Page 68
Software, Sonda Telsinc, Sonda Kaizen and Sonda Procwork since then. The company
wants to bring all companies under the Sonda IT banner. The company also revealed it
has no major plans to make further acquisitions in 2012.
Sonda also outlined plans to expand a channels programme, allowing certified partners
to deliver software to clients. This will be country specific and will focus on selling SAP
and Sonda's finance and tax software, and Sonda aims to generate 10% of sales from
such channels by the end of 2012.
In March 2014, Sonda announced that it has agreed to acquire the IT services unit of
Brazil's CTIS for an initial USD170mn. The Chilean company may have to shell out
another USD 36mn if the acquired firm meets certain revenue targets. So Paulo-based
CTIS posted USD358mn in annual revenue last year.
Company History
Founded in 1974, Sonda was founded in association with energy and forestry company
Copec. During the first 10 years of operation, it focused on the national market.
Significant contracts included representation of American manufacturer Digital
Equipment Corporation, and an outsourcing contract with the Chilean National Savings
and Loans Association. In the 1980s, Sonda expanded internationally, gaining contracts
in Peru in 1984.
Also during this decade, Sonda won a number of contracts with the Chilean public
sector, undertaking its first large systems integration project for the Chilean Civil
Registry. It began banking projects in a number of Latin American countries and a traffic
lights control system in Santiago and So Paulo.
Its first foray into mobile telephony was in the early nineties in Argentina, but similarly
this area of Sonda's business was rolled out in Brazil and Paraguay. In Q406 the
company listed 25% of its shares in the Chilean stock exchange.
In 2005, Sonda was awarded the contract for modernising the transport system in Chile,
Transantiago, which was due to be completed in October 2006. However, by February
2007, it still was far from completion, and questions were raised over how Sonda won
the contract. A company called Transporte Inteligente Multimodal (TIMM) filed a lawsuit
against Sonda, questioning the bidding process and claiming that the USD428mn
contract was exorbitant - the rollout of the system would cost no more than USD40mn,
they argued, leaving Sonda with profits totalling almost USD400mn. TIMM also accused
Sonda of using confidential information and technology belonging to TIMM for its own
benefit, and sought USD390mn in damages. Following this, all contracts with the public
sector during the five years previous were evaluated.
Financial
Performance
Sonda reported consolidated revenues of CLP878.5bn (USD1.4bn) during the financial

year 2014, growing 30.7% over the previous year. EBITDA reached CLP129.8bn
(USD213.9mn), an increase of 13.8% year-on-year. The company had profit was
CLP47.5mn (USD78.4mn), 28.4% lower than in the previous year, mainly due to
Page 69
extraordinary effects of the sale in 2013 of shares in related companies and higher taxes
accrued in 2014, as a result of the revaluation of investments abroad by a higher
exchange rate.
The results obtained during this exercise include the consolidation of the company CTIS
acquired in Brazil in May 2014, resulting in Brazil accounting for about 50% of total
annualized revenue of the company.
Revenue outside of Chile were up 51.3%, reaching CLP568.5bn (USD937.0bn),
representing 64.7% of the consolidated total, while EBITDA for the year grew by 37.7%
compared to 2013, reaching CLP77.0bn (USD126.9mn).
During 2013, Sonda's revenue declined as the firm's two largest markets of Chile and
Brazil contracted. In Q114, Sonda's Chilean revenue grew 2.7%, while Brazilian revenue
fell 0.8%.
Table: Sonda Financial Performance Geographic Breakdown
Chile
Revenue
(CLPmn)
Operating
Margin (%)
Brazil
Revenue
(CLPmn)
Operating
Margin (%)
Mexico
Revenue
(CLPmn)
Operating
Margin (%)
OPLA
Revenue
(CLPmn)
Q413
Q114
Q214
Q314
Q414
y-o-y
Growth (%)
77,909
72,461
74,951
74,988
87,529
12.3
15.1
13.7
11.5
14.4
13.9
55,291
53,111
105,950
112,070
112,188
10.2
7.4
8.3
3.4
5.1
22,343
14,854
16,045
17,843
24,787
13.8
16.0
15.4
18.7
17.1
25,828
26,232
26,725
27,480
31,240
21.0
9.0
10.2
11.8
11.1
9.6
Operating
Margin (%)
102.9
10.9
Source: Sonda, BMI

