Tuesday, March 23, 2010

Day 8: Gaucho ranch and pizza in the theater district

The group went to a Gaucho ranch to experience the equivalent of a southwestern horse show combined with a vaudeville act (on Saturday.) The Gaucho ranch was about 1 hour outside of Buenos Aires. Gauchos used to reside in the pampas, an area in the south of Argentina where most of the farming takes place. (They still are called this, they no longer don their classical garb and traditions.) Gauchos were Argentine cowboys who led the life of the recluse until the concept of land ownership started to cramp their style. This forced the Gauchos to settle and work for a ranch boss to make their keep. The dances, the traditions, and the lifestyle are kept alive by artists and families who own "tourist ranches."

We started the visit with wine and empenadas. There was a museum that showed some of the housing that the ranch boss held as well as the furniture of the Gaucho. The Gaucho lived off of the land so their homes were made of dirt, cow skins, and furniture made from cow bones. (I should have taken a picture here, grr.) As part of the experience, tourists could either chill out, ride horses, or ride in a horse drawn carriage. I chose to chill out. Some of the group actually went out and rode horses nearby.

Then a clanging cow bell called us back from our various activities to eat and enjoy the main show. The food was very good. An infinite supply of sausages (chorizo and blood), meat, chicken, and what could be classified as a cross between a dumpling and a donut coated in glaze and decorative sprinkles. As always on this trip, there was also a large, but finite supply of wine and beer.

In our meat-induced coma, they started the show. First we saw tango, of course. Then some sad, traditional songs that had everyone sniffling. We couldn't understand the words precisely, but one of the group translated one key phrase: children without a future but burdened with a past. Sad. Very sad.

After this sad song, they brought out the Gaucho. There was a dance between Gaucho and his wife. Then the Gaucho showed off his skills using bolas, three weights tied together with leather to bring down an animal, similar to a lasso. This Gaucho dance with bolas was impressive, jumping around spinning the bolas faster and faster. Very impressive.

The afternoon ended with a horse show where the Gauchos paraded groups of horses around quickly showing off their herding skills. Finally, the Gauchos had a competition where they would try and grab a ring hanging from a post with a rod while riding a horse at full speed. When the Gaucho was successful, a woman would move towards the Gaucho and he would give her the ring for a kiss. Nothing for men here, but some of the women on our trip were swooning.

Day 7: Intercultural training and Argentine economics/law

Our first day of visits in Bueno Aires was complementary to the first day of visits in Chile. We were introduced to a intercultural trainer who gave us an overview of things we learned in our global management class and how they applied to Argentina. It was a good review, and it segued nicely into the discussion of Argentine economics and business.

The second discussion was led by a lawyer from Zang, Bergel, and Vines. He told us the story of the financial crash of Argentina in 2001 where they defaulted on foreign loans, banks froze assets for 1-2 years, and their currency (and everyone's investments) fell to 1/4 their value. Since most Argentines were not debt burdened, nearly everyone in the country lost the value of their savings.

Now Argentina is in a political deadlock over how to boost their economy. Currently Argentina (and much of the developed Latin America) is growing at a rate of 9% a year. In order to free up more capital for further growth, Argentina needs to pay off some of its outstanding debt (that they were unable to default on). If they do so, foreign capital may flow freer to Argentina and continue to energize the growth.

However, to do so they need to pull cash from their reserves. There are two worries: one, the central bank would be entangled with (instead of autonomous from) the government. Secondly, by entagling these two, precedence may be set for the government to draw from the reserves, and their outstanding creditors may be able to gain access to those reserves. It's a tricky path they are walking, and something worth keeping tabs on.

Our final destination was Globant, an IT outsourcing firm in Argentina. Globant is based in Argentina, but has over 2000 employees world-wide. They are growing at a rate of 100 employees per month. Their value proposition is simple: they provide end-to-end design, development, and integration for companies wishing to cut costs or companies with chaotic growth that need help ASAP. While doing IT outsourcing is cheaper in India and China, Global has built in management of the entire pipeline. This means that the company could pay 20% more for Globant, but know that they will not be bogged down in managing a project on the other side of the world.

