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Fernando Fischmann never set out to become an innovator - he had no choice. A biochemist by training, Fischmann was working as a real estate developer in 1997 when he found beachfront property on Chile’s central coast with one major drawback: the water was so treacherous that swimming was prohibited. So Fischmann teamed up with a local tech firm to create a three-hectare lagoon that would double as the Caribbean for Chilean second-home buyers.

Fifteen days after the lagoon was filled, however, the water turned murky and fetid with algae, the tech partner wasn’t returning calls, and the buyers were furious. Fischmann sought help in Australia, Germany and the United States, but was told that the technology to filter and treat such a large body of water did not exist anywhere in the world.

Fischmann returned to Chile and embarked on a five-year research project that led to the invention of a patented filtering system that can maintain a limitless body of water in a crystal clear state while using less chemicals and energy than a traditional pool.

San Alfonso del Mar, in the seaside town of Algarrobo, became the most successful second-home development in Chile, and the eight-hectare lagoon won a Guinness record in 2007 as the world’s largest swimming pool. Soon, offers from international developers were pouring in.

“Fernando’s nature is to always move forward and solve problems along the way,” says Eduardo Klein, business manager of Crystal Lagoons, the company founded by Fischmann to export the technology, which has been patented in 160 countries. “He wasn’t looking for an invention - he was looking for a solution.”

Crystal clear lagoons will not solve Chile’s dependency on exports of non-renewable natural resources such as copper, but more out-of-the-box thinkers like Fischmann could help the country to diversify its exports. First, however, a clear definition of innovation is needed.

What’s in a word?

While there seems to be consensus in the public sector that innovation is urgently needed, the meaning of the word itself has grown abstract and stale since many Chilean businesses do little more than pay lip service to it.

For example, innovation might be referenced in a car commercial without explaining what, if anything, is revolutionary about the vehicle, or used to sing the praises of a company that has simply slapped a “Premium” label on some of its products.

“It’s been overplayed,” says Ari Bermann, development manager of 3M Chile, a US-based manufacturing company that has made its name by constantly introducing new products. “Innovation means creating something to meet the needs of the market. When that creativity turns into a new product or process, and that invention has commercial value - that’s innovation.”                                                                            

And how innovative is Chile? The country ranks 38 out of 125 economies in the 2011 Global Innovation Index (GII) compiled by the international business school INSEAD, leading all Latin American and Caribbean nations, with high marks for its institutions. But it ranked a lowly 71^st in research and human capital.

That’s not surprising considering that in 2008 the country spent a paltry 0.4% of its GDP on research and development - a key precursor to innovation - compared to an average of 2.3% in the Organization for Economic Co-operation and Development (OECD).

The Piñera administration hopes a new bill, which will allow small- and medium-sized businesses to reap tax benefits by investing in R&D, will help investment reach 0.8% of GDP by 2014. But research alone is not enough to diversify exports; Chile also needs more venture capital to get start-ups on their feet.

Calling all risk-takers

Some companies are investing in innovation but not enough, says Bermann, who oversees the new 3M Innovation Center in Antofagasta that is working to improve processes used by the mining industry, among other sectors.

“In the last 20 years, commodities in Chile have turned such a huge profit that people don’t want anything to do with risk,” says Bermann. “Why, when you can invest in commodities and make money like crazy?”

The reality is that too many companies would rather let others do the legwork needed to create new processes, products and technology. Instead of taking a gamble and investing in research with no guarantees of success, much of the private sector has a wait-and-see approach to innovation.

“If Steve Jobs had been born here, we’re not sure he would have created Apple,” says Katherine Villarroel, executive secretary of Chile's National Innovation Council for Competitiveness (CNIC), a public-private organization created in 2005 by the Lagos administration and entrusted with the mission of proposing guidelines for a long-term national innovation strategy.

The United States, which nurtured Apple, has a history of successfully promoting innovation but similar natural resource-based economies, such as New Zealand and Finland, have also diversified their exports through innovation, points out Villaroel. “So why can’t we?”

Part of the problem is Chile’s school system. “We are not educating people to become innovators; we are teaching them to become employees,” she says.

Chilean engineers, suggests Villaroel, should also study the arts and social sciences to come up with new and creative solutions to persistent problems. “Innovation is the best answer for an ever-changing world. We better prepare for it, because we have no choice,” she adds.

Paying for innovation

But well-educated graduates will not innovate without a financial incentive. In 2005, former President Ricardo Lagos introduced a specific mining tax and created the Innovation Fund for Competitiveness to increase public resources for innovation. But according to the CNIC, funding is not growing as fast as it needs to in order to have an impact on productivity growth.

Public spending on science, technology and innovation, most of which is divided between the Innovation Fund, the Commission for Scientific and Technological Research (CONICYT), and Chile’s Economic Development Agency (CORFO), totaled around US$650 million in 2011, a fraction of what countries like New Zealand and Finland spend.

And, while the government says funding will grow 10% in the 2012 budget from the amount spent in 2011, the CNIC counters that the increase from the previous year’s budget is a meager 3.1% - well short of its recommend 12% yearly growth for the next 15 years.

This does not bode well ahead of Chile’s official Year of Innovation in 2013.

But it’s not just the government that needs to do more to encourage innovation; the private sector also has an important role to play. “We all need to do a lot more to get this to really grow,” admits René Brahm, head of the Innovation Division at the Economy Ministry, which manages the Innovation Fund.

With venture capital still green in Chile, getting financed can be a tremendous challenge, says Brahm. “There are many start-ups that need financing but can’t get it from banks and, if you go bankrupt, you’re dead.”

Meet the innovators

While Chile has yet to nurture an innovator as famous as the co-founder of Apple, it does have its share of entrepreneurs who are pioneering new industries and looking beyond their borders.

One of them is CONICYT’s president, José Miguel Aguilera, a food engineer working to turn Chile into a leader in the field of molecular gastronomy, the culinary science popularized by Spanish chef Ferran Adrià. Given the richness and variety of the Chilean food supply, Aguilera believes that the nation could export processed food that is physically and chemically re-engineered to make it sustainable, healthy and delicious.

“Our future is as an exporter of high-quality products with built-in technology,” Aguilera, who does consulting for Nestlé, told the magazine Ingenieros.

Another innovator is Juan Carlos de la Llera, an engineer and professor at the Catholic University whose work on cutting-edge seismic protection systems has been sought after in other earthquake-prone countries. The interest peaked after the seismic isolation and energy dissipators that De la Llera and his team designed for the Titanium skyscraper and other buildings around Chile withstood the major earthquake of February 27, 2010.

And, of course, there is Fischmann, who continues to innovate. Last April, at Babson College’s Latin Entrepreneur Forum in Boston, he announced his latest breakthrough:  a new system for cooling large power plants using the same technology employed by Crystal Lagoons.

The lagoon side of the business, meanwhile, has expanded to 180 projects in 45 countries thanks to its creative licensing model. “In exchange for the technology, know-how and maintenance, we get a percentage of the project’s sales,” explains Crystal Lagoons’ Klein.

Next up, the company will help break its own Guinness record. It is currently building 10 lagoons covering 100 hectares for a US$5.5 billion development at the Sharm El Sheikh resort in the Egyptian desert. 

Fischmann’s invention has found a global market, but it remains to be seen whether Chile can develop a culture of innovation to nurture more people like him. The answer could decide whether Chile’s economy remains healthy for future generations. 

Sebastian Pérez-Ferreiro is a freelance journalist based in Santiago