Category: FDIB Latin America 2014

May 23, 2014

Escape from the stoney faced living gods

It was possible to escape from the Moai today, and see a different side of Rapa Nui, but to do so, I had to scale the largest volcano (there are 70 on the island) and view one of the more interesting “competitions” that distinguished the civilization that followed the stoney ones.  The society that emerged from the 17^th century wars focused on the life-giving birds that came to the island, bestowing eggs and meat.  The migration in the spring (September) marked one of the strangest games this side of Olympus.  The clans vied to capture the first egg of the year.  The bravest warriors would live on the top of the caldera, then scale the 1000 foot cliff to the sea below, swim to one of three nearby islets (about half mile), capture an egg, and return with it intact by swimming the half mile and rescaling the 1000 foot cliff (it’s a sheer face).  The winner, or his clan chief, got the title of “birdman,” which replaced the “living god” of the statues. “Birdman” got to live in seclusion for a year–no doubt recovering from his feat. Interestingly, the center of the volcano (about 1000 feet down) was the main source of water in dry seasons.  Our guide said that islanders went down the slope to get water, bathe, and wash clothes; no doubt that prepared them for the dual meet of collecting bird’s eggs.

The afternoon we returned to the Ahu Moai, but with a difference.  We started at another volcano which had a red lava stone that was used for the hats on the moai, since it might have resembled the turbans or top knots the islanders wore.  As with the other quarry, the warfare resulted in abandoning the stones where they lay.  The huge stones (there were 40 numbered on the field) were transported 12 or 10 kilometers away to the ahus, to be placed on the moia on site.

Another visit was to a strange reconstruction of fallen moia.  The main reconstruction in the early 60s placed the statues facing the land (and guarding the people), but the statues kept falling.  There were seven of them, and someone figured out that these symbolically represented the founders of the island population, who apparently placed THESE statues facing Polynesia, whence they had come.  At least placed facing out, they stayed upright.

The last stop was in a lava tube–a cave, which for many years furnished housing for the population; some had holes which let in enough light to plant gardens, but the one we stopped at gave us an idea of the power of the volcanic explosions and their results.

The group in my bus was literally thrown together from all over the world–a young man from Northbrook, one from Florida, and I represented the US; a couple from Chile went both days with me as did a lady from Brazil and a young woman from Australia.  I also talked with a Swiss businessman who was here on holiday from his half-year in Paraguay.  And we met a sailor from Chile who had spent 26 days at sea getting here.  As you can tell by this description, this “navel of the world” is on a lot of people’s bucket list, and having been here, I can understand why.

Long day/ride tomorrow.  Happy holiday.

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 funiculi (?), 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 more 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.

May 19, 2014
Chile
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, and 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. In addition, 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!

May 18, 2014

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, vineyards) 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?

May 17, 2014

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 Celsius 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), victory was followed by civil war in Argentina (the 3 Spanish viceroys eventually divided into 8 countries) which 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 rundown Italian area 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 Recoleta, another Belle Epoque resting place–so to speak; it’s a cemetery 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 carry on, and fruits and vegetables were strictly forbidden entry 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.

May 17, 2014 (am)

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 22,000 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.

One of the faculty shared his thoughts on Argentina, 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 samurai 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.

 

May 15, 2014

Buenos Aires, the harbor city situated on the enormous delta of the Rio de Plata, has a population of around 3 million.  The area around the city is roughly 13 million of Argentina’s 40 million.  Thus, it gave us a wider look at life in Buenos Aires when we went about an hour out of the city to visit a factory.  It was an easy hour on an expressway, until we got to an industrial district for our visit.

The company smelled good—Saporiti manufactures flavors and colors for food manufacturers. Today, chocolate was one of the flavors being produced, and as a chocoholic, I was ecstatic.   Founded in 1927, Saporiti’s  current CEO is 3^rd generation, who left a profession as an MD to take over the family business, and discussed some of the carryover between the two types of jobs. With 130 employees, $70 million in sales, and branches in a number of Latin American countries from Mexico to here, the owner discussed his plans for expansion, which included a look at the substantial Hispanic market in the United States. He did note, however, that as a mid-sized company, he was limited in his ability to supply a vendor like Coca-Cola, which demands similar taste around the world.  He stated that he was able to supply some niche products to big brands (I thought he mentioned a yellow cola, Inca Cola, in Peru).

