Thursday, March 13, 2014

Santiago, Chile - High Tech 2

High Tech Team 2 in Santiago, Chile

Team High Tech 2 started off its South American experience and planning at the Machu Picchu restaurant in Somerville, MA a couple of weeks before arriving in country. We considered it an experience in cultural and culinary immersion that helped us prepare for our trip to Peru and Chile.  After flying for more time than we wanted, it was a beautiful Saturday morning when we arrived in Santiago. Jeff decided to arrive a day early to get a head start but the majority of us made it per schedule with our entire luggage.

We started our day with the city tour and welcome reception back at the hotel and spent most of the Sunday at the foothills of picturesque Andes Mountains with some of us having the energy to go hiking or horseback riding. The evening was spent at a small vineyard with the owner showing us his property and discussing how it constituted a manifestation of his “emotional retirement.” What better way to end the tour than with some wonderful Chilean wine and cheese that definitely helped in assisting with the recovery process from the last 24 hours of travel.

Tuesday (March 11th) was the first team visit day in Santiago and thanks to the effort of each member of our team and Prof. Suarez, we had multiple team visits and had to split for most of our meetings. The member who scheduled the meeting took the lead role in the meetings but all of us had met the night before to discuss the general line of questions we may have.  We started as a full team with a meeting with the General Manager of Visa in Chile and then had to split to attend the remaining six meetings ranging from Office of Agricultural Studies and Policies (ODEPA), food manufacturers (NativForLife, Frutos del Maipo, Dimerco Comercial Ltda), a fruit exporter (David Del Curto) and Thomas Reuters, an information management company.

To keep our meeting productive, our strategy was two-fold - one, to learn about the broader aspects of business environment in Chile and two, to learn more specific about our concept and get more details about our proposed business idea. This worked well for us as we could utilize our meetings very effectively and get as much information as we could. The meetings were very productive and provided great insight on the unique characteristics of the Chilean economy and market. For example we learned that approximately 50% of retail profits in Chile were derived from credit cards issued and managed by major retailers. Historically the banks were reluctant to issue credit to low income groups and so the retailers have actively filled the void. The major retailers in Chile like Falabella now dominate the credit card market, and are actively working to export this business model to other countries in the region like Peru.

The meeting at the Chilean Ministry of Agriculture provided some insight on some of the challenges small farmers face regarding access to market and the minimal leverage they have when it comes to prices when negotiating with the brokers and major exporters. This to an extent confirmed the team’s hypothesis about an information asymmetry between the two sides.  Another interesting insight gleaned was the Ministry of Agriculture’s use of cell-phone SMS technology to provide advice/information to farmers about pesticide application and weather conditions.

The next day our team split into two with one part visiting the Chilean Government Office of Innovation and the other visiting the Carozzi manufacturing facility. Since we were in Chile on the eve of the inauguration of a new President, many of the current government officials were on their way out of the door.  Nonetheless the meeting with the innovation office was probably one of the best of the trip. We learned that despite Chile being on solid footing when it comes to its institutions and competitiveness, lower labor rates elsewhere in the region, and the increased pressure for structural reforms to address the serious income inequality in the country require Chile to move up the value chain in order to retain its favorable growth rate.  We had a fascinating discussion about positioning Chile as a regional R&D and entrepreneurship hub, through initiatives like “Start-up Chile” and the effective and efficient transfer of developed technology and research to its businesses.  We heard for example that while the general quality and quantity of scientific papers is very good in Chile, transferring technology to its businesses costs on average three times more than in countries like the US. There is definitely room for improvement there.

Team High Tech 2 (Jeff, Garfield, Arnaud, Greg, Ray, Kamal)

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