Purdue University Calumet - MBAE in Chile 2009

Sabir Fattah - one wrong turn...

2009-11-23T15:52:00.000-06:00

One wrong turn....For many tourists, this could be the end to a great trip, end up in a crazy situation or even danger...in Chile this leads to a great French restaurant with fantastic wine and food. Who would have considered gorgonzola to be the key ingredient to a wonderful creme brulee?

Both the wine and food continue to be central to the social scene of Chile, which we have thoroughly enjoyed.

Jennifer Fredricks - Final thoughts

2009-11-22T18:20:00.003-06:00

The Last Day....one element I have found amid my travels is the way exploring another country brings us closer together. Our speaker at Sonda, when asked how his Purdue MBA helped him, gave a perfect answer. While many might have been hoping to hear how Statistics changed his company, or how Decision Analytics led to the turnaround he had needed, he gave the honest answer that is one of the most important facets of this experience.....the personal impact.

It's difficult to teach someone how to build an arsenal of intelligent sounding boards with varying areas of expertise and perspective....yet this experience has taken many of us from acquaintance level to a level of friendship that builds and expands our circle of influence that cannot be achieved through reading a book or writing a paper. For that, I am grateful for this experience. Yes, the wine was wonderful, the food amazing, the speakers insightful, and the yarn fantastic. However, the circle of advisors I take with me from this group are priceless. The knowledge I continue to gain from them and will gain in the future is the lasting legacy of influence that will continue to build excellence and leadership within the business world.

With that, one last day awaits us in Valparaiso...the llama and alpaca hunt continues, although I have learned that the North is far better for Alpaca. I am hoping for more yarn, even though it took two of us to close my suitcase! For those who have been reading this blog, I hope you have enjoyed our experiences....we will see you soon!

Farewell Dinner at Menzon Nerudiano

2009-11-21T21:00:00.000-06:00

After a week of intense business visits and a LOT of information, it was time to celebrate! Our final group dinner was at a beautiful restaurant called Menzon Nerudiano. I think this celebration is best presented in pictures rather than words, so enjoy the pictures below.

Day 6 - Kimberly Clark Chile, Anglo American, and Entrepreneur Roundtable

2009-11-21T20:38:00.002-06:00

Today was our final day of business visits and again we were educated and challenged to understand the Chilean market and people. Our first meeting of the morning was with Kimberly Clark Chile. We were hosted by Claudia Leniz - Human Resources Analyst and Ximena Calderon - Marketing Manager. We learned that KCC was recently voted the #16 best place to work in Chile. They have 186 employees - 70% men adn 30% women. Their mission is to "lead the world in essentials for a better life." The facility we visited here was a distribution facilty only - there is no production of KC products in Chile - most are imported from Argentina.

KCC competes in three basic segments: babies and infants, feminine care, and family care. The Chilean market is an interesting market because of its relatively small size.The penetration of disposable diapers in Chile is close to 100%. There are 258,000 babies born her each year. KCC's strategy is to get mothers to trade up to a higher "tier" of diapers. Their strategy to do this is based on innovation and brand experience. They focus more on an emotional approach than a functional approach.

They have a special maternity plan to reach new mothers - a market that turns over every two years or so, as babies stay in diapers for approximately two year. They have a team of 11 midwives and nurses that visit moms and babies in the hospital to provide samples and information. This allows them to reach more than 55% of their total market. They have been a price war with Pampers for more than two years and Ms. Calderon re-emphasized the fact that it doesn't benefit any party in the distribution chain.

She spent considerable time talking about the feminine hygiene market and the family market (particularly adult diapers and pads). Ms. Calderon sees the adult "diaper" market as a particularly open market for them and they are working to demystify and destigmatize the use of these products.

Following these two wonderful speakers we got a tour of the distribution faciltities. Many students were interested to learn that KCC uses the same inventory bar code systems as their companies in the US. We were all amazed at the MOUNTAINS of diapers that we say. Several folks - including Prof. Daubek - wanted to test out the harness system and get to the top of the mountain!

Our second visit was to Anglo American - one of Chile's large copper producers. Angelo American is the fourth largest mining company in the world in terms of market capitalization wit a market cap of US$ 58.8 billion and US$ biillion in earnings in 2008. It is the third largest mining company in Chile with Codelco being the largest.

We have heard all week about the importance of copper in the Chilean economy - it is a critical factor in the "Financial Rule" that has been helped Chile withstand the current economic disruptions. Chile has the largest reserves of copper in the world - 36% of the world's reserves. Chile produces four times as much copper ore as the US produces and mining represents 35% of al taxes paid in Chile in 2008.

We learned about one of their mines near Santiago - the Los Bronces mine. A mine has a life of approximately 30 years. This particular mine produced 236,000 tons of ore in 2008.

Our third visit of the day was back at the hotel were we heard an interesting and intellectually challenging presentation by Michael Tupper who is the founder of Tubaloo.com. This is Mr. Tupper's thirs dot com start-up - his first was in 1995. He had experience in Silicon Valley at Intel and for 155 - a telecommunications carrier. He believes that this experience helps him craft a vision for what technology will hold two years out. In his present business he is developing softward for Google's new Android phone. He recommended an article that we should read in understanding the Chilean economic environment for entrepreneurship. It is an article in TechCrunch.com entitled "Chile wants your poor, your huddled masses, your tech entrepeneurs." Mr. Tupper has a comment post explaining his views dated October 11 at 1:10 pm. His comments provided a lot of food for discussion and was an interesting counterpart to our first meeting on Monday at Ministerio de Hacienda.

Mike Hecht - We're not in Indiana anymore

2009-11-21T05:14:00.000-06:00

While traveling from Chicago to Dallas, I had an opportunity to read the Insight Guide for Chile that Jacinda acquired. It helped pass some time prior to the longer flight from Dallas to Santiago, Chile. Once we got there, after a “great” nights sleep on the plane, we had the opportunity to tour parts of the city. One site visited was the La Moneda, the presidential palace. While I was standing there looking at the impressive building that the President only works in, I remembered a picture in the book.

