Author: Fred Hoyt

Goodbye to my new best friends

My new best friends are in the airport, on their way back to the states.  I’m in an airport hotel, awaiting a flight to Easter Island, half way to Papete–in the middle of nowhere.

Today, though, we were somewhere–along the Pacific Ocean.  We visited two sister cities, Vina del mar, a resort in the summer, and Valparaiso, one of the best harbors on the Pacific in Latin America.  We got to the beach, which for all the world resembled San Diego, with the sea lions cavorting (the males remind me of teen age boys showing off) and snorting, with cormorants spreading and drying their wings, and with gulls dive bombing like something out of a bad World War II movie (fortunately, we missed their “bombs”).  The twin cities of about 500,000 swell during the summer (January is the month Argentina vacations, while February is the school break for Chile), but we had the beach to ourselves–or so we thought until an enormous wave reclaimed its rights over those too close to it.

The real prize, though, is Valparaiso, a real “city on a hill.”  It’s a primary port on the Pacific side, and before the construction of the Panama Canal, was one of the most important ports in the world.  Even today, it bears some of the palaces that were built with successful trading, and is the home of the naval war college and the Chilean fleet.  The admiralty building on the main square will be the scene of a major holiday, commemorating the valiant (but futile) effort of a smaller Chilean boat to defeat a Peruvian vessel on May 21, 1882 (I think that was the year).  There was already a lot of gold braid in town, but it is also the day when the President of Chile delivers the “State of the Union” speech  at the Parliament building, which is now in Valparaiso.  The city’s hills once accommodated 46 funiculae (?), but now there are only 4, and the city buses are the only trolley buses left in Chile.  The homes are colorful, but the guide insisted that it’s a less expensive, less sophisticated city than Santiago.

One of Chile’s biggest exports is wine, so it was no surprise that our last dinner was at a vineyard on the way back to the airport.  What was a little surprising was that the owners were Americans who live in California, but are the fifth generation to own the property. Founding father CJ Kingston came to Chile when the upper peninsula in Michigan ran out of copper (Copper Harbor anyone?) , prospected for gold, copper, and wound up with a cattle ranch.  The latest generation came up with a strategy to develop a vineyard, and as part of the plan, to develop some wines to show the excellence of the grapes.  The Kingstons purchased the technology from the US, which was apparently advanced, and organized the smaller growers into an association to solve mutual problems, not a common practice in Chile.  They’re spending this year here, but have a distribution network online (oldcorralcllub.com for those who want to sample).  The owner explained the history, the making of wine, and served lunch with samples.  He’s an Eagle Scout so we had a nice visit about Scouting.

It seems like yesterday that I was sitting in the airport in Santiago meeting the faculty members who would be my constant companions for the past 8 days.  I enjoyed meeting them, learning about and from them, and, in my best Chinese, wish them yi lu ping an–a peaceful journey.

I had some expectations before I started this trip–about Brazil and Argentina. Sao Paulo was, I discovered, not the place to go to fall in love with Brazil, but the place to go to do business. It was rather like going to Shanghai without Beijing (without Rio? The Amazon?). Argentina was every bit as con carne, Belle Epoque, and tango as I expected (and probably more volatile economically than expected).

But Chile?

At best it was Marxist (Allende, whose palace, built in 1796, where the air force bombed and killed him on September 11, 1973, was our last stop tonight); followed by right wing dictator Pinochet; mines, especially copper, and Chilean Sea Bass, one of the cause célèbre of environmentalists; and earthquakes. It is, after all, on the Pacific Rim of fire.
I was, therefore, a little surprised on the road into Santiago to find a modern expressway (my 1990 entrance to Beijing was delayed by a donkey cart ahead of our bus on the two lane road), fronted by high rise buildings, modern hotels (including Western chains)–and the wealthiest South American country in terms of per capita income (about 20,000, or about 40% of the US); as one of the business faculty complained, “It’s too modern.”

Part of the prosperity comes from the copper mines, which makes Chile the “Saudi Arabia” of copper. The salaries of the miners is about triple the average salary, and when they settled strikes, miners get a bonus of $40,000, which accounts for the traffic jams, since the bonus goes into new automobiles.

The Chilean miracle began in the mid 80s, with the overthrow of General Pinochet, and the gradual opening of markets and the economy. In fact, some of the steps began earlier, when generals decided to lower tariffs to make Chilean companies globally competitive. As one of our speakers pointed out, it was easier for a dictatorship to do so, even though it hurt business supporters of the generals. Other Latin American countries followed the model. The changes from the mid 1980s in terms of ownership of goods, of life expectancy, and decline in the percentage of poor, are impressive. In 1950, the index was 100; today it is 437, most of the change coming since the mid 1980s, the percentage of poor has shrunk from 45% of the population to 14% today. 46% of the population owns automobiles, a rough indication of the size of the middle class. And life expectancy is 79, the same as the United States. And the social changes–especially with a woman president–are equally impressive; divorce became legal in 2003.