Globant is also committed to providing end-to-end solutions instead of boutique one-offs. From art design, UI design, backend development, network and network security, and data warehousing, Globant has rebuilt the value-chain for agile development. They claim that end users have specific desires in user interfaces and performance, and that Globant can make this happen better than any other IT outsourcing firm.

Day 6: Take me to Bueno Aires for beef and wine

(This was the day where I really started to get behind on sleep. This is also when Internet access got spotty. ;-)

We got up at 4:15AM to catch a flight to Bueno Aires at 7:30. With a group this large, you need to have folks moving a bit earlier than if you were on your own. The trip was without incident, but there was a weird thing that happened on the plane. Flying to Argentina they spray some sort of antseptic spray once all of the passengers board the plane. It was the weirdest thing I'd seen, and seemed like a fairly ineffective method to clean up whatever they needed cleaning. (I need to do more reading on this.)

Bueno Aires is quite beautiful. The buildings are a mixture of different styles: modern, french, italian, and spanish influences all brought together in a complex, frenetic, and vibrant downtown. The stories of the buildings were interesting as well. Many of the older buildings were part of a economic boom many many years ago, and were large for their time. We also toured Boca, a historic, but poor part of Buenos Aires. In boca (like the picture to the right) there were buildings where immigrants lived together in very small rooms. The whole building shared one bathroom. These poor immigrants worked and lived together to pull themselves out of poverty. In fact, according to the guide, different sets of immigrants would work through this neighborhood over time. First it was poor Italian immigrants, today there are mainly Peruvian immigrants.

The team wound down the evening with a fine wine tasting led by a sommolier. We then visited Porto Moderno and had a traditionally influenced meal at Estilio Campo. This was a carne-fest with lots of good wine and beef for a moderate, but definitely American price.

Monday, March 22, 2010

Day 5: Visit to Valparaiso and Vina del Mar

It was really really strange to revisit the place where Sarah and I spent 6 weeks learning Spanish. It was familiar, yet unfamiliar. I can't name the feeling quite right, but something had changed, and it didn't seem to be Valparaiso.

I did get a chance to meet our Spanish professor, Marcela. She was enchanting as ever and we swapped stories about family, I showed off pictures, and we talked politics. She was glad that Pinera won because he was younger, vibrant, and had a specific vision. However, the earthquake has changed Chile. Not in physical way, but in a mental one. "Chile changed in 3.5 minutes," was what she said. A country used to stability and control has been dislodged from comfort and faced with the same thing other well developed countries are facing: chaotic, unrelenting world markets.

Day 4: Energy, Lagoons, and Chile

Pushing more data to the blog...

On Day 4 we visited Enersis. This is the largest energy company in Chile. They used to provide end-to-end energy solutions: generation, transmission, and distribution. Now they've sold off the transmission portion of their company and focused on the generation and distribution. As you can imagine, the distribution of power provides the largest margins because they're selling to the end customer. Transmission is a long-term, low risk venture because you need to park money in transmission for 40-60 years to see a good return on investment. Stable, but not sexy.

We also visited the largest salt water man-made lagoon. There is a company with a set of technologies that makes it cost effective to have a very, very big swimming pool. A lagoon so large, you can sail on it. It's amazing, really amazing. Less environmentally impactful than a regular pool, consumes less energy/power, and cost less to run. You just have to visit their website to find out more: www.crystal-lagoons.com

I had an interesting side conversation on this day as well. A Chilean I was chatting with was critical of CORFO and felt they hadn't had any markable successes in technology. They also were lamenting the need for an extension campus or something in Chile. This would give Chile a leg-up and bring in more intellectual capital to generate more business.

Day 10: Internet is back, more stories

(Here are some tidbits for today! Internet finally works in our rooms)

Had a great visit at Ford Motors in Argentina today. I got to see cars and trucks on the assembly line being made at 2 cars per minute. Ford has been manufacturing cars and trucks in Argentina since 1913, unbelievable but true. They had a version of the focus Sarah and I may have considered if they were selling them outside of Latin America.

Another interesting tidbit is that cars and trucks in Latin America are primarily made to order. Argentines, in particular, don't have a lot of access to credit, so they pay cash for cars. Cars in the US are primarily pre-made in select models or packages.