Financial Data
Revenue (2010): CLP444.5bn

Revenue (2011): CLP593bn
Revenue (2012): CLP681bn
Revenue (2013): CLP672.2bn
Revenue (2014): CLP878.5mn
EBITDA (2010): CLP76.98bn
Page 70
Company Details
EBITDA (2012): CLP117bn

Net Income (2010): CLP33.55bn
Sonda S.A.
Teatinos 500
275v- correo 21
Santiago
Tel: 54-11/4331 7500
Fax: 4343 3561
corporatvio@sonda.com
www.sonda.com
Page 71
Regional Overview
Americas
BMI View: The growing middle class trend in Latin America has attracted several major ICT investors and
will continue to offer growth potential in the region's smaller markets. While Mexico and Brazil offer
significant opportunities owing to their size, both are dwarfed by the US, where consumer spending on
technology and communications remains high.
Key Features
Economic uncertainty in large emerging markets weighs on outlook
Middle class emergence in Latin American frontier markets presents upside
US is forecast to account for almost 68% of Americas households earning >USD50,000 in 2019, virtually
unchanged from 2015.
In terms of household income trends BMI expects the Americas to be the underperforming region globally
2015-2019. This is due to the negative outlook for several large markets including Argentina and
Venezuela, which remain mired in economic uncertainty, with no clear path to stability in the short-term.
Despite the challenges, our Country Risk team forecasts a medium-term trend of migration in household
income bands from USD1,000-5,000 to USD5,000-10,000, and from USD5,000-10,000 to
USD10,000-25,000 in Argentina and Venezuela, respectively, during the 2015-2019 period. However, even
this opportunity for vendors will be weighed against political risk factors and economic policy measures
including restrictions on device pricing, profit expatriation and hyperinflation.
There are some notable success stories in the Americas that warrant attention, including significant
expansion of the middle class in Brazil, Colombia, Ecuador, Mexico and Peru. Economic development in
these markets contribute to the majority of new households sitting in the USD10,000-25,000 household
income band for the Americas. This is the income band BMI associates with a shift towards mid-range
products (in a global context), as well as the emergence of demand for personal devices in the PC and AV
market, rather than an emphasis on shared household devices.
Page 72
5mn New Households Will Earn Over USD50,000

Americas Change In Households By Income Level, 2015-2019
Source: BMI Forecasts
Mid-range but design conscious brands are well positioned to capitalise in these markets, as evidenced by
the phenomenal success of Motorola handsets across the region in 2014 with its mass market price points
and solid design specifications enabling it to eat into the lead of Samsung Electronics. Motorola is now
part of Lenovo after being acquired from Google in 2014, positioning the global PC market leader well for
product and geographic diversification in Latin America over the medium term. BMI considers Lenovo's
strategy and competitive position to be strong in Latin America, with reason for some confidence regarding
the integration of Motorola after the successful acquisition and integration of leading Brazilian PC brand
CCE already under its belt.
In terms of premium level IT and consumer electronics device demand, our analysis of household income
trends points to the continued importance of the US market over the medium term. The addition of over
5mn households earning over USD50,000 by 2019 is a positive trend for Apple, which dominates the US
premium smartphone, tablet and notebook markets, with no other vendors nearing its brand cache. The
Apple Watch could also benefit from high income household growth with a large degree of lock-in to the
Apple ecosystem.
Page 73
Demographic Forecast
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only
is the total population of a country a key variable in consumer demand, but an understanding of
the demographic profile is essential to understanding issues ranging from future population trends to
productivity growth and government spending requirements.
The accompanying charts detail the population pyramid for 2015, the change in the structure of
the population between 2015 and 2050 and the total population between 1990 and 2050. The tables show
indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split
and life expectancy.
Population
(1990-2050)
30
20
10
2050f
2045f
2040f
2035f
2030f
2025f
2020f
2015f
2010
2005
2000
1990
Chile - Population, mn
f = BMI forecast. Source: World Bank, UN, BMI
Page 74
Chile Population Pyramid