The most interesting thing I learned from this manufacturer (surprisingly, manufacturing employs just over 20 per cent of the workforce, while agriculture, a big exporter, employs 5%) was that one of his efforts to create business, if not competitive advantage, is moving downstream.  He will work with a manufacturer to create a new flavor, and (for a fee?) not sell it to others in the same product category, providing research and development assistance to the small and medium sized companies he serves.  In addition, he will provide his expertise to his clients to purchase the right machinery.  Forecasting has got to be a great challenge since he has no “captive” audience; it’s difficult to get new business, but he said if the manufacturer is satisfied, he seldom changes a supplier—too much risk of a “different” taste.  Some of his ingredients take 2 or 3 months enroute (cocoa comes from Africa) further muddying his ability to manage supply and demand.  As he pointed out, he has a large warehouse to anticipate demand.

The second business was a service business that exemplified the flat world.  It was an advertising agency that stressed its ability to deliver creative services globally.  One ad they showed us found a market in Canada, the United States, and Thailand, for example, proving, as one CEO I met in India in 2001 pointed out, the right business can be headquartered anywhere.  The two entrepreneurs who integrated their production company forward, adding an advertising agency, were passionate in their presentation about their creative abilities, and some of the spots they showed us certainly demonstrated that they’d taken a lot of film-making skills and added them to the world of marketing.  My favorite was a coffee ad with a hand coming out of the coffee cup slapping someone awake.  I did not need it for their presentation!

It really hit me as we drove through their neighborhood looking at wonderfully solid homes of the rich (their office was a converted one-family many-room mansion that still had some elegant touches) that we were in the southern hemisphere.  As I looked up the street, I saw a beautiful sugar maple that was orange and red, rather like the one outside my home in Bloomington—in late October.  Here, 31 degrees south of the equator, it is climatologically mid-November.  If you love fall (and I do) you might consider moving to the southern hemisphere when it’s spring up North—if that’s not too confusing!

May 14, 2014

When I went for a walk this morning, I got really confused; I could not tell whether I was in Vienna, Budapest or Paris.  I had been warned that the city was deceptively European, an impression confirmed later when we walked between our visits through the main square—with statues of San Martin—surrounded by palaces built by land barons late in the 19^th century with Empire roofs that could have been in any one of those cities.  As our local guide gushed, this is the “Paris” of South America.

The area where our hotel is located is on Reconquista (maybe referring to the Spanish reconquest of Iberia from the Moors, maybe referring to the independence movement in Latin America, a by product of the Napoleonic wars, started when Napoleon put his brother on the throne of Spain) and Paraguay streets, but could—with its cobbled narrow streets and small shops be somewhere in Europe.  But in the 19^th century EVERY civilized city wanted to be Paris. (Not sure what that says about Chicago….)

Our first visit today was in a building that could have been a palace; built in 1914 to house the Navy Department, its gilded doorway, wooden library, comfortable old boy chairs was in fact nicer than some of the palaces I’ve been in in Europe.  Coincidentally, it was the 100^th anniversary of the opening of the building, and there was a celebration welcoming brass from the South American navies.  I felt a little out of place without gold braid, but we were there to visit with a lawyer who has sat on Argentina’s judicial committee for a number of years, a body instituted 20 years ago to provide choices for judgeships to the President, who until then had put his own men (usually men) in for life with few checks or balances.  Remember, I said the civilian rule in this part of the world is fairly recent—remember the Falklands War?

His talk brought to mind some of the hazards of the flat world—hazards especially to the losers.  As I’ve told my students, neither organizations nor people react well to change, and the existence of the nation-state and political parties and different interests serves as speed bumps in that flat road.  In the case of Argentina—a country of 40 million, 13 million of whom live in the environs of Buenos Aires—there’s a tug (as there is in most countries) between the protection of jobs and the protection of consumers, for whom the flat world means greater access to goods, usually for less.  As in Brazil, the effort to protect jobs has sometimes prevented businesses from adapting to competition.  In addition, the system is riddled with corruption and businesses with inefficiencies.  As in other Latin American countries, there is an election in the next year, and businesses, we were told, were reluctant to invest until then.

Lunch was in an Argentine restaurant with pasta and the ever-present grass-fed beef (90% of the cattle are grass fed), with some concession to the vegetarians in our midst (pasta).  The steaks were huge, as usual, and about half of it would have stood in for a meal for three days.  We were also introduced to a pancake called dulce la leche, a sweet crepe with caramel sauce that our guide said was too sweet for most Americans.   I had to confess to her that “my name is Fred, and I’m a sweetaholic,” but I confess (as did half our group), that the meaty lunch precluded much for dinner!

