A Strategic Framework for Sustainable Development in the Transition of Chile to a Knowledge-Based Economy

Universidad Central de Chile is the affiliation of the author, Dr. Bernardo Javalquinto, PhD.

Abstract

Although Chile’s historical reliance on exporting commodities like wine, copper, salmon, and agricultural products has produced macroeconomic growth, it has also constrained the nation’s ability to innovate, add value, and promote social inclusion. The nation needs to transition to a knowledge-based economy in light of climate change, global volatility, and growing economic complexity. To create a diversified, innovation-driven, and sustainable development model, this paper offers a 20-page scientific analysis of Chile’s present structural constraints, strategic opportunities, and practical suggestions. We offer a thorough plan for reestablishing Chile as a regional leader in knowledge-intensive growth, based on both international comparisons and domestic efforts like Start-Up Chile, CORFO’s Innova programs, and the Ministry of Science’s policy agenda.

Keywords: higher education, science and technology, innovation policy, economic diversification, sustainable development, Chile, knowledge economy, and regional development.

1. Overview

Chile has frequently been used as a model for market-oriented development in Latin America over the last four decades. Significant advancements in economic indicators were made possible by its fiscal restraint, investment-friendly policies, and openness to international markets. Its strong reliance on the export of natural resources, especially copper, has, however, revealed serious weaknesses.

Chile must shift from a resource-based economy to a knowledge-based one in light of the global environment, which is characterized by technological disruption, climate challenges, and geopolitical tensions. The COVID-19 pandemic exposed supply chain flaws, and the demand for conventional commodities is changing as a result of the energy transition. To guarantee resilient, inclusive, and sustainable growth, Chile’s economy must now diversify toward innovation-driven industries (World Economic Forum, 2022).

2. Chile’s Economic History

Resource extraction cycles have influenced Chile’s economic history: in the 19th century, nitrates; in the 20th century, copper; and more recently, exports of agricultural and aquacultural products. These industries have historically produced little knowledge spillover and poor domestic technological development, despite the wealth they generate (World Bank, 2021).

Despite increases in GDP per capita, Chile’s Gini coefficient is still among the highest in the OECD, indicating ongoing inequality. Natural capital depletion is speeding up, and economic concentration in Santiago exacerbates territorial disparities (OECD, 2022).

3. The Commodity-Export Model’s Drawbacks

3.1 Risk to the Economy

Changes in the price of copper have a significant impact on Chile’s fiscal revenues. Public investment declines during recessions, which limits the state’s capacity to implement countercyclical measures (IMF, 2019).

3.2. Lack of Innovation

Compared to the OECD average of 2.4% of GDP, Chile’s R&D spending is still less than 0.4% (OECD, 2020). The development of competitive high-tech industries is hampered by this underinvestment.

3.3 Degradation of the Environment

The marine and terrestrial ecosystems are severely strained by the mining and aquaculture sectors, endangering biodiversity and long-term economic viability (UNEP, 2018).

3.4 Inequality of Territory

The infrastructure, capital, and innovative potential concentrated in Santiago are absent from peripheral areas. This imbalance leads to a vicious cycle of underdevelopment outside the capital (OECD, 2022).

4. International Standards: Insights from Finland, South Korea, and Israel

With strategic investments in R&D, education, and targeted industrial policies, South Korea transformed from a low-income, aid-receiving economy to a global center for technology (Hausmann & Hidalgo, 2011).

By cultivating a diverse innovation ecosystem based on public-private partnerships and regional innovation hubs, Finland was able to successfully transform after the fall of Nokia.

Israel became the “Start-Up Nation” by leveraging its defense R&D, immigration of highly skilled workers, and strong university-industry ties (World Economic Forum, 2020).

Chile can learn a lot from these examples, including the importance of cross-sectoral cooperation, long-term vision, and well-thought-out policy frameworks.

5. The Innovation Ecosystem in Chile: Present Situation

Through impressive programs like Start-Up Chile, Chile has established itself as a global hub for entrepreneurship (CORFO, 2019). However, the innovation ecosystem remains fragmented.

inadequate industry-academia cooperation.

absence of sustained policy continuity.

Santiago’s innovation programs are overly centralized.

inadequate risk financing and venture capital.

There is currently no cohesive national innovation system in place to coordinate ministries, universities, regional governments, and the private sector (Ministry of Science, 2020).

6. Education and Human Capital Challenges

Chile’s educational system faces many obstacles:

The number of students enrolled in higher education who pursue STEM careers is low.

The needs of the industry are not being met by technical and vocational education.

Universities’ capacity for research and technology transfer is limited.

Chile’s educational system lacks the integration required to support a dynamic knowledge economy, in contrast to Finland’s competency-based education models or Germany’s “dual system” (OECD, 2022).

7. Regional Inequalities and Knowledge Centralization

Institutions in Santiago receive more than 70% of public research funding (OECD, 2022). As a result, areas with economic potential, such as Biobío, Antofagasta, and Los Lagos, remain underutilized.

Decentralized growth can be unlocked, and rural-to-urban migration can be reduced by creating regional innovation hubs through local universities, tech parks, and specialized centers (BID, 2022).

8. The Transition to Environmental and Social Sustainability

Social inclusion and environmental sustainability are essential for a knowledge economy.