This picture was taken during the 1973 coup. While standing in the square in front of the impressive white palace, I realized that this occurred not long ago. This was within my life time and the country has struggled to grow out of the Pinochet dictatorship to the democracy created today. This was clearly evident due to politicians campaigning for the presidential elections scheduled soon. Change has been rapid in this fascinating country.

On the lighter side, I must admit one of my best laughs has been a trip to Cerro San Cristobal.

The statue sits on top of a hill about 1400 meters high. Jacinda, John, Jeff and I took the funicular, as it is called, to the top for a beautiful panoramic view of the city. I must admit it the view was stunning. Instead of taking the funicular back down, I was able to “persuade” the group to walk down via a trail which they reluctantly agreed to. After about 5 min. and a lot of laughs, Jeff started calling me the ninja psycho camper hiker dragging him on a switchback trail with no railings. I don’t think he stopped “freaking” out for most of the “leisure” walk. Yes, my legs did hurt the next day. At least we burned off some calories from the excellent food.

This has been a great experience, especially the time to get closer with the cohorts that I have had the honor and pleasure to sit with every Saturday. Thanks for your friendship – you to Sushil!

Jennifer Fredricks - Yarn Success!

2009-11-20T13:55:00.002-06:00

Day 6....while the Llamas and Alpacas remain unseen, proof of their existence can be found in the suitcase of yarn purchased on Rosas Street. In Chile, the stores are grouped together by purpose...multiple shoe stores, multiple fabric stores, etc. Rosas Street had many yarn stores and, with the assistance of two classmates who speak Spanish (thank heavens!) I found beautiful hand dyed Alpaca, Llama and hand spun wool yarn at very reasonable prices. It was a great immersion experience as we were definitely the only tourists on the street!

Jennifer Fredricks' hunt for Llamas

2009-11-20T05:57:00.002-06:00

Day 5....still no llamas. However, I have located the textile district that promises multiple yarn shops and plan to visit this afternoon.

Farrad Ali - Ace photographer

2009-11-19T21:55:00.000-06:00

Greetings all.

Thus far, I have spent 5 nights in Chile. Upon commencing my journey here, I must admit that I had some reservations due to my perceived language disadvantage (i.e. not a fluent speaker of Spanish). I must say that I am quite surprised in what I am able to recall from 2 years of high school Spanish and 1 year of Spanish in college. That was 150 years ago… ;-) While my conversational Spanish is lacking (to say the least), my comprehension of words and meanings seems to come back with each day. It is amazing how things can lie dormant from years of non-use and come back along with the memories from when you learned the concepts.

Just about everyone from MBAE9 knows that I am a vegan. Since coming here, I learned to state that I am a “vegano”. Some people at restaurants know what that means, while others don’t (same as in the US). I had done my research on vegetarian restaurants before coming to Santiago and I learned of El Huerto Restaurante via happycow.com. I was very pleased to learn that both Claudia and Maria (two of our three tour guides) knew of the restaurant and suggested that we go there one day. On Tuesday, a group of us traveled to El Huerto via the Metro (subway). The food was great for me (many vegan options) and we had some great conversations during the meal as well. For the past two days, I have also eaten falafel and hummus at a local mediterranean restaurant.

With each day that we stay in Santiago, we branch out more to explore the city. We’ve traveled to local markets and restaurants each day to try new foods and shop for gifts for friends and family back home. Today, we traveled to Funicular San Cristobal. For 1,600 pesos, you get to ride a cable car up to the top of a mountain that provides spectacular views of Santiago. This was a great experience and I recommend that all who came with us get an opportunity to go.

In addition, we traveled by taxi to Parque Arouco. This is a very modern mall in the Los Condes (uptown) area of Santiago. I felt transported back to any mall that was in the US. They had many anchored department stores along with a ton of specialty shops. If I ever get to live here one day, this would be the area that I would choose to reside (golf courses, restaurants, malls, etc).

Today, we met the CEO of Telmex Chile along with other VPs and directors. The entire staff that greeted us was very welcoming and we really got an in depth view of the issues that Telmex Chile faces and how they plan to address the issues. More importantly, they noted that since the principal owners of Telmex Chile have a great stake in the company, they are embracing a long-term strategy to grow their marketshare as opposed to a short-term strategy to yield quarterly results for shareholders. This was food for thought. They have stressed a “people first” approach and I wish them the best of success in obtaining more marketshare here in Chile.

Overall, my initial assessment of Chile is that it is a very modern country is many respects. It has some outstanding architecture (corporate and metropolitan buildings) and the people here have been very friendly and welcoming. While this is the second country that I have traveled to in Latin America and the first in South America, Chile strikes me as a country that adopts some of the best features from the US and Europe in its makeup and strategy. This leads me to believe that this is a unique competitive advantage for Chile that would be hard to duplicate by other countries in Latin America. There are many opportunities here for those with the skills and education. From wineries to think tanks to non-profits, we have seen a broad spectrum of life and industry in Chile. I look forward to maximizing the remainder of our trip to obtain further clarity and insight.

Buenas noches y buena suerte.

Day 5 - Libertad y Desarrollo and Telmex

2009-11-19T21:42:00.001-06:00

Our time in Chile is going by so quickly! It is hard to believe that the week is more than half over. We have one more day of business visits and then sightseeing in the Andes and Valparaiso & Vina del Mar. There is so much to do and so little time... Many of us are foregoing sleep so we can experience as much as possible!

Our first visit today was at Instituto de Libertad y Desarrollo (ILD) where we were treated to a passionate presentation by Sr. Tomas Flores. ILD is a privage research and study center - a think tank - independent of any political, religious, business, and governmental affiliation. It was founded in 1990 and is dedicated to the analysis of public policies and to promoting the values and principles of a free society. It aims to promote freedom in the political, economic, and social fields, proposing concrete formulas for the improvement of a free social order through analysis, investigatoin, and diffusion of public policies. Sr. Flores is a well known economist in Chile and is frequently a guest on talk shows and CNN Chile. He told us that ILD is similar to the Heritage Foundation and the Cato Institute in the USA.