The second visit was to an entrepreneurial company that provides IT services in 30 countries, but is based in Argentina, showing that the flat world reaches here, too. It is the largest provider in Mexico and Argentina, third largest in Columbia, and has the largest number of Spanish-speaking consultants for SAP.  They pointed out that the GDP has been rising, but so has inflation, ranging from 25-35% (wow), which led to a major devaluation in January, and the intervention of the government to control prices. The exchange rate last year ranged from 6 (legal) to 12 (black market), but the government has pegged the peso to the dollar ratio at 8-1.  I understand that you can go to the black market, though, and still get 10 or 11.  The government has also limited the outflow of dollars, which has led to a thriving black market in dollars, which bring a better ratio on the street.  The government is controlling prices, and pushing some industries more than others—e.g., IT services.  Neovis, the company we visited, is one of 1600 firms, employing 80,000 in Argentina.  Still, the major exports are agricultural—machinery and soybean, and the major imports are gas and oil.

I had a real treat—a dinner with one of my advisees who is studying this semester in Buenos Aires.  We made plans to meet before I came down here, and he took me to a local restaurant, and talked about the difficulties of doing business here, and shared his observations about what he’d learned, as much about himself as about Latin America.  He lived the Confucian saying, “It is a pleasure to welcome guests who come from afar,” and it was good to catch up with an IWU student.  He’s looking forward to going home (he studied in Barcelona as well, and says this is a tougher place to live than Europe), but admitted “it’s a great place to visit.”  As long as you don’t overdo the steak.  As I said, Argentina is a great place for meat, but I can feel my arteries hardening….I had pasta tonight.

May 12, 2014  Having a “real” good time in Brazil

It’s hard not to have a “real” good time—the currency is the “real.”

The day in this overwhelming city was spent at two businesses (or on the highway going between the two) which gave us some interesting views of life in Brazil.

The first was with two operations/marketing people from Azul airlines, Brazil’s equivalent to Jet Blue.  In fact, the airline was founded by one of the Jet Blue entrepreneurs, who left the US airline in something of a cloud, but who had a good enough reputation with investors to parley 235 million dollars into the start of what is Brazil’s 3^rd largest airline.

If you think of the size of Brazil (5^th largest country) and population (5^th largest country), and the poor infrastructure,  air travel makes a lot of sense.  Donald Needleman recognized that need for business travelers, and copied the Jet Blue model here in 2008.  In six years, the  company has grown to the point where it has filed to fly to Miami and New York, using secondary airports (Fort Lauderdale and Newark) ala Jet Blue’s model.

The founders set a nearby city of 7 million, within driving distance of San Paulo as a hub (it’s apparently easier to drive away from the city than into it).  Sao Paulo has the second largest number of helicopters for in city travel in the world—and when the Azul executives go into the city, they travel in a bullet proof car.  They’re not alone in tight security; most of the industrial factories, and some of the homes, and even a few of the malls, are fenced with razor wire at the top. Azul executives have managed, through efficient computer programs, to capture about 85% of business traffic on smaller planes with more frequent service than the existing domestic airlines.  They demonstrated that it’s cheaper (as well as faster) to fly than to take a bus or a car, though rates are also subject to equations that maximize revenue.

They painted an interesting picture of the airline industry in Brazil, describing it as akin to the balance of mass destruction in the Cold War. If everyone is rational, all can survive, but if one lowers fairs, it could ruin them all.  They also described some of the problems peculiar to airlines in Brazil—the high taxes on fuel (which led to experiments with local manufacturer Embraer in an ethanol-friendly plane, ethanol being one of the domestically-produced alternatives to fossil fuel) and the short runways or the lack of fire trucks which makes it difficult to expand.  The government did privatize the major airports they said, which has reduced the amount of bureaucracy (Brazil is the 79^th worst country in the world to do business) , but the presence of Petrobas, the gasoline monopoly, makes aviation fuel almost 40% more expensive in Brazil than in the United States.  They also discussed the possibility of carrying freight, but they said it would require larger planes, though they do carry small packages. We also saw the command post where they work on scheduling maintenance, arranging luggage in  plane (from the corporate headquarters) etc.  When I asked about corporate social responsibility—almost invariably the first topic any of the Indian companies mentioned—they were ambiguous, mentioning “education and kids.”  As for reducing carbon footprint, they said that they would embrace it when customers were willing to pay for it, because in the long supply chain the airlines were much less profitable than the manufacturers or the airports….it’s not India.

