Thursday, March 27, 2014

Lima, Peru - High Tech 2

High Tech Team 2 in Lima, Peru

Just as in Santiago, Chile we had a mix of interesting site visits in Lima with business leaders, academics, government officials and subject matter experts.

We had meetings with the American Chamber of Commerce, ESAN University, BTG Pactual (Investment Bank), Agroideas (Peruvian government entity responsible for assisting small farming coops), Technoserve (an NGO assisting small farmers become more effective at accessing the market) and VisaNet. Greg pulled in some extra effort and scheduled two additional meetings with Inter-American Development Bank and a food exporter and restaurant owner on the following Friday morning. We did still however manage to join our class for lunch and the awesome textile mill tour that Jason had helped schedule.

The meeting set up at ESAN University was a fascinating panel discussion with eminent agribusiness academics, entrepreneurs and consultants. We learned about the similar history Peruvian farmers experienced with their Chilean counterparts as it pertains to the agrarian reforms in the 1960s, and the government partitioning of land into small subsistence-based “mini-farms.” Peruvian farmers however faced more acute geographic isolation due to the poor road infrastructure in their areas, and inadequate access to government funded irrigation systems. As a result many of these farmers have resorted to illegal Coca farming in order to make ends meet.

One way for small farmers to enhance their wellbeing is to band together their lands and aggregate their production in the form of co-ops. Agroideas is a government entity that actively encourages this by offering government funding for equipment, technical know-how and other assistance. The catch however is that these co-ops have to actually produce business plans that prove their viability, sustainability and profitability. NGOs like Technoserve provide consultation services and advice to these co-op members on their business plan preparation and presentation. It seems that Peruvian co-ops have something in common with Executive MBA students who are about to start work on their capstone projects!



 
 

Sunday, March 23, 2014

Peru - Illegal Mining - Mining

Did you know that 60% of the GDP of Peru comes from illegal activities? That’s right, over 60% of the economy is under the radar and does not contribute to the common welfare of all Peruvians. The illegal economy is divided into three equal sectors of drugs, mining, and timber (mahogany).
 
Many Peruvian peasants with little education drift into illegal mining. These miners are not your average Joe with a pick and shovel  in the hills. Rather these are smart entrepreneurs who run large scale operations. They convert equipment from other industries to mining and operate million dollar dredgers. They operate 40 km from the near roads in either the jungle or mountains. There is one 
mining village which is at 5800 M above sea level. (The mine is at 6500 M above sea level) This village has widescreen plasma TVs, iPhone, iPads, and the latest technology. It however, has no running water or sewers. These miners exist on the edge of Peru, but, cause large scale damage.
 
These low budget miners focus on getting the gold out of the ore as quickly and efficiently as possible. Hence they separate the gold with either mercury or cyanide. This is done is in make shift huts and basins using human muscle to drive separation of the gold, silver, or platinum. Once this mineral is extracted the waste water and tilling's are dumped either in local lakes, jungle, or nearby piles. This creates environmental destruction as watersheds and downstream drinking supplies are contaminated with mercury or cyanide. People, especially children, are effected and neurological symptoms are occurring in these make shift villages. Yet still the illegal mining continues. 
 
Why? The cold hard facts is that there is money in the land of Peru. A miner can spend $400/ oz. in contribution cost and sell the gold for close to $ 1300 / oz. netting close to $ 900 / oz. profit. Gold is legal and can be sold in the open market. It requires none of the money to ensure protection like drug operations require. If you were a peasant with little education, then, this is the ticket out of poverty. Many illegal miners pay for their children to attend private school and university while at the same time providing car and apartments for their children.
 
Why is this tolerated? Corruption and bureaucracy. Many cyanide plants for mining are out in the open on the side of highways. Likewise, mercury is imported through the ports under government supervision. Bureaucracy is the other problem. The ministry which oversees mining, does not write the environmental laws, and still another arm of the government enforces the laws.
 
In the end the people of Peru lose and the environment is destroyed. A long term solution is needed to provide a mechanism for miners which does not require the use of mercury or cyanide.
 
 
Best Regards,
 
Greg Montemurro
 
 
 

Saturday, March 22, 2014

Looking at a problem from all sides: Water - Agriculture 1

By: Amber Conley

There is clear consensus across all of the research and all of the stakeholders that water availability is a challenge and it is going to only get worse.  What isn’t in agreement is what to do about it.

Two members of our team took an interest in water.  Margaret started investigating irrigation efforts and Sean took a look at fog harvesting.  Before long, Sean’s research uncovered current, local MIT research in fog harvesting and this gave us an opportunity for some local, pre-trip meetings.  These meetings along with additional research gave Sean some great information that helped him build out a few hypotheses for our team to focus on.  This was a key part of our pre-trip planning and organization.  The extra effort Sean went through to build out a business case framework allowed our team to identify meeting topics we wanted to flush out on our trip.
Before long, Sean’s salesman skills helped us book several meetings.  At one point we even started to wonder if we had too many fog meetings.  We decided as a team to keep scheduling these meetings and if need be split up to cover them.  What was important about these meetings was the breadth of stakeholders they covered from academic research to NGOs and government ministries to individual farmers/entrepreneurs.  This breadth gave us an opportunity to really investigate the problem from all points of view and understand where the opportunities existed.
Given the short duration of the trip there were of course meetings and visits that were just not possible to schedule.  We would have loved to travel into the mountains of Peru to visit an actual installation.  But looking back on our trip, while our schedule was hectic at times, we feel we maximized our schedule to collect as much information as possible to explore the business opportunities of fog harvesting. 