Based on the Index of Economic Freedom (Heritage Foundation) Chile is now in the top 10. During the 1960's it ws a very closed economy. In 1974 their tax on trade was 95%. Today it is 6%.

Sr. Flores echoed what we heard at the Ministerio - that restriction of taxes is a global strategy for Chile. All parties and involved individuals want to increase free trade agreements and engagement with the world. At this point in time, China is Chile's most important trading partner. He also shared some interesting facts comparing Chile now to Chile in the 70's. Remember that Chile only became a democracy 20 years ago...

70's Now

Exports as a % of GDP 13% 39%

Exports in US$ (millions) 1.247 66.456

Num. Co's exporting 208 5666

Num. exported pdts 412 3749

Num. countries exp to 60 166

Copper as a % of total exp 83% 49%

He also identified the key factors in the modernization of Chile's economy - starting in the Pinochet era and continuing into the present time: 1) privitization of social security, 2) labor legislation, 3) Capital markets, 4) an independent central bank, 5) decentralization of public services, 6) emphasis on social issues, 7) privitization, and 8) fiscal reform.

After this we had a little bit of time until our next meeting and we got to hang out at ......... Starbucks! I have never seen so many in this group move so quickly toward caffeine! One of the interesting things we have seen here has been the number of, seemingly well cared for, dogs roaming the streets and just hanging out. They seem friendly and not afraid of people at all. This particular dog seems to have a taste for the good life - he was hanging out on this comfortable bench in front of Starbucks!

Our final company visit of the day was to Telmex Chile. We were very fortunate to speak with four individuals at this company: 1) Patricio Varas - manager of strategic planning, 2) Fernanda Schouthaler - labor relations manager, 3) Emilio Martinic - Marketing and products manager, and 4) Alejandro Rojas - CEO. We learned that Telmex Chile is a spinoff of Mexico's Telmex - a telecommunications monopoly. Telmex Chile, however, is a new entrant and in a completely different competitive position. In Chile, telecommunications is a US$6 billion market - half of which is mobile and the other half is fixed phone, pay TV, and broadband. Telmex Chile has a 9% market share (excluding mobile) which is up from 2.5% since 2005. They are aiming for 35-40% market share.

They noted that their model is that growth will come from a superior customer experience. They shared that most Latin American telecommunications companies don't do this well focusing on churn rather than customer retention.

Shannon Medsker & Curtis Gabriel - Conservative Chile

2009-11-19T20:57:00.001-06:00

Curtis and I have traveled to a lot of places...but we have never been able to see any country like we have in Chile. Being able to actually see what makes a country 'tick' has been truly amazing. Today is the fourth day that we have had meetings with different companies, and one theme seems to be a constant in every meeting....Conservative. Every company has mentioned that they take a conservative approach in one way or another. Whether it is financially, acquisition wise, strategy, etc. We wonder if that has anything to do with the fact that 70% of the Chilean population identify with the Roman Catholic religion??

The culture has also been fantastic! The Chilean people are great! We are grateful they are patient with our limited Spanish speaking ability! Actually, in our experience, Chile has been one of the hardest countries to communicate in. We can communicate what we want relatively easily, but the hard part is trying to understand what they say back! Many countries that we have visited, including the Middle East, has not been this hard! We believe it to be the lack of education, which was actually mentioned by the Finance Ministry as a big weakness in the country. In Europe and the Middle East, we believe that the education is better and therefore a lot of people in the service industry are better with English. However, as Americans, we should not say anything! We always expect everyone else to adapt to us!

Today has been a great day! We had the afternoon off and enjoyed some shopping, tennis, the spa, and a great dinner at Liguria! (Curtis has banned me from buying anything else, though...the Hermés scarf threw him over the ledge!)
Looking forward to another busy day tomorrow!

Jeff Smith - Buenos Dias to those at home

2009-11-19T15:07:00.003-06:00

Buenos dias to my cohorts that couldn’t make the trip - we miss all of you. Every company that we have visited (public and private, large and small) has confirmed that the business principles that we have learned in MBAE11 are relevant and are all used by successful companies all around the world.

The concept of adapting to cultural differences to be successful in international business is very evident here. This trip has help to put everything that we learn into perspective. You should plan to make the trip next year, I’ll be there.

That’s enough about the learning aspect of this trip. We are having a great time interacting with each other and with MBA from previous classes. The time that we have spent together (especially at night) has strengthened our bond.
Jeff

Sushil Sajnani on Spices in Chile

2009-11-19T11:07:00.001-06:00

We are a group of three vegetarians and one vegan- los quatro (four in Spanish) with unique dieting habits. The Chile trip began with skepticism which got further endorsed on the American Airlines (AA) flight. AA served us with a scanty vegetarian dinner and only fruits for breakfast. At that point in time, the least we knew was that there were multiple pleasant surprises in store for us in Chile.

It has been the fourth day since we are in Chile and all four of us feel that Chile is a food lovers’ paradise. From the Chilean ‘Pappanas’ (a local dish of chick peas in pumpkin curry) to Spanish Tapas, from Lebanese hummus and Falaphal to Mexican Fajita one had a huge choice of tasty vegetarian food. In between all this one was treated to an exotic Chilean drink called ‘Pico Sour’ – a whisky based drink. This drink tastes even better over discussions on American slang (Thank you Jeff)

The entire trip has been an enjoyable knowledgeable enhancing experience. I was particularly impressed with the first meeting with Mr. Magendzo a senior official at the Central Bank of Chile. This was an eye opening meeting which changed my perception about Chile.

In the next report I will give you all more updates on some more experiments with vegetarianism food in Chile.

Till then, here is Sushil signing off.

Day 4 - Sonda and Un Techo Para Mi Pais

2009-11-18T20:04:00.002-06:00

Each day brings something different and a new perspective on the successes and challenges that Chile faces. Our first business visit of the day was to Sonda - one of Latin America's leading IT services providers with more than US$ 350 milion in sales per year. We were hosted by Sr. Rodrigo Pena. We were delighted to learn that he holds a Purdue MBA!

