Temperatures Rising: Preparing for the Trip

As Boston attempts to emerge ever so slightly from the deep freeze and record snowfall that has engulfed the city this winter, the EMBA 27 teams are gearing up to visit much warmer temperatures as we prepare for our international trip to Santiago, Chile and Lima, Peru. Our class has a somewhat unique situation in that we have chosen to visit the same locations as our comrades in EMBA 26. This has proven quite helpful as we have had plenty of opportunities to converse with Alumni and gain critical insights into what is important, what is not, and establishing a strategy for the trip.

Preparation for this excursion has been as charged as any other portion of the program. In the few weeks after our third, and final team of the program was established, we were obligated to create a team charter, perform in-depth analysis on different countries, provide multiple comprehensive yet succinct presentations of our findings, and work together to begin forming a concept for our international trip and Capstone project. Our team quickly embraced efficiency!

Establishing industry meetings in our host countries has proven a daunting task. Now just 10 days out and we are finding ourselves struggling to put firm meeting commitments on the schedule. With such a significant number of great contacts, we thought we would be able to get on the map quickly. But with only two confirmed meetings and many irons in the fire, beads of sweat may begin taking shape on our foreheads soon… It is definitely heating up.

Meanwhile, back in our “real” lives, we are each preparing our organizations and families for our 8+ day excursion abroad. At the start of each team call we share accounts of preparing lists of things that must be done, training others to take on the extra work-load, working insane hours to complete as much as possible, and trying to figure out how to cram in a few extra hours of quality time with loved ones.

This is a nerve-wracking, yet exciting time for our team, and we are savoring every moment of it.

Marjorie Nelson is an EMBA 27 student and part of the healthcare team for the capstone project. Marjorie is the Director of Manufacturing at GeNO LLC in Cocoa Florida.

Preparing for the International Field Seminar: Chile and Peru

The Boston University EMBA 27 class will visit both Santiago, Chile and Lima, Peru on their international trip beginning this Friday. During the trip, students will have the opportunity to participate in the following activities:


• Lectures and presentations, including discussion of cultural, legal and regulatory issues
• Site visits with businesses, government officials, and non-profit organizations
• Team assignments that engage students with local organizations


Students will be blogging throughout the trip, sharing their insights and lessons learned. Stay tuned for more posts from Chile and Peru!

Lima, Peru: High Tech Team Visits

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!

 

EMBA 26 in Peru - Learning about Illegal 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 nearest 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 makeshift huts and basins using human muscle to drive separation of the gold, silver, or platinum. Once this mineral is extracted the waste water and tillings 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 makeshift villages. Yet still the illegal mining continues. 

 

Why? The cold hard fact 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 cars 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.




--Greg Montemurro
Greg was part of the mining team for the EMBA 26 Capstone Business Plan project. He currently works for Keurig, Inc. as Senior Director of Manufacturing Operations. 

 

 

 

 

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

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. 


By: Amber Conley

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)

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.

Adventures, A Great Connection - High Tech 1

After a full day of meetings in Lima, our team was exhausted. That morning we had met with Peru 2021 and in the afternoon we met with the founder of "Fundacion Peru" and "Pronaturaleza". We had one meeting that we had been trying to set up for weeks, but seemed elusive. It was with Enrique "KB" Agois - the technologist and Internet architect at Rimac Peru, one of the largest insurance companies in Peru.

However, at the last minute, KB moved some commitments around and arranged to meet us for dinner. He was bringing his wife, Adriana, and we didn't quite know what to expect.

We started dinner and learned that Adriana was a doctor herself and we immediately struck a very familiar tone with them both. What began as a dinner between strangers was quickly transformed into a brainstorming session around our ideas on mobile technology, health care and change management for patients, doctors, and insurance companies. The ideas were free flowing around what verticals to start different services in, how data from smartphones could be leveraged and what ideas would be viable.

KB gave us great insight into how forward looking companies like Rimac are pushing themselves to be. He shared with us an anecdote from a meeting where he told the senior executives "in the future, no one will buy car insurance because there won't be accidents". We took his example of the driverless car and applied it to how health care will work in the future. The result was an intensely invigorating and enlightening meeting. 