We also went to Mercado Libre, the eBay of South America. The most curious part of that visit was to see how they addressed their customers. They felt that since South America was behind the technological times, many more of their customers are not very serious internet users. This requires more user education than in the US.

Saturday, March 20, 2010

To all of the people following this blog

Hey all,

I've got a bit of writers block right now supported by spotty internet access. I'm hoping to write more on Sunday after our trip to Uruguay.


Tuesday, March 16, 2010

Day 3: Development, Economics, and Poverty

The time differential plus the great Chilean wines makes getting going in the morning difficult. But, with great gusto, my classmates and I got serious and put on some suits. It was time to meet with CORFO, the Central Bank of Chile, and Un Techo Para Mi Pais.

National Development Corporation (sp? CORFO) is an effort in Chile to foster internal growth, bring in foreign investment, and create collaboration between Chilean and the world. Tax breaks, seed funding, and a rich network are provided to foreign entrepreneurs and corporations to expand the economy. This is critical for two reasons:

  1. Chile has very little large-scale manufacturing
  2. Future growth in the Chilean economy relies on extending to the global markets

CORFO is currently focusing on bringing the service, technology, and biotechnology industries to Chile. CORFO is set to change because Pinera’s new government is likely to restructure CORFO.

Central Bank of Chile

In a recent economics class that was part of the TMMBA program, we learned that an economy could pick two of the following three things to control inflation: currency, issuance of bonds, and setting interest rates. Chile floats their currency exchange rates, so the Central Bank issue bonds and set interest rates. The Central Bank is autonomous, and is not influenced by presidential elections.
Chile’s primary export is copper. Over 50% of their economy is copper production. This is good, because they receive royalties and own 35% of the copper industry. Chile also imports most of their fuels, manufactured goods, and intellectual property. But, this combination of factors makes Chile vulnerable to external shocks; if the world market on oil rises or copper prices fall, Chile’s economy will be impacted. This makes managing a stable economy difficult, but Chile has been very successful in doing so.

(I need more time to digest what we learned, so I’ll revisit this with a more rested eye.)

Un Techo Para Mi Pais
When a natural disaster hits an impoverished area of the world, a great deal of attention is immediately focused on that area. News crews, funding, and volunteers flood in to help. Eventually, this becomes yesterday's news. Once the news crews leave and resources dwindle, reality sets in for the extreme poor living in the slums. Un Techo Para Mi Pais (UTPMP) steps in and keeps the awareness within the affected country. They do this by building temporary housing for people living in slums.
The temporary housing provides immediate shelter for the poor and creates a multi-faceted symbol:

  • Builds trust between UTPMP and the affected people
  • Gives these people a symbol of hope
  • Creates awareness among people in the country of origin of how bad the slum situation is
  • Inspires activism and volunteerism among people in the country affected
  • Pressures the local government to provide more support for these individuals

From an organizational standpoint, UTPMP has been very successful at scaling their organization. This success is due to an organic growth model, low-touch management, flattened management hierarchy, and highly customized regional offices. Part of this success, as one of the TMMBA folks pointed out, was the short-term appointment of most of their labor. UTPMP volunteers are primarily college age adults who at most spend 2 years working on the project. This means that no-one gets entrenched in the organization; it’s agile.

Sunday, March 14, 2010

Day 2: Things I've never expected to say: "This wine goes well with the pate"

Well, I could talk about the whirl wind tour of downtown, more thoughts on the virtuous circle of economics, or the fact that it's a major bummer that Sarah and Jane are in Seattle and not here, but I'll talk about pate instead. (No, it's not a side effect of an MBA, I swear.)

John is one of my fellow students that I'm rooming with at the hotels. And this whole adventure started with an argument what time it really was, or at least what the difference in time was between the US and Chile, specifically Santiago. He said 3 hours, I said 4. We checked with Microsoft (via the clock app) and decided it was 3. John and Microsoft were both wrong.

After a relaxing time just hanging out, we went downstairs to meet up with the group for dinner. Nobody. We waited. Nobody. Then I ask the concierge what time it was. 8:15PM. Nice. We missed the group by 1 hour.