Sonda was founded in Chile in 1974 with 20 employees and one client - Copec, which is Chile's largest fuel retailer. Now, Sonda employs more than 10,000 people in nine countries. It has operations in 95% of Latin American countries. Its revenues for 2008 were US$758 million and it has a market capitilization of US$1.0 billion. It became a publically traded company in November 2006. Like many of the companies we have talked to, it is financially conservative. It had no debt until 2005 and this has been a key competitive advantage against local competitors.

Sonda provides IT solutions across a wide range of industries and countries. Some of their most interesting projects included a betting system on horse races a traffic control system in Santiago and Buenos Aires, modernization of the Chilean ID system, a livestock trackability project in Uruguay and Columbia, and an electronic payment system for the public transit in Santiago.

On the way to lunch we came across this gentleman outside our restaurant. He was sharpening knives and while we waited for the restaurant to open we saw a number of the chefs coming out to get their knives sharpened for the lunch and dinner meals. I so wish that I could find someone like him - cooking is so much better with really sharp knives!

A few of us went to a very special restaurant "Como Agua Para Chocolate." Do you remember that book? It was a beautiful restaurant with excellent food and service. We were seated next to a gently burbling fountain. The food was excellent. Hugh had a chicken that was flambed in brandy - interestingly, the chicken was flamboyently wrapped in foil and the lit liquor simply appeared to heat it.

By FAR, the most special part of the meal was the chocolate fondue for dessert. The chocolate was dark and rich and we were given fruit to dip into it.

Our afternoon meeting was anticipated by many and it definitely did not disappoint. We were hosted by Cecilia Dosal and Marisol Alarcon of Un Techo Para Mi Pais (UTPMP). UTPMP is a non-profit organizatoin run by college students and young professional who construct transitional housing to lift people out of extreme poverty. It was founded in 1997 as Un Techo Para Chile and began its expansion to other parts of Latin America in 2001.

Poverty is an urgent reality in Latin America. 200 million people (38%) of people live in poverty in Latin America. 80 million of those (15%) live in extreme poverty - less than US$1.00 per day.

Their business model has three parts: 1) building of transitional homes, 2) social inclusion programs, and 3) building of sustainable communities. The transitional homes are built in 2 days by teams of 8-10 volunteers per house. The average cost to construct one of these houses is US$1,500, of which the families pay 10%. These houses are VERY basic. They are built for families living in the slums who prior to getting one of these houses had no real protection. The houses are simply a floor, walls, windows, a door, and a roof. They include basic furniture such as beds and a table, but no running water or electricity. These houses can last approximately 10 years. UTPMP has built more than 43,000 houses since their inception and this year they will have built approximately 2,500 houses. The houses are not the end of the project, but only the means to an end. The houses provide a channel to start working with families and building their trust.

In Phase II (Social inclusion programs) UTPMP focuses on community organizing. Members of each family meet once a week with the support of two volunteers to set a road map identifying timeslines and priorities. This is important as it teaches the value of citizenship. A second part of Phase II is the implimentation of social proramming including education, health programs, economic development and microcredit programs, legal aid, and cultural and recreational activities. The aim of these programs is to reduce the families' vulnerability and exclusion with programs designed to empower. The programs provide opportunities for people to take charge of their own development. Phase III is the development of sustainable communities. In Chile, this means working with public housing.

It was heartening to learn the UTPMP's goal of eradicating poverty is now also a goal of the Chilean government! Marisol, Cecilia, and their 200,000 volunteers were an amazing example of social enterprise in action!

MBAE10 Alumni, Pamela Quintero & Salena Steffy-Fuoss in Chile

2009-11-18T15:06:00.001-06:00

Our plane touched down on Saturday, November 14, 2009. We decided to arrive one day early in order to participate in an all-day excursion to Isla Negra and Pomaire. Prior to leaving Chicago we did not know if we would be able to make it in time for the daily tour. Fortunately, our plane was on-time and we quickly arrived at our hotel. We booked the tour and within 1 hour we were on our way to Isla Negra with our gracious Tour Guide, Sandra Gonzalez of Turis Tour.

As we started our journey to Isla Negra we quickly learned many important and interesting things about Chile, from Sandra. As we went through the Lo Prado under water mountain tunnel, we learned that it is 3 km long and took 4 years to build. This tunnel is significant because instead of going 6 to 8 hours through the mountains, drivers can now use the underpass and cut the travel time down to 1 to 2 hours. Sandra also pointed out one of the former copper mines that has since been closed due to the higher marginal costs (when compared to the marginal benefit) of extracting the copper. As she stated, one of the negative by-products of the copper mining industry is related to the changes in the landscape. Because of the techniques involved in the extraction, large sediment mountains are created and are unable to sustain vegetation. She did explain however, that with Chile having 7 of the 10 largest mines in the world, new techniques are being developed to reduce the effects on the environment. This seemed to be confirmed when we met with the CFO of Empresas Copec.

On our way to Isla Negra, Sandra shared a Chilean legend with us, as we passed an old cemetery along the main road. The legend states that years ago there were attempts to build a road that would cut through the cemetery and force the movement of certain cemetery plots. As workers attempted to break ground with various types of equipment, for some reason the ground could not be broken. After several fruitless attempts, a decision was made to go around the cemetery.

We then passed a wind farm and our guide explained that when it rains the wind turbines help to reduce the effects of freezing on the grapes. This is an important measure for protecting one of Chile’s primary agricultural products and their wine industry.

As we continued to make our way to Isla Negra, Sandra discussed several recent economic changes in her country.

She discussed the effort to reduce the number of homeless in Santiago through a low cost housing purchase. Those that qualify for the program are given the opportunity to purchase homes in two installment payments totaling about $1,000 US dollars. In order to foster a vested interest, the house is incomplete when initially turned over to the new homeowners. For example, features such as doors and stairs may be missing. The idea behind this is that the homeowner will begin to understand the value of home ownership and develop a stake in their new home, as they begin to complete the structure of their house. The success of this program is monitored by social workers that visit the new homeowners periodically, to verify their progress. It is expected that within 5 years the homeless encampments will be eliminated in Santiago. Also on the subject of housing we were told that homes in Santiago range from $50,000 in the city to $140,000 in the valley’s surrounding the city. These homes are more expensive due to lower pollution, increased safety, and short commute into the city.
In the past 3 to 4 years the justice system has changed dramatically in Chile. We were told that in the past, a defendant was unable to defend him or herself in court. In recent years, the judicial system has become closer to that which we are familiar with in the United States - where a defendant is innocent until proven guilty. Defendants now have the ability to participate in their own defense. However, this system is still in its infancy and has resulted in an inefficient and timely court process.