Lima, Peru Team Site Visits - Agriculture 2

On Thursday, our team visited 3 companies in the agriculture and food industry in Lima, Peru.

First, we visited CPX PERU which was established in 1997 and is dedicated to the exportation of Peruvian Health Foods.  CPX is one of the market leaders in the exportation of Maca (men you may want to google this) and cat's claw derivatives.  It belongs to Cooperativa Pacifico Group, a Peruvian investment group with more than 42 years participating in different development projects in Peru. 
 

Agriculture 2 Team at CPX Peru

 

 

Paul, Karen, Peggy, Tom, Milagros Quinones (CPX Director), Christine, Rob, and Mark
 

 

Next we visited Inka Crops, a Peruvian producer of alternative snack foods from locally grown crops in Peru.  The company was founded in 2007 and has diversified itself in the snack industry by creating products like Inka Corn, a giant corn grown in the sacred valley near Cusco.  The 12,000 hectares of the sacred valley are capable of growing this giant corn every year without having to allow the soil to regenerate. 

The team ended the day visiting Austral, a fish meal and fish oil company.  Their products are used in both direct human consumption (e.g. Anchovies canned for local and export sales) and indirect human consumption (e.g. Fish meal sold to provide food for livestock).  We were hosted by Adriana Giudice Alva, CEO and Jorge Gutierrez who ran sales for the company.  They explained their business and how they work within the new quota system enacted by the Peruvian government to ensure the protection of the Bio Mass and the sustainability of the industry. 

Our site visits allowed us to get amazing insight into the challenges and opportunities of running businesses within Peru.  In each situation, we were able to see the vast amount of potential entrepreneurial and business opportunities.  While those opportunities are abundant, Peru also has many structural issues to fix such as, regulatory and legal environment, income inequality, and corruption.  

Overall, an incredible day seeing an amazing city in South America.

Tom

Miners at ESAN Business Schools - Mining

On Thursday March 13th the Mining team was at the ESAN Business School in Lima Peru. ESAN was established by Stanford University Business School and is celebrating its 50th year in 2014. The mining team met with faculty and ESAN’s EMBA cohort. It was good to share insights on business with the EMBA team from ESAN. The ESAN program is a 12-month full-time program. Unlike BU’s EMBA program, all of ESAN’s EMBAs have put their career on hold for 1 year while they attend class. Both programs have strong concentrations in entrepreneurship and focus on using

teamwork to reinforce applications through capstone projects. The ESAN EMBAs offered valuable insight into business practices in Peru.

 

Best Regards,
 

Greg Montemurro

 

 

 

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)

Team Ag 1's Adventure in Puerto Montt- Agriculture 1

By:  Colleen McCracken

 

Team Ag 1 has been busy learning all about salmon and water generation opportunities in Chile!  What a busy week it has been!  After spending 3 days in Santiago, 4 members of the team ventured on a short excursion to Puerto Montt to visit with 2 salmon processing plants based upon the tip of our EMBA “rock star” professor Fernando Suarez.  This trip proved to be one of the most exciting, interesting, and unbelievably successful trips we could have taken.  We are happy to share this experience and our wonderful pictures and videos for all of our classmates, professors and staff to enjoy!

 

Our trip landed us at the Puerto Montt airport in the rain.  Yes, my friends, it does rain in Chile.  In fact, in Puerto Montt and Puerto Varas it rains 300 days a year!  But I digress!!  After attempting to stuff all of my suitcases (and everyone else’s too) into a small Hyundai Elantra, we ended up with a perfect Maine pick up truck!  We then began our short journey (or so we thought) to Puerto Varas.  To say the trip was an adventure was an understatement! Because of course we decided to travel without the use of a GPS (or so we told Jon as he started to drive out of the airport).  Since there is only one road that leads north to Puerto Varas, right Amber?