The second visit gave us a glimpse into the retail/consumer goods economy—at the French retail/online chain, Sephora.  The general manager for Brazil (a recent addition to the company) trained as a chemical engineer and got bored with manufacturing—“it’s the same thing every day.” She got an MBA in marketing, worked for banks and L’oreal before coming to Sephora.  She is part of the Americas division (US, Canada, Mexico, and Brazil) and described what we in business call “glocalization”—the adaptation of a global model (French in this case) to meet the needs of a different target market (in this case, Brazilians).  Her numbers and observations on the marketplace were interesting.  Despite the recent slowdown in the economy (despite high employment, there is high inflation, and discontent with the money spent on the World Cup and Olympic facilities at the expense of addressing social issues) as women move into the middle class, one of the early purchases is fragrance—and especially, in Brazil, hair care.  While something like 70% of the women have curly blonde hair, they purchase an average of 5 products to straighten their hair and care for it.  There are only 14 or so stores, and 40% of the sales are on the internet, but the company has fostered ecommerce with free shipping in Brazil.  She talked as well about developing some products in Brazil as a way of bringing the price down and catering to local tastes. Most of the products come from the United States, France, or China—meaning high tariffs on imported cosmetics.

Dinner was at a local barbeque, with something like 19 different cuts of beef for sampling.  I probably ate more beef tonight than in the last three months.  Our guide promised nightmares, but I’m hoping for pleasant dreams, which I wish on you too.

We have another visit tomorrow morning, then leave the “real” world for Argentina.

 

May 11, 2014  bom dia from Sao Paulo

Just before I left Bloomington, my son David said,”Dad, you’ve never been to Brazil, Argentina, and Chile. I expect I’ll be reading a lot from the Lonely Planet.”  I want to assure him that I don’t have a copy of that standby, so what follows are sleepy observations over 6,000 miles south of Bloomington Normal.

I’d like to say it’s an easier flight than Asia, and it certainly is shorter—by about 3-4 hours.  In addition, the time zone change is only 2 hours (it’s two hours later in Sao Paulo than in Bloomington, lying south but also East).  But David is right: it is a new experience for me.

I can sort of thank the Pope that I’m in a Portuguese-speaking country.  Early in the age of exploration, he divided the world between his two major Catholic countries—Spain and Portugal—and what is now Brazil fell into the Portuguese partition.  That’s made the Portuguese language one of the most popular in the world because Brazil’s population is nearly 200 million, surprisingly overwhelmingly urban.  I think the figure I saw was 85%, with Sao Paulo at around 12 million, and the more famous—and once capital city, Rio de Janeiro, around 6 million.

Sao Paulo owes its founding nearly 460 years ago to the Jesuits, who came to convert the Indians. One byproduct was that the fields and mines that fueled the growth of Brazil (this was the age of mercantilism, when colonies existed to enrich the mother country) were staffed by African slaves, adding to what proudly has emerged as a multinational society.  Sao Paulo has Jewish, German, Japanese (yes, there’s a Japantown, but not a Chinatown) areas, among others.  In return for the language and the religion, Brazil made Portugal richer; Lisbon suffered a major earthquake in the middle of the 18^th century, and it was rebuilt in Baroque style, made more baroque by the import of gold from Brazil. The churches in Lisbon are incredibly gilded!

Ironically, it was gold that led Brazil to declare independence from Portugal.  During the French Revolution, the royal family fled Portugal to settle in Brazil when Napoleon took over the Iberian Peninsula.  Apparently, when the King returned to Portugal, his son remained as Emperor of Brazil.  Son apparently got annoyed when dad raided Brazilian gold to pay debts to Britain (the Brits should have settled for port wine, I think), and declared independence from Portugal.

Sao Paulo owes its prominence initially to agriculture.  There’s not much left from 450 years ago (the churches, though, are quite classic; the main Cathedral, the Se, is supposed to resemble Notre Dame in Paris), but there were some nice mansions once owned by coffee barons.  Brazil is one of the leading countries of the world in coffee production, which we savored at a local non-Starbucks stop on our tour of the city.  It’s also a major producer of sugarcane—and ethanol—which has led to a number of auto plants located in the Sao Paulo area, partly because the car engines need to be adapted to burn the “cleaner” ethanol fuel (ethanol from corn is expensive because the corn needs to be converted to the sugar that comes from sugar cane).

It is fall here, and getting cooler; which means the large homeless population is camping in the public parks.  There were a few squares downtown that I would love to have explored, but our guide exercised caution and kept us on the bus.  It will be interesting to follow the world’s greatest sporting event—as the World Cup is (probably accurately, except in the United States) billed here, given the cost overruns and deadlines for facilities that might not be met, which begins in 33 days.  I’m glad we’ll be gone by then.  Someone said there are 8 million cars on the streets of Sao Paulo, but the government will probably do something like Beijing did (license plates dictated when people could drive); we may get a sense of the potential nightmare when we start our serious visits tomorrow.

I hope you all had a wonderful mothers’ day.  It’s celebrated here, too.