We finally reached Isla Negra and discovered a quaint artistic town on the edge of the Pacific Ocean. Our first stop was the home of Pablo Neruda – a famous Chilean Poet who was awarded the Nobel Prize. His home, which overlooked the sea, was reminiscent of a boat. We learned that Pablo Neruda was passionate about the sea, as it reminded him of his childhood and experiences with his father. As we passed through the rooms of his home, it seemed very much like the shape of the country - each room connecting to the next through narrow “boat-like” passage ways. We quickly discovered that he was a collector of many types of artifacts and items, including: bottles, statues, bugs, seashells, and of course anything that was from a boat. In fact, the story is that one day he told his wife that his desk was coming that day. It turns out, he saw a piece of wood floating in the sea and as the tide pulled it closer, he retrieved it. The piece of wood, which later became his writing desk, was a hatch door from a ship.

Before departing Isla Negra, we ate lunch at a local restaurant, as we overlooked the Pacific Ocean. After lunch, we walked down to the beach where we felt the ice-cold water on our feet. On our stroll back across the beach, we befriended one of the stray dogs (very common in Chile) with our peanut butter crackers. He escorted us back to our vehicle and we were off to Pomaire.

In Pomaire, we got our first experience with local artisans and their handicrafts. The town markets, offered everything from Pottery goods to Alpaca clothing. The traditional and hand-crafted items provided excellent choices for gifts for our friends and families back home.

As our trip ended and we said our goodbyes to our new Chilean Friend, Sandra, we realized that our decision to visit Chile would be one that we will not soon forget.

Hugh Daubek's search for Pepsi

2009-11-18T14:55:00.003-06:00

Hola from Chile! I thought this afternoon was fantastic. The NGO Techo para Chile is a social organization doing good in many countries. I hear of churches doing good deeds in countries, organizing many things in countries, including my own church, but this is an organization totally dedicated to removing poverty from the streets.

One of the things they do is to build houses on slum land - the government complained that they were building on land they did not own and the NGO said "Do you want these people out on the street or in a house?" The house is totally modular which means it can be broken down, moved to another sight leaving no footprint, and giving some other family an opportunity to have a house for three to five to ten years until they can afford to improve their living. I was amazed that in 2001 they started their international expansion. The family who will live in the house pays 10% of the construction costs. They can earn that in 2 to 6 months. The house is wooden floor, sides, and ceiling and sits on pegs. See the picture of the full sized house and the model.

Good grief - Coca Cola has a monopoly! We finally, finally, finally found a restaurant with Pepsi Cola. So before lunch we had Pepsi at this restaurant and then went to Como Agua para Chocolate for lunch. After lunch I went back to buy bottles of Pepsi for Chuck and I. That was interesting because I didn't have Chuck along to use his limited Spanish. It was a battle of the languages - my total English and the waiter's total Spanish. Holding up four fingers and Pepsi didn't communicate the message. The waiter constantly wanted me to sit down and I constantly wanted to get four Pepsi's and go out the door. After I finally got the Pepsi and paid for them, the waiter kept wanting to take the tops off. I said "no" and walked out the door at which point the waiter ran after me and said "no, no, no, no." He told me I could not take the bottles and I finally realized that what they wanted was a deposit on the bottles. I gave the cashier more money and they allowed me to peacefully walk out with my Pepsi.

Reflections from Chuck Rarick

2009-11-18T14:30:00.001-06:00

Today was a very interesting day. The group visited a social enterprise which builds housing for the poor. A good example of some career choices for MBA students who may seek another route with their lives. It was of interest to many, but of special interest to a few who are already involved in such ventures. Our day was also interesting in our choice for lunch ..... a small place that has a very good chocolate dish with fruit.

Jennifer Fredricks' reflections on Chilean food

2009-11-18T14:15:00.001-06:00

Dinners have been wonderful and from all corners of the world. The combinations of cultures are evident in dishes such as this one...scallops in coral sauce. We had dinner in a French restaurant but the amazing seafood of Chile was the main course in this dish.

Jacinda Yerga's reflections

2009-11-18T04:01:00.002-06:00

Buenos dias, most of you know that I started the program by making 90% of my decisions based on intuition. After concluding many classes in this esteemed MBAE program I am shocked to find myself thinking in a different manner. As we have all learned studies show that even simple decisions are better made using decision analysis. When Jennifer and I were walking through the wine tanks yesterday (see picture below) our professors would be proud of the model we recreated starting with the decision node and moving along the sequence of events telling a beautiful story of wine moving from point A to point B in the most cost effective manner. We of course laughed the whole way!

The two words supply and demand have been spoken by each speaker we have heard thus far. It is a simple concept but I studied economics vigorously and all the late nights are paying off. The graph is my friend one I intend to keep for a lifetime.

My hope and wish would be to also keep the rest of my cohorts as lifelong friends. I am having a great time with each person here and miss the rest of you. The Andes Mountains are beautiful, out of all the places John and I have traveled the wine and food is by far the best. John even mentioned retiring here. We learned that Chile needs education reform, maybe I will take Spanish lessons after graduation. Could you all see me in front of a classroom as a teacher?

Cheers, Jacinda

Kevin Hoffmeyer's thoughts on Chile

2009-11-17T21:05:00.001-06:00

In a short amount of time, the group has developed a basic understanding of the Chilean economy, major business sectors, and the people. Our pace has been steady, but the best way to increase learning is from the immersion and direct exposure that we have encountered.

Our hosting companies to date have been extremely gracious and willing to answer all of our questions posed - no matter the sensitivity. This openness to develop our learning of Chile has been appreciated by all. As we have also witnessed, an MBA covering the ‘big picture’ of business is beneficial for leadership and entrepreneurial success.