 

With the rain falling down, we traveled through the unpaved roads of Puerto Montt, suitcases precariously bouncing and floating in the back.  After finally deciding to use the expensive GPS with after our many side road detour it suggested we climb a set of stairs…  Sean’s great sense of direction turned us around and put us on the right road so we arrived in beautiful Puerto Varas at the inviting and rustic Gran Hotel Colonos del Sur.  As you can see in the pictures, the view was breathtaking!  Views of the beautiful lake and Osorno volcano is not a hard way to spend the evening.  After a couple wonderful bottles of Carménère and a beautiful fireplace, it was time to rest up for our busy day of visits to the salmon processing plants!

 

Our morning began with a trip to The Harvest Marine, (a Norwegian company) processing plant, with the wonderful and incidentally handsome, Felipe Puga, where they produce 40 tons per day of salmon. This tour and visit was amazing! After shedding our ties and heels and “gearing up” with our full uniform of masks, hats and galoshes to ensure salmon safety, we entered the plant only to find out that nail polish was not allowed; especially nail polish laced with beautiful gold specs!  I bet you can’t guess who this was!!!  Nothing a couple of latex gloves couldn’t cover thank goodness; and so our journey began. 

 

The plant was nothing short of spectacular!  Luckily Jon took a video of the complete tour so that we could share this experience with you.  We were fascinated by the automation and the attention to quality and safety within the plant.  I don’t think any of us were ready for the “splash” that occurred when each of the salmon passed through specific gates based upon weight and grading.  It is interesting that after the horrible ISA salmon virus epidemic in 2007/2008 which decimated 70% of the entire Chilean salmon population.  This plant is living proof that the Chilean production of salmon is on the rise again and back in the #2 production position, second only to Norway.  It is interesting, however to learn, that even though production is returning to pre-2007 levels, government regulation, farming quality concerns, and significant hits to profitability over the last 5 years, are limiting the value proposition to producers and minimizing the potential for increased production even though demand is expected to continue to increase globally over the next 5 years.  We said our goodbyes to Felipe which for some of us was hard but it is was great to learn about the Chilean “one kiss”.  From my perspective, I much prefer two…..but again, I digress! 

 

Our next visit was to AquaChile, a Chilean branded company, who is the largest producer of salmon, trout, and tilapia in Chile.  After learning that the processing techniques were not likely different from what we learned at Harvest Marine, we opted to instead talk further about the problems and issues that exist within the industry rather than touring the processing plant.  This proved to be a smart decision.  We met with Vincente de la Cruz, who was most welcoming and willing to share his knowledge and expertise as the Vice President of Sales for Aquachile. We learned a great deal about the problems of sea lice and salmon safety and the roll the hatcheries play in keeping this under control.  What really caught our attention, and brought us to the edge of our seats was the success of the retail store in the plant’s parking lot.  We learned of their new test retail stores in 3 regions of Chile and the most recent store to be opened in 2 weeks in an affluent area of Santiago.  We talked about the brand that is AquaChile and the work they are doing to keep the fish used in fish meal a sustainable part of the industry.  We toured the first store that is located on the AquaChile campus and realized what an opportunity there could be to educate Americans on the salmon industry and the quality and the work that is being done to create a sustainable industry and a business concept was born…….but of course we cannot share that idea.  And for now, it is one option of several that we are considering on the Ag 1 Team.

 

We are blessed by the beauty of Puerto Montt, and Puerto Varas and we are blessed by all of what we learned in such a short period of time and we are blessed by the time we had together enjoying this beautiful place in Latin America……We feel blessed!

 

(videos and pictures to be posted soon…)

Chile: Energy or Water? Not in my Backyard - Mining

Chile is a beautiful country. A land of deserts and the Andes which is stretched across 3000 miles of coastline. Its main city, Santiago, sits in a basin surrounded by mountains and contains 7 million of Chile’s 17 million citizens. In this land of beauty there is a problem. There is not enough water or energy for its largest sector of the economy to thrive. Mining needs water and energy. By the year 2020, the copper mining industry will need an additional electric power of 3,000 MW in order to produce 39.4 TWh, 80% more than in 2010.