One of our visits was to a foundation whose role is to increase innovation in the country. The joint public private organization has put its energy into four basic areas, that coalign with the nation’s big business, or strengths. One, of course, is mining: how to make it more efficient, such as ways to monitor the pipelines that transport the chemicals. A second area is agricultural. One of the foundation’s early accomplishments was turning salmon into a profitable export item, and selling the turnaround for a profit. A third area is in efficient use of water. The foundation has pioneered a water week, important for a country that is on the cutting edge of desert, with some areas that have not seen rain in 300 years. The final area involves energy–since this is another country in Latin America with fossil fuel shortages. Some of the emphasis has been on wind, and when we were in the mountains yesterday, we certainly understood why.

The major challenges as one of the speakers–a Columbia University Ph.d. in economics who is chairman of the Economics department of the University of Chile–outlined for us: how to sustain growth of 5%, particularly in an economy 50% of whose exports are still in copper; the answer there is move up the value chain and diversify into, say processing (China is only a purchaser of raw materials here, but has also started to export automobiles); the other is to narrow the gap between rich and poor. In developed countries, the rich 20% are 6–7 times richer than the poor; here, it’s 14X. Consequently, tax and other government policies are in question under the second term of the woman president.

One interesting fact came up when we visited the University of Chile, the leading school in the country. We were at the School of Business, and it’s pretty apparent in all three countries we visited that the great hope for the future lies in education. I was consequently amazed when I discovered that basically you decide on your career at age 17 when you a) take the national college entrance exams, and b) decide on a course of study. If you matriculate as an undergraduate business/econ major at the University of Chile, you have two years of introductory courses–only business and economics classes, and then two years of specialized courses in your business major. “No liberal arts classes,” I inquired? “No.” I wonder what my liberal arts colleagues at Illinois Wesleyan might say about that…..or rather, I know….

Today is the last full day of the FDIB trip. What a wonderful journey of discovery for me! And I hope, through this blog, for you, too!

What’s not to like about a sleepy Sunday in the Andes?  Santiago is sheltered by the Andes, and so we were able to drive about 25 miles out of town to a resort/farm/ranch (fruit trees, honey bees, vinyards) about 4500 feet high, surrounded by snow-capped peaks.  We spent the day hiking, or horseback riding, or sitting in the sun alongside a roaring mountain stream waiting for our lamb to be roasted.  What’s not to like?  Other than if we were here in the dead of winter (it’s “November” now), we’d be able to teleski–they’d take us up in a helicopter and let us ski down the hill. Or if we were here in the summer, when the roaring mountain creek accommodates whitewater rafting.  What’s not to like?

It’s chilly in Chile, where we landed two hours ago, a country nestled between the Andes (crossing at night was not too exciting) and the Pacific.  And it is chilly here–around 10 degrees for a high, and dry; our guide said average rainfall is 8  inches, and a desert in the north is supposedly the driest place on earth.

One of my readers (David) corrected my history of the tango, which is from the Belle Epoque period–before world war I, which was the height of affluence in Argentina, and the joy of much of our tour of the city today.  The Plaza du Mayo, which is where the Cathedral is located, also housed the royal governor’s quarters and the Pink Palace that at one time, I believe, was the Parliament building.  The square is the major scene for protests, including, Saturday morning, the veterans of the Falklands (Malvinas} campaign 30 years ago.   The stunning cathedral, built in classical style (you can hardly be the Paris of South America without aping Paris), and looking like the Parthenon from the outside, also houses the body of Jose San Martin, the liberator who in the Plaza sounded the call to revolution from the French on May 25, 1810.  From what I understand, while he drove the Spanish out of Argentina, Chile and Peru (that’s the Argentine version) civil war in Argentina (the 3 Spanish viceroys eventually divided into 8 countries) lasted until the 1850s, when I believe San Martin’s body was brought back from Paris.  The tomb rather resembles Napoleon’s.  Not having participated in two world wars which altered the face of Europe and Asian pretenders to be Paris (e.g., Saigon and Shanghai), much of the Belle Epoque remains intact, which makes the wide boulevards and statues appropriately majestic for a capital city.  I think I took more pictures today than in the previous week combined.

We also went to one of the harbors, the Boca neighborhood, where the former run down Italian . has been gentrified, painted with bright colors, and turned into a boutique/craftsy art area, with handicrafts and local goods such as Havanna, a wonderful chocolate rich with caramel.