2015 (LHS) & 2015 Versus 2050 (RHS)
Source: World Bank, UN, BMI
Table: Population Headline Indicators (Chile 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
13,213
15,454
16,337
17,150
17,924
18,645
19,284
na
1.2
1.0
0.9
0.9
0.7
0.6
Population, total, male, '000
6,527
7,645
8,083
8,483
8,865
9,221
9,535
Population, total, female, '000
6,686
7,809
8,254
8,667
9,059
9,423
9,749
Population ratio, male/female
0.98
0.98
0.98
0.98
0.98
0.98
0.98
Population, total, '000

Population, % y-o-y
na = not available; f = BMI forecast. Source: World Bank, UN, BMI
Table: Key Population Ratios (Chile 1990-2025)
Active population, total, '000

Active population, % of total population
Dependent population, total, '000
Dependent ratio, % of total working age
1990
2000
2005
2010
2015f
2020f
2025f
8,446
10,040
10,958
11,778
12,345
12,688
12,808
63.9
65.0
67.1
68.7
68.9
68.1
66.4
4,767
5,413
5,379
5,372
5,578
5,956
6,476
56.5
53.9
49.1
45.6
45.2
46.9
50.6
Page 75
Key Population Ratios (Chile 1990-2025) - Continued
1990
2000
2005
2010
2015f
2020f
2025f
3,958
4,293
4,065
3,797
3,685
3,656
3,619
Youth population, % of total working age
46.9
42.8
37.1
32.2
29.9
28.8
28.3
Pensionable population, '000
809
1,119
1,313
1,574
1,893
2,300
2,856
Pensionable population, % of total working age
9.6
11.2
12.0
13.4
15.3
18.1
22.3
Youth population, total, '000
Table: Urban/Rural Population & Life Expectancy (Chile 1990-2025)
1990
Urban population, '000
2020f
2025f
11,003.4 13,282.4 14,315.6 15,254.2 16,124.5 16,917.1
17,606.0
Urban population, % of total
2000
2005
2010
2015f
83.3
85.9
87.6
88.9
90.0
90.7
91.3
2,210.6
2,172.0
2,022.1
1,896.5
1,799.6
1,728.0
1,678.7
Rural population, % of total
16.7
14.1
12.4
11.1
10.0
9.3
8.7
Life expectancy at birth, male, years
70.6
73.8
75.2
76.2
77.7
78.9
79.8
Life expectancy at birth, female, years
76.6
79.8
81.2
82.1
83.1
84.1
84.9
Life expectancy at birth, average, years
73.7
76.9
78.3
79.2
80.5
81.5
82.4
Rural population, '000
Table: Population By Age Group (Chile 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
Population, 0-4 yrs, total, '000
1,466
1,332
1,241
1,223
1,219
1,211
1,186
1,322
1,492
1,332
1,240
1,223
1,220
1,211
1,170
1,468
1,492
1,332
1,241
1,224
1,221
1,241
1,327
1,468
1,492
1,333
1,242
1,225
1,244
1,175
1,326
1,466
1,491
1,333
1,243
1,275
1,246
1,173
1,324
1,465
1,490
1,333
1,111
1,248
1,243
1,172
1,323
1,464
1,489
883
1,276
1,244
1,240
1,169
1,321
1,461
737
1,107
1,269
1,238
1,234
1,165
1,316
631
874
1,096
1,257
1,227
1,225
1,158
Page 76
Population By Age Group (Chile 1990-2025) - Continued
1990
2000
2005
2010
2015f
2020f
2025f
500
719
859
1,079
1,239
1,212
1,212
443
602
699
837
1,053
1,213
1,189
376
461
575
670
806
1,019
1,176
288
387
429
538
631
764
970
220
304
346
386
489
580
707
150
205
255
294
333
427
512
91
127
155
195
229
265
346
39
62
81
100
131
158
186
13
24
32
42
55
74
91
13
18
24
33
Population, 100+ yrs, total, '000
Table: Population By Age Group % (Chile 1990-2025)
1990
2000
2005
2010
2015f
2020f
2025f
Population, 0-4 yrs, % total
11.10
8.62
7.60
7.13
6.81
6.50
6.15
10.01
9.66
8.15
7.24
6.83
6.54
6.28
8.86
9.50
9.14
7.77
6.93
6.57
6.33
9.40
8.59
8.99
8.70
7.44
6.66
6.36
9.42
7.60
8.12
8.55
8.32
7.15
6.45
9.65
8.06
7.18
7.72
8.18
7.99
6.91
8.41
8.08
7.61
6.83
7.38
7.85
7.72
6.69
8.26
7.62
7.23
6.53
7.09
7.58
5.58
7.17
7.77
7.22
6.89
6.25
6.83
4.78
5.66
6.71
7.33
6.85
6.58
6.01
3.79
4.66
5.26
6.29
6.91
6.50
6.29
3.36
3.90
4.28
4.88
5.88
6.51
6.17
2.85
2.99
3.52
3.91
4.50
5.47
6.10
2.18
2.51
2.63
3.14
3.53
4.10
5.03
1.67
1.97
2.12
2.25
2.73
3.11
3.67
1.14
1.33
1.56
1.71
1.86
2.29
2.66
0.69
0.83
0.95
1.14
1.28
1.42
1.80
Page 77
Population By Age Group % (Chile 1990-2025) - Continued
1990
2000
2005
2010
2015f
2020f
2025f
0.30
0.41
0.50
0.59
0.73
0.85
0.97
0.11
0.16
0.20
0.25
0.31
0.40
0.48
0.03
0.04
0.06
0.08
0.10
0.13
0.17
Population, 100+ yrs, % total
0.00
0.01
0.01
0.02
0.02
0.03
0.04
Page 78
Methodology
Industry Forecast Methodology
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined.
Common to our analysis of every industry is the use of vector autoregressions. They allow us to forecast a
variable using more than its own history as explanatory information. For example, when forecasting oil
prices, we can include information about oil consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality
is poor. In such cases we use either traditional decomposition methods or smoothing methods as a basis for
analysis and forecasting.