 

Mining in Chile is using seawater pump over long distances. This is used in ore removal as well as in the concentrator process. This requires energy and is corrosive to the equipment and the environment. Copper mining globally consumes about 12,6 m3/sec of fresh water.

 

Why does Chile have such a shortage of freshwater and energy? Chile is an arid country and has enough fresh water around Santiago with glacial melt water. However, the country as a whole is short on water. This will be a limiting factor in Chile’s growth and they are in the process of looking into desalination plants to provide for future Chileans. However, this is not practical for mining. 

 

Energy is a different story. There has not been a consistent energy strategy over the last 10 years. This is largely due to the inability of the government, people, NGOs, mining companies, and energy companies to agree on a set of goals. Chile has a growing environmental movement and many people don’t want energy projects or desalination plants in their backyard. This has led to the desire to find a zero impact energy strategy, however, this is not practical as any energy project including renewables have an impact on the environment. 

 

Chile has thousands of wind, water, solar, and geothermal projects on hold. Not because these projects don’t have merit, but because of gridlock due to the failure of communities and government to find the best solution for a watershed and ecosystem. Rather than meeting in the middle of regional solutions, all parties tend to focus on either site solutions or government policy. Chile spans 3,000 miles and crosses many ecosystems and watersheds.

 

This will be the main challenge for Chile’s new government. If they can break the log jam, then, the future is bright for Chile as reserves of copper are projected to last another 100 years.

 

 

Best Regards,

 

Greg Montemurro

 

 

 

Carozzi Blog - Agriculture 2

Agriculture #2 Site Visit

 

By: Robert Genduso

Carozzi S.A. (Carozzi) is a 115 years old family owned international food production company that operates through its three business divisions: Corporate, Chile and International division. It produces, distributes and sells pastas, salsas, drinks, desserts, cereal, juice and soft drinks, snacks, sauces, flour, biscuits, tomato paste and fruit pulp, through its subsidiary Empresas Carozzi SA. Carozzi markets and exports its products through brands, namely, Trattoria, Carozzi, Rizzo, Pomarola, Caricia, Costa, Costa Kids, Ambrosoli, Sprim, Parma, TG Mariposa, Bonafide and DRF Billiken. The company sells its products in Brazil, Japan, Central America, Mexico, Peru, Paraguay and the US. It operates through commercial and distribution offices in the US, commercial offices in Mexico and Paraguay, manufacturing plants in Argentina, Chile and Peru. Carozzi is headquartered in San Bernardo, Santiago where the newly constructed production facility is situated.

 

The EMBA visit was scheduled by Prof Suarez on behalf of an Agg2 request to visit a food production facility to get a better understanding of Chilean food company capabilities.  One of the Agg2 business “sparks” was to create and/or grow an existing specialty artisan food line for either domestic or export sales. This was a big pull by Prof Suarez!

 

Upon arrival, we were met by Peter Pickett, former CEO of Carozzi US and now GM of the 130 hectares complex which includes the new 350M production facility employing close to 4,000 people. We started in the employee store which carried the entire products- eye opening from pasta to pet food. As we walked across the campus to the conference room prepared for our visit, it was obvious that this was a fully vertically integrated campus from the abutting railway for raw material delivery to finish goods production and distribution warehouses. When we arrived to the conference room, we were met by Jose Juan Lugany Rigo Righi, the number two in the Carozzi C-types.  Today, EMBA26 had exclusive access to the number two and three at Carozzi. We sat for a presentation on the company history, product lines, and recent accomplishments. By recent accomplishments I am referring to one of the greatest comeback stories in business history. In late summer 2010, the Carozzi site experienced a devastating fire which wiped out more than half the campus and all of the pasta production (largest seller) capabilities. This is the same year Chile experienced a major earthquake requiring huge infrastructure rebuilding.  However, Carozzi and the leadership team were able to map a path, execute and complete rebuilding of a state of the art production facility in less than 15 months without a single pasta stock out. The mission was to prevent the competition from gaining a single inch on the supermarket shelves. They succeeded and two years later have actually gained in market share. How did they do this? Dedication & loyalty (paid all during rebuild), vision (rebuild bigger/better), strategy (how, versatility, flexibility) leadership (hands off site based), operational expertise, risk assessment and risk acceptance. We were so impressed with how all the tenets of our EMBA education were tied into the story, we offered to write a case on Carozzi and the recovery. Prof Suarez will close the case study particulars etc.. The purpose of this visit was to confirm what we expected about Chile and Food production capabilities: They are Fully Developed. What was surprising was their position on vertical integration-a must to ensure quality. Whether this was out of necessity due to void in intermediate services or the true desire to control quality is unknown at this juncture….but VI is alive and healthy at Carozzi.