The third area was Recolleta, another Belle Epoque resting place–so to speak, it’s a cementary whose mausoleums are way over the top housing the remains of politicians, lawyers, doctors, and Evita, who is buried with her brother in an elaborate tomb that is the destination for most tourist traffic.  Eva Peron–who died I believe in 1952, still exercises a magnetic charm in Argentine politics.  The cemetery is the equivalent of the one in Paris that has the remains of Jim Morrison of the Doors–there’s that Paris connection again, built when Argentina was one of the 10 richest countries in the world.

We had a great lesson in doing international business when we landed at the airport in Chile.  One of our faculty was pulled aside and informed that there was a banana in his carryon, and fruits and vegetables were strictly forbidden in the country.  Since the faculty member (“Not me”) had mistakenly checked the customs box that he was not importing anything, he spent ½ hour in a special room apologizing profusely, signing documents that would surface should he ever do the same again, saved primarily by the Florida International assistant who was Spanish speaking.  A great lesson, as I tell my students, on the hazards of doing international business.

I’m just glad it was “not me”.

Tomorrow we get to sample the Andes, and I’m really looking forward to it.

At the end of a long day, we found out it takes two to tango, which was Argentina’s gift to the Jazz Age.

But before then, we had a non-typical FDIB (Faculty Development in International Business) trip—we had some free time in the afternoon.  Our main visit was to the UADE—a private school in Argentina that specializes in business and professional programs.  It was an “open house” day, with hundreds of prospective students, loud music, lots of displays, and two crowded on campus Starbucks.  The 22000 student university charges tuition (the state universities are free), but the tuition is only about $2000 per semester.  It positions itself as a school with close ties to the business community, a fact reflected in the kinds of degrees it offers, which border on the practical.  You can’t major in Sociology here for example.  It sounds like the kind of school I wish our business students attended in South America.

One of the faculty shared his thoughts on Argentina with us, reinforcing what we’ve heard from businesses: the current uncertainty of politics and economics.  Part of the problem is that Christina Kirchner, the current leader, cannot succeed herself.  The family plan (her husband served the maximum consecutive two terms, she has served almost two terms) was to have her husband succeed her, but his death left the party/dynasty with a vacuum for the election next year.  Thus, the professor said, the consensus that governed the country is ending and there is a political/economic/and foreign policy crisis. Christina’s legacy (she’s a Peronista—see Evita for a framework) will be a massive new Opera House, carved out of one of the magnificent old Empire-style buildings (the shell was saved) because the existing Opera House is owned by the opposition party and she won’t set foot in it!  The economic bargain struck 10 years ago to control inflation and create jobs has also been disrupted. Although there’s no obvious problems (it’s not Greece with vacant stores), the hyperinflation of the last few years prompted our guide to say, “If you have pesos, keep them as souvenirs; they won’t be worth anything in the future.” He described the business environment as grim, with low growth, corruption, and statistical data that is at best unreliable.

His most interesting (to me) observations were on foreign policy.  I hadn’t thought of South America as divided East/West, but it is—at least economically.  The economic alliance here is Mercosur, Argentina, Brazil, etc., which is in the title of the program, but we’ve not mentioned it otherwise. The union is much less real than the EU for example.  The Pacific Alliance of Chile, Peru, and Mexico is a serious rival. While he predicted Argentina will have to reforge friendly relations with the United States,  the new balance of power will be more challenging, especially China.  He described China as “potentially the Britain of the 21^st century,” pointing to some projects (dams and infrastructure) and purchases (soybean, but only the raw product with no value added) as indicators that China wants resources—period.  I’ll have to think about that.

We had the afternoon free, and it was my first chance on this trip to do what I love to do–wander aimlessly.  Actually, I did aim—at the Scout shop in Argentina.  With 40000 Scouts, in at least two different organizations (one Catholic), Argentina Scouting is celebrating 100 years as a “Scout franchise.” I can predict with 120% certainty that Troop 19 will have the only blue and white neckerchief slides from Argentina at Canyon Camp this summer.

I also stumbled on one of the few museums here that isn’t art-based–the museum of “arms”.  The collection of guns was outstanding (the ticket taker made sure I saw the samuri materials), but what was most interesting to me was the fact that Latin America has had a lot of wars that did not involve the United States.  Now I need to read more about the history of this region!

In the evening, we did what you have to do–go to a Tango show.  Tango is Argentina’s contribution to the Jazz Age, and the show’s retro dress looked like something out of Woody Allen’s “Midnight in Paris.” Before the show, we had a tango lesson, and I have a certificate (and a partner who was not trampled) to prove I took the course, and know, at a minimum, it takes two to tango.

We’re touring the city this afternoon before leaving for Chile.  Oh, and I made it through the day without any red meat.  The city has great pasta, probably a reflection of its Italian immigrants.