Thanks to Austral for their coordination of activities and added insight of the Chilean culture and economy. I truly look forward to the remaining company discussions and the opportunity to meet personnel from my Corp. based in Santiago tomorrow.

Jennifer Fredricks' reflections

2009-11-17T20:55:00.002-06:00

Chile is truly an amazing place! Both its government and private structures are open to implementing new methodology, which is serving them well.

I find it refreshing that Chile is not attempting to be or become a world power. Through their quiet evolution, Chile continues to develop and advance its people through innovative fiscal rules. The business community, though holding a healthy competitive spirit, works together to promote Chile in general. This was evident by speaking with a major exporter of avocados and table grapes as well as with a local winery. They both praised the work of competitors as helping to "get Chile on the map" and appreciate their size and scale, while continuing to forge ahead. The commitment to sustainability, mindfulness of carbon footprint and celebrating their own uniqueness makes Chile a country to watch as implementation quietly continues.

Brad Krieger on the Errazuriz Winery

2009-11-17T20:35:00.003-06:00

Being a huge wine fan, the prospect of visiting Chile immediately grabbed my attention. I truly believe that in order to understand a new culture, you have just dive in. In the past, that attitude has led me to eating unidentifiable sea creatures, smoking a pretty rough hookah in Palestine or eating more saurkraut than anyone should ever endure. In Chile, however, it means sampling premium wines and gourmet food.

Today's visit to Errazuriz didn't disappoint. If your local Trader Joe's sells Chilean wine, it's likely they don't stock anything of this caliber. I'm glad our guides chose quality over quantity.

The wines we sampled had body and texture that truly put them in the leagues with the big dogs of Europe and California. They said that they're a mix of old world and new, but I'd put them much further into the new. The carmenere, Chile's star varietal, was outstanding. But the highlight of my day was a sampling of the Don Maximiano Founder's Reserve. Wow. Forget sea bass. Fly to South America to try this wine. So smooth, it tasted like a big piece of red velvet cake.

All of the wines were paired with an incredible meal of seafood, meat and fresh pressed avacodo oil from the area. The food was just as good as the wine.

My favorite thing about this visit was the laid-back and easy-going nature of the entire experience. It was food that could stand up in NY with wine of Napa and Bordeaux quality but with zero attitude, expectation or drunken wine trollies. The Chilean wine experience may be one of the most underrated luxuries in the world. Muy bueno!!

Day 3 - Exportadora El Parque & Errazuriz Winery

2009-11-17T20:32:00.006-06:00

It was another excellent day in Chile - and yet one so very different from yesterday. We continue to learn more about the country and its economy and understand the opportunities and issues in doing business here. Today's visits took place about two hours outside of Santiago. Both were housed at the Errazuriz Winery.

Our first visit was with Sr. Sebastian Bulnes who is the owner of Exportadora El Parque. This company integrates a number of large growers in the commercialization of their products. The company has more than 1,000 hectares planted with avocados, table grapes and citrus. They primarily market to the US, Europe, and Asia. In fact, if you have grapes or avocados at home right now, chances are good that they came from El Parque.

Of particular interest to our MBA students was the fact that the business model for El Parque was developed five years ago by Sr. Bulnes as a project in his final class (Entrepreneurship and New Venture Formation) for his MBA at the Kellogg School of Management (Northwestern University). The business model tries to eliminate distributors and link producers and retailers more closely together.

Sr. Bulnes told us that food is Chile's second most important export. Overall, Chilean exports are forecasted to drop 25% in the next year, but food exports are forecasted to grow 9% to at least $13.5 billion US dollars. If this happens, food exports could represent 25% of Chilean exports in 2010. Food products are one of the most stable sectors in the country.

Chile has four advantages which are creating the conditions for the country to become a world food power: 1) a mediterranean climate and and ecologic island status which protects the country from diseases and pests thus reducing costs associated with eliminating these, 2) they are counter season with the most important markets for food exporting - US, Europe, Asia, 3) Free trade agreements - Chile has FTA's with more than 88% of the world's GDP, and 4) committed management with know how to do business in more than 100 countries.

Following Sr. Bulnes' presentation, we took a very interesting, precarious bus ride up to the orchards to see their avocado fields. Once there the group divided in two and in turns went further up into the fields. We learned that a single plant can produce 20 kilos of fruit per year. All the fruit is harvested by hand and it takes about three weeks for the fruit to get from the tree to your supermarket. Interestingly, the fruit can be "stored" on the tree after it is ripe. They simply get larger and richer. El Parque uses high density farming. In the past, approximately 100 trees were planted per hectare. Now they plant 1100 trees per hectare. They intentionally keep the trees small and dense. The picture below is of "baby" avocado still on the tree. It will take approximately nine months for these to mature.

Our day in the Aconacagua Valley continued with a visit to the Errazuriz Winery and an excellent presentation by Sr. Luis Enrique Izquierdo. We were all looking forward to this and were not disappointed. The winery is a boutique firm focused on producing premium wines. Their challenge is to grow the market for Chilean wines as a whole and to differentiate themselves strategically.

A key date for the company was January 23, 2004 at a blind tasting in Berlin. Chilean wines triumphed over wines from Bordeaux and Tuscany. Wines from Errazuriz took first and second places (Sena and Maximiliano Founder's Reserve brands) in the tasting by wine experts from around the world. This success has been repeated many times elsewhere around the world. This is, in fact, a key aspect of the winery's marketing program. Placing an ad in Wine Spectator (a leading industry magazine) costs $25,000 US dollars -yes, you read this right!. The tastings are a more effective way to reach the opinion leaders and grow the reputation of Chilean wines. Recently Eduardo Chadwick - the current CEO and decendent of the founder - was named the 39th most important person in the wine world, in large part because of the quality benchmark that the winery produces.

The winery aims for excellence in all strategic areas and pursues a differentiation strategy based on five factors: 1) brand image, 2) owning their own vineyards, 3) emphasis on human resources, 4) distribution with international partnerships (did you know that the UK drinks more wine per capita than anywhere else in the world???), and 5) development of iconic wines.