Adventures, Right to the Top – High Tech 1

On Tuesday afternoon in Chile the HT1 Team had a busy schedule. However, one of the most coveted interviews of the week was scored by Fernando Suarez.  He had set us up to meet Claudio Munoz, President, Telefónica Chile.  Fernando worked with Claudio years ago and was able to make the connection.

After going through considerable security at the Telefónica Building, we took the elevator to the top floor to meet Claudio.  Claudio gave us an overview of the company from its origins as a Spanish government owned company created in 1924 as Compañía Telefónica Nacional de España (CTNE). Telefónica was the only telephone operator in Spain and still holds a dominant position (over 75% in 2004). Since 1997, the Spanish government has privatized its interest in the company. One fact that we found interesting is that Telefónica is the second largest corporation in Spain, behind Grupo Santander (our big Chilean Bank meeting on Monday).

Telefónica owns Telefónica Chile, formerly CTC (Compañía de Teléfonos de Chile) that is the biggest fixed-line operator and internet service provider in the country. The Telefónica Group has been in the country since 1989. The mobile business is run by Telefónica Móviles through a local subsidiary. On 25 October 2009, Telefónica Chile changed its name to Movistar, including cellphone, landline, satellite TV, and internet.

Claudio shared that the change to the name Movistar was in part due to it being more attractive to the younger market that they believe is critical. Mobil penetration in Chile sits at 130% and Movistar is targeting the age group from 12 to 21 and call them the “Interactive Generation”.  In this target group, 70% of the phones are smart phones with a data plan.  Last year Movistar launched a communications satellite that makes it possible for all of Chile to have cellular capability.

We discussed with Claudio his thoughts on our Capstone focus area of mobile technology supporting health care accessibility and he was very supportive of these types of innovations that use the mobile platform.  He did give us the insight that some of the barriers to entry would be the doctors and the Isapres (countries private insurance companies).  They would need to be part of the value chain and buy into the idea.  Movistar is attempting to infuse innovation into Chile and its company.  They have an innovations group and are a major supporter of Start-Up Chile.

We sat and discussed many technology topics with Claudio that afternoon and as with all of our Chilean business meetings, there appeared to be no time pressure and the feedback we received was very candid and helpful. 

First Day of Team Visits in Chile - Agriculture 2

Our first team day of site visits in Chile was one we were very excited about!  As a team, we had leveraged the BU network and names provided by Pete to set up two meetings with BU alums: Javier Larrain of Coquineria and Jaime Ruiz-Tagle Claro of Cintazul.  Additionally, Tom leveraged his Oracle connections to set up a meeting with a Risk Officer and Relationship Manager at Rabobank, Jorge Torres Montebruno.

Our day began with breakfast with Irene, an employee at Oracle in Santiago, but a native Peruvian.  Irene was kind enough to accompany us on our site visits for the day and assist with any language barriers.  Given her time in Chile and her upbringing in Peru, we also wanted to spend time talking to her directly about her own experiences.


The morning was great as Irene offered some important insights.  Specifically, she mentioned how there is a lack of variety in food / produce offered in Chile.  She said that Peruvians (and other South Americans, specifically Brazilians) were used to having a large variety of produce to choose from year round - she found this to be lacking in Chile.  Additionally, she said the best restaurants in Santiago were all Peruvian and the food scene in general was lacking.  She thought that Chile was clearly a more booming economy and offered a better quality of life for her family, but she missed very much the culture of her native Peru.  Irene also mentioned the growing industry for specialty herbs and supplements grown in the Andean region - specifically Maca and cat claw.  She thought there could be an opportunity there.  Lastly, Irene discussed the difference in food quality and standards from Chile to Peru.  In Chile there is more access to refrigeration, storage and higher inspection standards than in Peru.