Wednesday, March 19, 2014

Team Food - Agriculture 2

I was fortunate to spend 5 additional days in Peru traveling to Cusco, the Sacred Valley of the Incas, and of course, Machu Picchu. We were assisted in our travels by a local tour company that provided a driver and guides. Overall, contact with these folks as well as people we met during our visit to Lima, provided a richer context with which to think about the research my team had done about the social context of Peru. We had researched the diversity of the Peruvian population and indeed, my time spent in Peru confirmed this. I met 3 Peruvians with Asian ancestry:
  1. Irene—a colleague of Tom Winston’s at Oracle whose family roots are in Japan
  2. Gilberto—a driver whose father immigrated from Canton as a child
  3. Dr. Cecilia Ono—a research scientist at CPX who also had Japanese roots
Interestingly, all 3 identified themselves as Peruvian and Irene and Gilberto knew little of their ancestral cultures and didn’t speak their ancestral languages. Food seemed to be the strongest link to their Asian ancestry. Cecilia, on the other hand, spoke fluent Japanese and even received her PhD from Tokyo University. While I was in the Cusco area, I saw a more indigenous population. Our travel guides were both from the area and had a lot of cultural pride on their indigenous ancestry. They spoke about their regret that they could not speak Quechan. They said they were not taught their ancestral language at school and were discouraged from speaking it. However, times have changed. Now, children in the Cusco area are formally taught Quechan and encouraged to speak it in an effort to preserve the language and traditions. In fact, students of the national university in Cusco must demonstrate proficiency in Quechan to graduate. While Irene, Cecilia, Gilberto, Alex and Karina (our travel guides) all had different backgrounds from one another, they all identified themselves as Peruvian, essentially expressing strong cultural identity with a strong national identity.

We heard a lot during site visits of the challenges reaching Peruvian consumers. Andres Abusada at InkaCrops explained why he exports his products rather than trying to distribute to the many small bodegas where most Peruvians shop. Andres also described that most of these small bodegas carry single serving or smaller sized products because that is how many Peruvians buy fast moving consumer goods. At class visits, this type of consumer behavior was also confirmed by the CEO of Quicorp Peru. I observed this at a pharmacy in Ollyantambo, a small village in the Sacred Valley. While looking around to see what medications could be bought without a prescription, I observed a customer buying 2 tablets of what we would call Pepto Bismol in the US. Our local guide, Karina, also took us to the San Pedro Market in Cusco. She explained that there are no supermarkets in Cusco, the 4th largest city in Peru and that the local populace still buys food daily.






She said that Peruvians feel it is important to use all 5 senses in evaluating food in the market to buy and that she would find it strange to go to a supermarket and buy fruit or meat pre-packaged. She says she has relationships with sellers of fruits, vegetables, meat, fish, etc.. She also says that going to the market is a social event, particularly on Sundays when she tends to run into people she knows. She is exactly the middle class demographic we have been reading so much about and is even a working mother with 2 young sons. Yet, despite how busy she is, she still prefers to shop in a traditional market. While there will be tremendous opportunities to create value for this customer segment, old traditions are still very important and not so easily changed.


Peggy Chou Team "Aggie 2" (Food/Agriculture2)

Sunday, March 16, 2014

Ag 1's Chile and Peru trip: Planes, trains, buses, vans, taxis and rental cars - Agriculture 1

By Amber Conley

For the majority of our team, in 12 days of travel we had 9 flights, 2 trains, several taxis, 1 rental car and what seemed like an infinite number buses or vans.  While this trip was exhausting it was an amazing experience we will never forget.

It all began with our planning.  After each submitting initial concept ideas, we held a brainstorm session expertly facilitated by Jon.  He then helped us categorize our ideas into the key Agricultural areas of water (both irrigation and harvesting) and salmon fishing.  Alas, his wonderfully researched sanitation idea while not forgotten was not focused on…but we had to draw the line somewhere…

With the 2 areas of focus identified we began to flush out pre-trip research and meetings.  Sean went above and beyond with his research and not only had pre-trip meetings but ultimately had the best formed hypothesis going into the trip.  The team also held pre-trip meetings for salmon and Colleen took the lead on setting up great key meetings in Chile for this topic.  Rochelle worked to schedule a meeting to give us a great viewpoint from an individual entrepreneur in farming.  And Margaret had a wonderful personal contact with a CEO that we could learn a lot from.

All in all we had 10 team meetings arranged before we took our first flight (these came in very last minute as vacations ended just the week before our trip in Chile/Peru) and several more solidified after we landed.  We also helped share additional contacts with the other teams.

In hindsight, a lesson learned from our team experience would be to try to divide and conquer more.  Our team set out to try to attend all meetings together when possible.  And while this helped us be sure we captured all of the information from the discussion, I think it left us all with our heads spinning from the back to back travel and tight schedules.  On our team day in Peru, we were forced to divide and split up across meetings.  This was tough as we all wanted to be in attendance but it just wasn’t feasible to be in two places at the same time.  If I were to start at the beginning, I would try to align each meeting with a single owner/facilitator and separate note taker and then give the rest of the team either another meeting or some scheduled down time.