Following an excellent lunch hosted by the vineyard with tastings of white, red, and a sweet dessert wine, we were given a comprehensive tour of their facilities including a gorgeous new building for their iconic wines. This building is designed in the shape of a spiral that turns the same way water flows in the southern hemisphere. It also is designed to be very kind to the wine, using gravity whenever possible rather than forcing the wine through pipes in an un-natural manner.

Then came the really tough decision - what to buy to bring home? It was a difficult decision among excellent alternatives and we got back on the bus with lighter wallets but completely happy. We only wish we could have taken home this much wine!

Day 2 - Enjoyment

2009-11-16T22:00:00.047-06:00

Along with our excellent business visits, we also had time for some enjoyable meals and conversation. After the visit to the Ministerio de Hacienta, some of us went to the lovely Provedencia neighborhood, by subway, and had lunch at two adjacent restaurants. This neighborhood is also home to the Austral Group - our hosts in Chile. We were thrilled to find the only vegetarian restaurant (El Huerto) in Santiago as we are travelling with three vegetarians and one vegan. The food presented there was beautiful and I'm told was also delicious.

Another group ate at the restaurant two doors down, Bistrot Boca. Here is a picture of our menu and of part of the group eating there. Chirimoya is a local fruit that is very sweet. The John, Jacinda, Mike, and Jeff (to the right) got to taste the mousse, but unfortunately they ran out for the rest of us. The owner was nice enough to give us some chirimoya juice so we could at least taste this new fruit.

It was a lovely, long, civilized, Latin American lunch taken at about 1:00 pm. We had some delicious wine with lunch and thoroughly relaxed. It was really nice to get into a neighborhood and eat as the locals do.

Our dinner was equally excellent. We had our welcome dinner at the lovely Akarana Restaurant. Upon arrival, we were able to relax on the patio and enjoy a pisco sour, wine, or some wonderful fresh juices. The rasperry juice was delicious! When we moved inside, we took up most of the tables in this small but lovely restaurant. Below are some pictures from the dinner. Yes, that last one is of men's underwear (with names) - it was hanging in the women's bathroom. I am told that there is a similar work of art in the men's room.

Day 2 - Empresas Copec

2009-11-16T21:59:00.002-06:00

In the afternoon, our education continued at Empresas Copec. Epreseas Copec is Chile's largest publicly traed company. It's market capitalization is $19 billion dollars which is more than 10% of the total market capitalization for the entire country. Empresas Copec is a financial holding compan for their subsidiary business in natural resources and energy.

Our speakers at Empresas Copec were Sr. Rodrigo Huidobro, the Chief Financial Officer (industrial and civil engineering degree from the Catholic University of Chile and MBA from MIT), and Sr. Jorge Ferrando, the Business Development Officer (industrial and civil engineering degree from the Catholic University of Chile and PhD from La Sorbonne).

Sr. Huidobro noted that Empresas Copec wants to be in sectors in which they can lead. Currently they hod the number two market whare world wide in pulp products, the number one market share of sawn timber market in Latin America and 65% of the fuel distribution market which is the largest in Chile.

They are a financially strong company with an EBITDA of between 1.6 and 1.8 and a debt to equity ration of 0.5. They have a conservative and healthy financial structure.

Of their divisions, Forestry accounts for 75% of their assests and 76% of their income, however Fuels account for 76% of their sales. This is due to fuel being a very low margin business. Their forestry business is both vertically and horizontally integrated. The pine trees they grow in Chile grow faster than most places in the world - it takes a pine tree 25 years to reach maturity her versus 100 years in the United States.

Their fuels businesses are solely distribution companies. They do not produce fuels. Copec is the largest auto fuel distributor in the country and it consistently outperforms the market in terms of operating efficiency due to their prime locations and extraordinarly high brand recognition. They hold approximately 60% share of the market.

Here are some pictures of us waiting for the bus after the presentation. The picture on the left is of Pam, Selena, Jennifer, and Shontrai from MBAE10 who travelled with us to China. And the picture on the right is of Shontrai and his friend and our colleague from Indiana University Northwest, Dr. Vernon Smith.

Love Kalra on Ministerio de Hacienda

2009-11-16T21:45:00.001-06:00

Comment on the education part noted in the prior post - A point was raised by one of our cohort in the question and answer session. It was asked "To be competitive in the global services Chileans has to be fluent in English or at least should be taught English as a language in the school" and our speaker Sr. Igal Magendzo replied "for Chilean government the current focus is to provide students of Chile with the basic education and after that only they will be looking into anything (English education) else". After the session with the ministry we had a informal discussion with our group guides and they gave us a very good insight to the Chile education system from the public school teachers perspective and all the problems teachers have been facing and how they go on strike whenever government does not meet their demand which actually effects the future of the students.

Day 2 - Ministerio de Hacienda

2009-11-16T21:35:00.002-06:00

What an absolutely wonderful first business day! On a personal note, our day started with the excellent news that Professor Rarick was feeling better and would indeed be joining us here in Chile. He will be meeting us here after our visits tomorrow.

Our first visit of the day was to the Ministerio de Hacienda (Finance Ministry) where we were hosted by Sr. Igal Magendzo and Sra. Pamela Arreano. Sr. Magendzo is the Macroeconomic Coordinator for the Ministerio and Sra. Arreano is a macroeconomic policy advisor for the Ministerio. Sr. Magendso gave a wonderfl presentation which brought to life the reasons analysts refer to the "Chilean miracle" of economic stability. In simple terms, the hilean government has a "Fiscal Rule" which states that they will spend only structural income (vs. actual revenues) and that any windfall income will be saved and allocated to the Pension Reserve Fund, the Central Bank capitalization, and the Economic and Social Stabilization Fund. The Chilean government's income comes primarily from two places: taxes (71%) and copper (29%). The structural income mentioned above is a combination of a forcast of GDP and copper prices for the upcoming year. As a result of "The Rule" Chile's social expenditure spending is countercyclical - that is they spend more during difficult times.