Janice was our advisor for the day and we began by walking over to Coquineria which was located a few blocks from the Ritz.  It was another beautiful day in Santiago and we sat down at Coquineria and waited for Javier to join us.  Coquineria is a boutique food store and restaurant.  There are currently two in Santiago.  Javier's wife started the store with a partner (a chef) and Javier has now joined the business full time.  He talked about the fact that this market didn't exist in Chile prior to Coquineria.  It was a previously unmet demand.  The store focuses on importing high end food products from mostly Western Europe, specifically many French foods.  They also sell cookbooks, high end cooking ware and do a robust wedding and catering business.  The store has an attached restaurant featuring many of the products sold.  Javier mentioned that the market in Chile is probably only 4-5 restaurants TOTAL.  He also mentioned he had been approached to open a store in Miami, but wanted to focus on the Chilean market first and foremost.  We had a great time walking around the store and seeing the best selling products - a pre-packaged duck and canned bellini's.  We asked Javier about where his customers shop besides his store, since it is not a full service supermarket… he said they do regular shopping, but would come to him for special products to round out their kitchens.  We learned from Irene, a middle-upper class woman living in Santiago, that her family wouldn't shop at Coquineria except for VERY special occasions.  It seems that it is certainly for a very high end clientele.  We thought the concept was very interesting, as we see a lot of this having success in the United States.  Javier mentioned that his biggest challenge is training and retaining talent.  He said that the service standard is Santiago is not what he would expect and want for his clientele.  He mentioned that ensuring his staff shares his expectations has been an ongoing issue.

After our meeting at Coquineria we stayed there to eat a delicious lunch and could clearly see that quality is a differentiator.  We then had some time before getting in the van to head to Rabobank.  Rabobank Group is a leading global financial service provider.  Their global customers are primarily in the agriculture business.  From Rabobanks' website:

"The food and agribusiness is undergoing a period of dynamic development. The world population is growing rapidly and the agricultural sector is facing the enormous challenge of meeting the growing demand for food. The agricultural sector must not only produce more, it must also do it more sustainably. Rabobank is committed to contributing to this endeavor with our global network and unrivalled knowledge of the players that operate in this market."  

We met with Jorge Torres Montebruno who is a key relationship manager for Rabobank Chile in the Agriculture sector.  He is also knowledgeable of the groups movement into Peru.  Jorge walked us through the key risks in the business today and how his group sizes up financing opportunities and needs.  He mentioned that many of the smaller producers receive their cash flow financing from larger groups like Dole.  Jorge's team is focused on corporate clients in the $75MM-$100MM space.  In Chile, they are working with salmon, poultry and fruit producers / exporters.  They are beginning to cover Peru as well.  In Peru there is less banking competition, so higher net spreads, lower rating (BBB) and higher risks.  He mentioned the fruit industry has suffered a lot over the last 4-5 years and operations and therefore margins have been impacted.  The key contributors to this have been the drought, strikes and the exchange rate. He did mention that berries have been able to weather this storm, as they have higher convertibility and can turn over >1 x a year. He said the bank looks at new technologies and higher conversion ratios as the future--specifically focused on more effective uses of water. 
  