We then embarked on an adventure looking for a restaurant. We wandered around Providencia for a while, and quite literally stumbled upon Baco, an excellent little wine bar tucked away from the busier streets. Just as we walked up to the front, the power went out everywhere in the city.

after waiting 15 minutes we finally convinced the servers we intended to stay, and they served us cheese, cold cuts/pate, and wine. That's when I learned about pairing wine with Pate. If there's one thing that Chile has taught me so far, it's that there is simply not enough wine flowing to people in the world.

As the wine flowed, we had a great set of conversations: the future of IT, learning languages, Chilean political system, and the value of continual learning. It was one of those experiences where the food, conversation, and wine align and the buzz of it all lifts the stress away. Way cool!

When the power finally came back on, all in the restaurant cheered and we had dessert. The creme bruelle, according to our waiter, has been called the best in Chile. He was right, and he paired a sweet wine that had a unique flavor. This flavor was the result of an infection called Botrytis cinerea or Noble Rot. If the vinter manages this infection properly, they can create a very sweet wine that's a bit more acidic, thus balancing the sweetness. It was awesome.

What did we learn about wines? That Baco only serves good wine. Of the list below, John and I preferred the Syrah! If you can get it any of these, try them!

R: Terranoble Syrah Reserva (2007)

R: Sta. Ema Carmenere (2005)

J: Perez Crus Carmenere (2007)

J: Morande Merlot Reserva (2006)

R&J: Villard Late Harvest El Noble (2006)

Day 1: The economist sitting next to you on the plane

So, my first flight was about the marketing of collection clothing for children. What could top that? A second flight discussing Chilean and Latin American economic policies with an economist working for the IMF!

The gentleman sitting next to me noticed the book I was reading (Finance for Development) and asked to look at it. He flipped through it, went to the references section and found his name. This is how I was introduced to Leonardo Hernandez. Leonardo got his PhD at Columbia University in New York in Economics. He worked in academia in Chile, the World Bank, and the Central Bank of Chile. He now works for the IMF.

I had just read about how some economist believe that growth in Latin America is limited by the size of and available of instruments within capital markets. The capital markets in Latin America are much smaller than those of the east asian countries. The theory is that these small capital markets simply do not allow for enough small and medium sized enterprises (SME's). While this may be true in some parts of Latin America, there are strong universal (central) banks that provide the same liqudity as capital markets do. Leonardo thinks there's a much more likely cause.

In economics, institutions are defined "as formal and informal rules that shape the behavior of individuals and organizations by reducing uncertainty (Stallings)." Leonardo felt that institutions were the major limiting factor in growth and stability of Latin American economies. He cited two examples.

(I'm not an expert on law, and I'm paraphrasizing the conversation, so send me corrections if I'm wrong.;-))

First, he talked about the differences between the systems of law. The English system (common law) is interpreted on a case-by-case basis by the judicial system. The French system (civil law) is interpreted based upon previously legislated statutes. Since judges are free to interpret law in common law, regulation does not have be as codified as in civil law. In the United States from a law perspective, it doesn't take all that much to get a business going and to keep it going. However, in Chile, there are more laws in place and therefore more bureaucracy to get through to start up an SME. The speed at which an economy can grow is limited by the system of law.

The second institution he talked about was cultural institution. If you have a society that condones corruption and cronyism then these politics can significantly hamper the development of SME's. No country or culture is without corruption, but countries that do seek out and bring to court bribery and cronyism cannot stabilize their economies. Chile works hard to try and keep it's corruption at bay, but recently Chile's ailing transportation system had fell victim to these vices. The cultural values, it seems, can provide a breath of life to or can brutally suffocate small business development.

So, in essence these institutions have more influcence over the performance of the economies of Latin American than the capital markets.


Stallings and Studart, Finance for Development: Latin America in Comparative Perspective





Day 0.5: Meeting passionate people from Gymboree

(Forgive the delay, but I was a walking zombie yesterday and simply could not type to save my life. I tried three times yesterday!)