It is essential to invest in green technologies like solar and hydrogen.

We should promote circular economy models at all levels.

Innovation agendas need to include vulnerable communities (ECLAC, 2021).

If innovation policies give environmental goals top priority, Chile’s wealth of renewable resources will put it in a strong position to lead clean energy transitions.

9. The Foundations of Strategic Policy for a Knowledge-Based Economy

To successfully transition, Chile should prioritize:

The goal is to increase R&D to 1% of GDP by 2030.

bolstering patent and intellectual property rights.

extending global research partnerships.

We are establishing ecosystems for innovation at the regional level.

We are creating adaptable regulatory sandboxes for new sectors of the economy (biotech, fintech).

Consistent funding sources and strategic coordination among ministries are essential.

10. Institutional Reforms and Governance Modernization

STI governance necessitates:

depoliticizing funding for innovation and science.

Enhancing the independence and technical proficiency of organizations such as ANID (Agencia Nacional de Investigación y Desarrollo) is crucial.

The Ministry of Science established a separate National Science, Technology, and Innovation Council in 2020.

Building public trust requires dynamic evaluation mechanisms, transparency, and evidence-based policymaking.

11. The Agenda for Science, Technology, and Innovation (STI)

The top priorities for Chile’s STI agenda should be

We are studying data science and artificial intelligence.

Applications of biotechnology in agriculture and health are being explored.

Innovation in renewable energy (ocean, solar, and hydrogen) is underway.

The study focuses on marine technology and ocean sciences, taking into account Chile’s 6,435 km coastline.

Demand-driven innovation should be encouraged through the use of public procurement (OECD, 2020).

12. Public-Private Partnerships’ Function

Engaging the private sector requires

The government and private parties jointly invest in these funds.

We are offering innovation vouchers to encourage SMEs to engage in research and development.

Universities and businesses host collaborative research centers.

Chile could adopt successful models from Singapore’s A*STAR or Germany’s Fraunhofer Institutes (World Economic Forum, 2022).

13. Creative Methods of Financing

To pay for the changeover:

Use sovereign wealth funds for strategic research and development, such as the Fondo de Estabilización Económica y Social.

Create venture capital markets for businesses with a scientific focus.

To encourage private investment in sustainable technologies, issue “green innovation bonds.”

14. Open Access and Data Policies in Science

Following OECD and UNESCO recommendations, Chile should integrate open data standards and encourage open access to publicly funded research to improve cooperation and transparency (OECD, 2022).

15. Implementation Roadmap: Short-, Medium-, and Long-Term

Brief (1–2 years)

Increase the baseline for public R&D investment.

Establish pilot innovation hubs at the regional level.

Universities and technical schools should restructure their STEM curricula.

Three to five years is the medium term.

Pass the National STI Law.

Increase SMEs’ incentives for innovation.

Sign agreements for international R&D collaboration.

Long-Term (5–10 years)

Establish the National Innovation Council.

Make a 1% investment in R&D.

25% of exports should be knowledge-based products and services.

16. Dangers of Doing Nothing

Not taking action will:

Solidify your reliance on commodities.

exacerbate social injustices.

Make Chile susceptible to disruptions in technology.

Reduce the prospects for future generations’ prosperity.

Global value chains are changing due to the digital-industrial revolution; Chile cannot fall behind (World Economic Forum, 2022).

17. In conclusion

Chile is currently experiencing a pivotal moment. For sustainable development, the transition to a knowledge-based economy is now necessary rather than optional. Chile can reestablish itself as a global standard for emerging economies by focusing on science, innovation, education, and inclusive growth.

Vision, tenacity, and a national commitment to investing in the future are necessary for this transition.

Citations

Latin America and the Caribbean Economic Commission (ECLAC). (2021). Horizontes 2030: Equality at the heart of sustainable development. Santiago, Chile.

Hidalgo, C. A., and Hausmann, R. (2011). The Atlas of Economic Complexity: Charting Routes to Wealth. MIT Press.

The International Monetary Fund (2019). Staff Report for the 2019 Article IV Consultation in Chile. Washington, DC.

Chile’s Ministry of Science, Technology, Knowledge, and Innovation (2020). The 2020–2030 National Science, Technology, Knowledge, and Innovation Policy outlines Chile’s strategic direction in these fields for the decade. Santiago, Chile.

(2020). Organization for Economic Co-operation and Development (OECD). The report includes key indicators for science and technology. OECD Publishing, Paris.

OECD stands for Organization for Economic Co-operation and Development (2022). Review of Chile’s Production Transformation Policy: Benefitting from New Horizons. OECD Publishing, Paris.

UNEP (United Nations Environment Programme). (2018). Latin America and the Caribbean: Global Environmental Outlook No. 6. Kenya’s Nairobi.

World Bank, 2021. 2021 World Development Indicators. Washington, DC.

World Economic Forum, 2020. Geneva: Global Competitiveness Report, 2020.

Bank for Inter-American Development (BID). (2022). Best Practices for Innovation and Regional Development in Latin America.

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How to refer to this citation: Universidad Central de Chile, Javalquinto, B. (2025). A Strategic Framework for Sustainable Development: Chile’s Transition to a Knowledge-Based Economy (journal article)