Once we left Rabobank, we went back to the hotel to meet up with Jaime of Cintazul.  Jaime spent almost two hours with our team and a member of the other Agriculture team.  He was such a wealth of knowledge and someone I'm sure we will continue to be in touch with throughout this process.  Jaime runs a family business spanning MANY different disciplines, however he is specifically focused on fruit and egg production.  They also produce almonds, olives and other items - but we spent most of our time talking about fruit.  Jaime talked to us about Gesex which is an export conglomeration.  Gesex has about 12-15 mid size fruit producers and sells to large players in the US, Asia, Europe and Latin America - namely Kroger and Walmart.  Gesex sells under that brand, but has the producers provide the fruit directly to them in provided packaging.  It is then up to Gesex which fruit goes where and each package is individually coded so the original producer receives the sale.  Gesex collects an 8% fee.  They also help with consultation on quality, technology, better production, etc… The producers ultimately take the risk but don't have to deal with the buyers.  Jaime spoke very highly of this model and said it has been great for his business.  However, it is one with limitations.  He believes there is opportunity for more Gesex like companies for smaller producers, or even for specific products.  Gesex itself, when looking to grow, does not add more producers, rather it asks for more from their group of producers.  The group itself also shares ownership and has about 70% of the company.  The remaining 30% is among the management team.  The management team is a key driver to the success of Gesex.  The team consists of large players in the food business who came in with connections to many of the key buyers.  These relationships are so important that Gesex recently went to the second layer of management and offered retention bonuses.  Lastly, Jaime spoke at length about the challenge of water. 

Overall, it was a great day with a ton of learning.  Our team didn't have a big dinner that night, rather everyone sort of crashed as we prepared to head to Peru the next day!


By: Christine Maloblocki Blanchette

EMBA 26: Surf's Up - Cruising to Success in Chile

Success abounds in Chile. From large multinationals keeping costs low for consumers and delivering products across multiple retail outlets/brands to recycled fishing net skate boards to strong financial banking and financing, Chile has arrived.

Wal-Mart Chile
Wal-Mart once again did not disappoint with a strong display of operational and cost leadership. One of the most impressive moments for me during our visit was learning that 40% of the senior leadership team was comprised of women. Leaders in key roles such as, CFO, CMO, COO among just a few. Wal-Mart Chile provides significant support for professional women including helping them maintain a work-life balance and seeking growth opportunities in management and senior management. Wal-Mart Chile requires at least one woman-applicant for all management positions. 

Santander
Managing risk is standard practice for Santander, but leading a company through the tumultuous seas of a global financial crisis requires the fortitude of a general and the spirit of a coach. For me Mauricio Larrain Graces brought to life the necessity of strong leadership and thoughtful planning. Mauricio provided insight on doing business in Chile by explaining the independent corporate strategy of Santander and the local banking habits of Chilean and South American consumers. Santander has more than twice as many branches as their next competitor, an indication of the personal connection consumers have with their bank and the trust that is build at the local level. Mauricio gave an amazing talk about leadership hitting four points that, like other moments in EMBA, have changed the way I approach work and life. Mauricio spoke about four key areas to building and leading a successful team. 

1. Have a dream – You need to set goals and have a vision for the future. Renew the dream – continue to push the organization with larger goals, constantly moving to the next place.
2. Choose the top talent. He joked that you don’t always want the top of the class, but talent that will stick with you and share your vision. Hiring people who only care about money will not provide the company the support needed to reach its goals.
3. Systematic communication. Share the vision of the future, share the corporate strategy at all levels. Talk to people and get to know them.
4. Control – put in the necessary controls so each person can succeed.

Once all four are in place support your people. Ask them what you can do for them and how you can support them.

Bureo Skateboards
Elbow pads, helmet and a foam mat may help as you learn to cruise to the beach on Bureo’s newest cruiser skateboard, but it was the soft landing provided by Start-up Chile that allowed this adventure to succeed for the company and the Chileans. Bureo manufactures a sustainable skateboard using recycled plastic fishing nets - nets that collect in the ocean and cause damage to the environment. It isn’t only Bureo “making waves”, but also the Start-up Chile organization. Start-up Chile offers $40,000 dollars, assistance in registering and filing all the necessary corporate documents, makes connections for new entrepreneurs, and provides assistance with language and housing. Repayment of all of these services is a six-month commitment to the program, supporting the organization’s outreach efforts and a public nod to where you started once you hit it big. The program is fully funded by the Chilean government and with the change in leadership happening the day we visited, the program director is confident that the funding will continue in the years to come. 