Flying alone has one advantage: you're forced to meet people on the plane. Every once and a while you meet folks who are really interesting. The Miami flight was a discussion on children's clothing.

I met two district managers for the company Gymboree on the Miami flight. Carmen and Hiram worked in Miami and Puerto Rico respectively. They were on their way back from a company all-hand meeting. They were also extremely passionate about the company; I have not see this feverent of passion in a while. We talked about what were Gymboree's differentiators and what was the value proposition.

It turns out that Gymboree creates styled collections for their customers. They capture a customer, typically women, when they are pregnant and have had great success in keeping them throughout the 8-10 years of a child's growth. The clothes are high quality so they can be used by multiple families or families with more than one child. They also told me about a different brand, Janie and Jack, that targets a bit more upscale experience.

Their customers are such big fans that they create fan websites, separate from the parent organization (i.e. GymboFriends). These fan websites discuss the latest collections, swap sales information, and generally help build the Gymboree experience for their customers. It's really interesting how a clothing retailer can have such passionate people.

I was practicing some of my new marketing knowledge so during our discussion we swapped value propositions:

I came up with "We never take our customers for granted" for Gymboree

They came up with "We are the foundational experience for tomorrow's professionals" for the University of Washington.

Business geek, I know. ;-) The next post is about the Chilean economist I sat next to on the next leg of the flight! Fun eh?

Friday, March 12, 2010

Day 0: Delayed in Seattle

I find myself at SEATAC with flight delays all the way to Miami. While I wait, I'll write! (Yea for Internet, yea for blogs, yea...)

The TMMBA program has a joint flickr site for photos from the trip. See the wonders of Chile and Argentina from the comfort of your couch/laptop combo:


The most interesting thing going on in Chile besides the earthquakes is the shift in power from left to right. Sebastian Pinera was just elected president of Chile. He replaces Michelle Bachelet, the first woman president of Chile and a center-left candidate. Much like the George W./Gore election, the Chilean center and center-left simply did not go to the polls to keep the left in power. Pinera also out-charmed the remaining voters over the left-leaning candidate with his comparative youthful vigor.

Unlike George W. however, Pinera is an accomplished businessman who also received his PhD in economics from Harvard. He's a free markets supporter and is thought of favorably by the likes of the Cato Institute and the Inter-American Dialogue. His claims to fame were bringing a credit card system to Chile and having a stake in LANChile, an international airlines.

Left leaning citizen of Chile worry about Pinera's loose ties to the Pinochet era. His brother was an advisor and some folks on his cabinet served under Pinochet. To this day, Pinochet's ghost and the thousands of Chileans who dissappeared or were murdered under his rule color the relationships between political left and right as well as social lower and upper class.

The class differential is also a huge factor in the recent earthquakes. Wealthy parts of Chile and large Chilean cities are almost unaffected by the earthquake. Whereas the poorer neighborhoods and cities were devastated. The differential between the lower and upper class is much more pronounced in Chile than in the United States, and should be considered when reading about their politics and economy.






Sunday, March 7, 2010

Research writeups for the trip and additional visits!

Originally I was going to do research on the Central Bank of Chile, but that visit is still in limbo. I suspect that between the earthquake disaster and the shift of power from left to right (Bachelet to Pinera) they're a bit busy. So, I'll also be writing up a piece on Zang, Bergel & and Vines, a corporate law firm. More on this later...

The two new touristy trips are a visit Colonia de Sacremento or a possible soccer match in Argentina! Colonia de Sacremento is considered a must see, and hey: it's in Uruguay so that's three South American countries for nearly the price of two. We're not sure if we're going to go the match yet and we don't know who we're going to see. Possibly one of these two matches:

Sun 21: San Lorenzo vs Colon
Sun 21: Boca vs River





Thursday, March 4, 2010

Why not blog it?

A couple of folks have asked me for postings, and I thought a blog would be best. There's some pre-trip assignments to be done, and I'll talk about those in the week remaining before the trip. Yes, we're going to Chile in spite of the earthquakes. All of the companies we were planning on visiting are committed to showing us around. Then it's off to Buenos Aires. But more about this later as I've got 3 group papers and 1 personal paper due before I leave.

(Chilean alternative for adios)