We mainly use OLS estimators and in order to avoid relying on subjective views and encourage the use of
objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for
example poor weather conditions impeding agricultural output, dummy variables are used to determine the
level of impact.
Effective forecasting depends on appropriately selected regression models. BMI selects the best model
according to various different criteria and tests, including but not exclusive to:
R2 tests explanatory power; adjusted R2 takes degree of freedom into account;
Testing the directional movement and magnitude of coefficients;
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value);
All results are assessed to alleviate issues related to auto-correlation and multi-collinearity;.
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BMI uses the selected best model to perform forecasting.
Human intervention plays a necessary and desirable role in all of BMI's industry forecasting. Experience,
expertise and knowledge of industry data and trends ensure analysts spot structural breaks, anomalous data,
turning points and seasonal features where a purely mechanical forecasting process would not.
Sector-Specific Methodology
A number of criteria drive our forecasts for each IT variable.
IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor
data and low apparent agreement between many sets of figures in terms of market definition, base and
methodology. In addition, forecasts are affected by consideration of a variety of internal and external
political and economic factors.
Within best-practice techniques of time-series modelling, our quarterly updated forecasts are improved
substantially by intimate knowledge of the prevailing features of each local market.
Individual variables taken into account in creating each forecast include:
Overall economic context, and GDP and demographic trends;
Underlying 'information society' trends;
Projected GDP share of industry;
Maturity of market structure;
Regulatory developments and government policies;
Developments in key client sectors such as telecommunications, banking and e-government;
Technological developments and diffusion rates;
Exogenous events.
Estimates are calculated using our own macroeconomic and demographic forecasts.
Sources
Additional sources used in IT reports include national ministries and ICT regulatory bodies, national
industry associations, and international industry organisations such as the International Telecommunication
Page 80
Union (ITU), officially released company results and figures, and international and national industry news
agencies.
Risk/Reward Index Methodology
BMI's Risk/Reward Index (RRI) provide a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market. The RRI system divides into two distinct areas:
Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is further broken down into two sub categories:
Industry Rewards (an industry-specific category taking into account current industry size and growth
forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for
potential returns for investors).
Country Rewards (a country-specific category, factoring in favourable political and economic conditions
for the industry).
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period. This is broken down into two sub categories:
Industry Risks (an industry-specific category whose score covers potential operational risks to investors,
regulatory issues inhibiting the industry and the relative maturity of a market).
Country Risks (a country-specific category in which political and economic instability, unfavourable
legislation and a poor overall business environment are evaluated to provide an overall score).
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Score, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
Risk/Reward Score a weighted average of the total score. As most of the countries and territories evaluated
are considered by BMI to be 'emerging markets', our score is revised on a quarterly basis. This ensures the
score draws on the latest information and data across our broad range of sources, and the expertise of our
analysts.
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Sector-Specific Methodology
In constructing these indices, the following indicators have been used. Almost all indicators are objectively
based.
Table: It Risk/Reward Index Indicators
Rationale
Rewards
Industry
IT market value, US$bn
Denotes breadth of IT market. Large markets score higher than smaller ones.
Sector value growth, %