Sr. Magendzo noted that Chile has gone from having a more volitile economy than average in the region to now having a more stable than average over the last three decades. He also noted that Chile has the fourth highest average growth rate in GDP in the world over the last 30 years after only China, Malaysia, and Ireland. In addition, Chile has the lowest risk premium of all Latin American Countries.

Regarding the current worldwide financial crisis, Sr. Magendzo noted that Chile has the most aggressive combination of fiscal spending in a recession and reduction of interest rates to stimulate spending. They are able to do this because of the surpluses they've achieved (currently $10 billion dollars down from approximately $36 billion dollars before the crisis). Speaking to the stability of the economy, he noted that no other country has suffered a sharper drop in exports while at the same time having its GDP contract at the lowest rate.

Finally, he noted that education is the number one priority of the Chilean government if they want to be able to continue to compete in the world economy. He believes that future growth will come from global services such as financial services and this will clearly require an educated workforce.

Day 1 - Touring Santiago

2009-11-15T20:12:00.005-06:00

Buenas noches! After the orientation and lunch, we had a very interesting tour of the city of Santiago. Here are a few random facts that we found out on this tour:

The name Santiago means St. James
The population in Santiago is 6 million - in Chile as a whole 16 million
The oldest church in Santiago is the San Francisco Church which was finished in 1618 - two years before the pilgrims came to Plymouth Rock on the Mayflower. It is also the oldest building in Santiago.
The Government Palace is called La Moneda (The Mint) which is what it was originally used for. It was built in 1805. It is now the Chilean equivalent to our White House, however it doesn't house the head of state. The President is "homeless". The Chilean government doesn't provide housing for the head of state so they choose where they live.
The inflation rate in Chile for this year is NEGATIVE 0.1%.

Our first stop was the Plaza de la Constitucion where La Moneda was. Our guide, Gustavo, told us many interesting things about this city and country including what the three colors in the Chilean flag stand for - he said that it was based on the French concept of liberte, egalite, and fraternite (apologies for misspellings). Surrounding this main plaza are many government buildings including the one housing the Ministerio de Hacienda where we will be tomorrow morning.

Following that we saw the Chilean stock exchange as well as strolling along the Alemeda and the Paseo Ahumada.

We spent significant time at the Plaza de Armas - the city's historic center and what is said to be the actual center of the city. The first corner of the plaza brought us to this very interesting statue in honor of native americans. We understand that this caused no little controversy when it was erected. You can see the entire group in this picture. We also saw the statue of Santiago's founder Pero de Valdivia - pictured, of course, on a horse.

We then got back on the bus for a ride to our next stop. We were lucky to wait for the bus next to this fountain - that water felt so nice! A sign in the bus said the outside temperature was 30 degrees celsius! That is 86 Farenheit for the rest of us! What made this all the more amazing was the snow that we could see capping the mountains. It was also quite striking to notice that many, many of the apartment balconies had an abundance of folliage growing on and from them. It seems as though the owners had created their own abundant outdoor space.

Following this we went to the Centro Artisanal de Los Dominicos which was a very quaint shopping areas of small shops. This was were we got our first sight of goods made from lapuz lazuli - a beautiful blue stone that is only found in Chile and Afghanistan. Lapaz is used to make all kids of goods from jewelery to letter openers, to the seemingly upbiquitious penguins. The water is very cold along most of the Chilean coast and penguins are often found further north than you might expect.

Thus concluded our tour of Santiago. We went back to the hotel and went our separate ways. Many went to the Patio Bellavista. This was a charming "town square" area with a number of restaurants and shops. One of the most fun, and tempting, was the crepe stand where we treated ourselves to crepes with fruit and chocolate or fruit and dulce de leche. What a great way to start a meal!

Day 1 Update

2009-11-15T11:05:00.007-06:00

We have arrived in Santiago! We came in two batches but all arrived safely. We only had one lost piece of luggage and we hope they will find it quickly. The flights were uneventful. We got to watch movies we hadn't seen because we've been so busy - I was thrilled to get to watch "Julie and Julia".

Here is a screen shot of the map showing our flight path - we went over Cuba and then down the west coast of South America. It was about an eight and a half hour flight from Miami to Santiago.

Note: You can always DOUBLE CLICK on any photo to enlarge it.

When we got into Santiago those holding US passports paid the $131 reciprocity fee and then we all went through customs. After picking up our luggage we met Maria Jose Garcia, one of our hosts, and took the bus to the hotel. Because we arrived so early in the day, our rooms weren't ready yet. So, a few of us went out for bruch.

Leticia, Aureliano, Hugh, Maria Jose and Maricruz Larrea (our program manager for the trip) went to a lovely new restaurant near the Museum of Visual Arts. The patio where we had breakfast was a visual feast unto itself. It featured a large piece of the Berlin Wall - right in Santiago! We had a traditional breakfast of coffee or hot chocolate, fresh orange juice, and toast with avocado. The latte that Aure and I had was so beautifully presented - another piece of art!

Following that we headed back to the hotel for the Orientation Meeting. There we met up with the rest of our group. Maricruz gave us a thorough introduction to Chile and what to expect - she reminded us that we should adapt to Chile and not expect Chile to adapt to us. In particular she said to remember that things are a bit slower here and that there is a lot of kissing (on the cheek) when greeting each other.

At the orientation meeting we met up with Shaun Sheffield and Barrett Helmet. Shaun is originally from Muncie, IN and founded the Austral Group as part of a project for his MBA program. Barrett is the Sales Manager and was our original contact for this trip. That's Barrett on the left and Shaun on the right. We also met our other host for the week, Claudia Fernandez.

We are all now resting, showering, blogging, and otherwise amusing ourselves until our tour of Santiago at 3:30. We will write more this evening.

To leave a comment

2009-11-14T07:16:00.001-06:00

Just click on the word "comments" below any post. This will bring up a dialog box where you can leave your comment.

Follow MBAE-11's Study Abroad trip to Chile

2009-11-10T13:56:00.000-06:00

Welcome! We invite you to come back often to follow the progress of the MBAE's study abroad trip to Chile. The links to the right will connect you with all of the companies and places we will be visiting. There are also links to news and articles about Chile - in particular about Santiago and Valparaiso.