Images: www.bureoskateboards.com/the-rip/

ESE Business School
While in many respects Chile has cruised into the modern world, many have still had to walk a long hard road. During our lecture at ESE Business School, it was very apparent that income inequality was still a major thorn in the side of Chile. Chile has a high Gini coefficient, which many believe to be linked to the disparity in education levels. Only 40% of the population had enrolled in higher education, a figure that should be closer to 60% to compare more directly with more developed nations. Access to education is a large issue for poorer families. Private and public higher education is similarly priced with each sector providing mixed quality.

--Karen L. Graham

Karen is a Practice Development Manager at Ropes and Gray LLP, a global law firm with offices in Boston and around the world. 

EMBA 26: Want to be an entrepreneur? Learning about Start Up Chile.

If you have an idea which has been pulling at you and always wanted to start a small company, then, Chile could be the place for you! The Boston University EMBA cohort visited Start Up Chile on Monday, March 10th during the international field seminar.

Start Up Chile was created by the Chilean government. An independent third party, Corfo, monitors the program through InnovaChile. The program provide $40,000 USD of capital (equity free) for entrepreneurs with winning ideas, a one year visit to Chile, office support, and access to Chile’s social and capital networks. Budding entrepreneurs go through a rigorous selection process. Two elements of the selection process are a global focus on the projects and a business plan focused on expansion. In return these entrepreneurs must have projects which start in Chile, last at least six months, and they must spend time teaching Chileans the art of innovation and entrepreneurship.

The BU EMBA team met a team of three from California. Their company Bureo Skateboards, used old fishing drag nets made of nylon. They were able to take someone’s trash and turn it into money. The nets were the raw material which was then ground and used to make recycled skateboards. It’s a win for the environment, the end consumer, and of course Bureo. They believe they can get their marginal cost for their cruiser skateboard down to $10 USD. These cruiser boards typical sell for $90 to 150 USD.

Start Up Chile began in 2010 with a pilot program of 22 start ups attracted from outside of Chile. In 2011, the program went live when they brought 87 start ups from 30 countries, from a total of over 600 applicants. Currently, there are over 650 start ups competing for 100 spots.

Start Up Chile’s goal is to invigorate the entrepreneurial spirit in Chileans. They are well on their way. So, if you have a great idea, think about taking it down to Chile to commercialize and earn some money on the way.

--Greg Montemurro

Greg was part of the mining team. He currently works for Keurig, Inc. as Senior Director of Manufacturing Operations. 

EMBA 26 International Seminar: Santiago, Chile and Lima, Peru

The EMBA 26 students just completed their International Field Seminar in Chile and Peru. They visited both Santiago, Chile and Lima, Peru on their trip. Some continued on to the Cusco Region in Peru to climb Machu Picchu, a breathtaking 15th-century Incan estate built atop the Andes mountains. During the seminar, students had the opportunity to participate in a number of activities. 

The class is divided into teams focused on specific industry sectors. Each team is tasked with creating a new product or service for development in either Chile or Peru. Throughout the field seminar teams had site visits to research their industries and learn about doing business in Chile and Peru. Each team was asked to reflect on their site visits and experience on the trip. 

EMBA 26: High Tech Team 2 Preparing for the International Seminar

High Tech Team 2 

EMBA 26 Team High Tech 2 met on cold Thursday evening on February 27th at Machu Picchu to discuss the upcoming capstone trip details. For those of you who are wondering about the venue, Machu Picchu is a Peruvian restaurant in Somerville, MA. Our team (excluding Jeff who was travelling) experienced the Peruvian cuisine firsthand in our own backyard before the trip. We discussed the capstone industry visits over Chicha morada (a Peruvian drink made from purple corn). As a team we all feel excited and enthusiastic about the trip and getting to experience the business and social context of two countries within a span of a week. We hope to get the maximum learning out of this trip to help us prepare for Module 5 and the Capstone project. The team was also looking forward to some fun times when not busy with site visits to balance work and leisure.

Kamal Kaul is a member of the EMBA 26 class. Kamal currently works in software development for JPMorgan Chase.