year-on-year (y-o-y)
Denotes sector dynamism. Scores based on annual average growth over five-year forecast
period.
Government initiatives and

spending
Denotes spending boost provided by public sector, which can be a crucial determinant of
sector development.
Hardware, % of total sales
Denotes maturity of market. A high proportion of hardware sales, compared to services/

software, indicates that the overall IT market is immature.
Country
Urban-rural split
Urbanisation is used as a proxy for development. Mainly rural states score lower.
GDP per capita, USD
A high GDP per capita supports long-term industry prospects.
Overall score for Country Rewards is also affected by the coverage of the power transmission network across the state.
Risks
Industry
Intellectual property (IP)
laws
Markets with fair and enforced IP regulations score higher than those with endemic
counterfeiting.
ICT policy
Subjective evaluation of official policy towards IT development, as enshrined in statute and

tax code.
Country
Short-term external risk
Score from BMI's Country Risk Index (CRI). It evaluates the vulnerability to external shock,
which is the principal cause of economic crises. Such a crisis would cut investment.
Short-term financial risk
Score from CRI, to denote risk of currency crisis and stability of banking sector. The former
would hit revenues in hard currency, while the latter would curtail investment funding.
Trade bureaucracy
Score from CRI to denote ease of trading with the state.
Legal framework
Score from CRI denotes the strength of legal institutions in each state - security of
investment can be a key risk in some emerging markets.
Bureaucracy
Score from CRI denotes ease of conducting business in the state.
Corruption
Score from CRI denotes the risk of additional illegal costs/possibility of opacity in tendering/
business operations affecting companies' ability to compete.
Source: BMI
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Weighting
Given the number of indicators/datasets used, it would be wholly inappropriate to give all sub-components
equal weight. The following weighting has been adopted:
Table: Weighting Of Components
Component
Rewards
Weighting, %
70, of which
- Industry
65
- Country
35
Risks to
30, of which
- Industry
40
- Country
60
Source: BMI
Page 83
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Q3 2015