ON THE EDGE: CLIFF OF SCHIFF

Lima, Peru and Santiago, Chile are two very different cities with very different histories, cultures and people. Peruvians were passionate about preserving their culture. 87 ancient civilizations resided in Peru’s land. Peruvians were friendly, open, welcoming and warm. They also tended to have a distinctive look. Peruvians are darker skinned, tend to be below 5’8 and their Spanish is very clearly pronounced.

Chileans were quite different from the Peruvians. Chile has a tumultuous history and it seemed they were less focused on preserving aspects of their cultural history as much as the Peruvians were. On the other hand, Chileans had a more formal set of customs, business culture and a distinct dialect of Spanish which they spoke.  One of our recent meetings with Parque Arauco, a mall owner and operator, provided some interesting insights into Chile and and Peruvian culture. When we met with the Parque Arauco representative, one of the primary factors she cited as responsible for the continued growth in shopping mall retail was cultural. South America uses malls as cultural meeting places, not just shopping centers. Friends and families travel to malls and congregate to eat lunch, shop, play games and enjoy all the activities the mall has to offer aside from solely shopping in its stores. I hate mall shopping in the U.S. and only shop online, but considering that South Americans have less public spaces to congregate, this makes sense. This altered my perspective on the potential growth of ecommerce in South America. While eCommerce seems ripe for exponential growth in the region, strong cultural barriers such as the mall experience may be the major impediments that slow its adoption.

In addition to these cultural differences, the postal system doesn’t work as well in Peru and Chile. In the U.S. while we all complain about the postal service, it actually works fairly well most of the time. 99% of homes have addresses and the mail gets delivered to those within a reasonable amount of time. This difference means that an eCommerce retailer who is trying to make inroads into these South American countries will likely need to either hire a local courier or create their own courier business to deliver packages more effectively than the public services do currently.

http://www.elciudadano.cl/2015/03/11/151784/responsabilizan-a-celulosa-arauco-por-problemas-de-salud-en-ninos/

When you see articles like this one about Arauco group in Chile, it spurs mixed emotions. On the one hand, I think it is atrocious that corporations are using harmful chemicals that make their way into our water, our farms, and our food - entering our bloodstreams and resulting in harmful consequences. On the other hand, in a capitalist society isn’t it the role of government to protect the citizens and the commons? 

After meeting with Arauco group, you begin to see things differently. It is easy to victimize a corporation that may be involved in these business practices. It is harder to maintain that perspective when you meet the people that work at said company - who are kind, well spoken and hard working. 

Indigenous protesters carry a banner reading: “We are not terrorists,” a response to the application of the controversial anti-terrorism law to the conflict

On September 8th, 2014 a bomb went off in a subway that killed 14 people. The government and people were furious and justice was demanded by the citizens of Chile.  The government characterized this terrorist act, among 200 other bombings in Chile in the past few years, as "anarcho-terrorism". On September 22nd, 2014 the government claimed to have captured the people responsible for the attack. In order to do so, the government enacted an "anti-terror" law, whereby the Chilean government was allowed to detain suspects without charge and command greater sentences upon conviction as well as, most controversially, use anonymous witness testimony as primary evidence.- in the specific case of investigating terrorist acts. The use of this anti-terror law has created an uproar in Chilean politics, serving as a polarizing topic that has served to create more extreme perceptions of government's role in Chile.

A Shining Path unit ready to go on patrol, Courtesy of Vice.com

I read Vice news because they seem to always have the risky, edgy, real and unaltered content that I look for in news media. When I read a recent synopsis of a 2010 interview with the Shining Path leadership, I was taken aback by the risk the reporter had to take in order to get the story. While Shining Path was known for many things, such as being narco traffickers, they did not admit to any such thing. In fact, all they admitted to was allowing coca farming and that their fight was for communist dogma - not to fund the drug trade. 

While the reporter wanted to believe this, it was hard to trust people who told you they didn't sell drugs when they carried automatic weapons, RPGs, and employed children to fight.

The interview from Vice news below is the last interview that was ever done of the Shining Path leadership, they were lured into a boobytrapped house which exploded and killed them all in August 2013.

A coca farmer in Tingo María, Peru. Photograph: Mariana Bazo/Reuters

The minister of agriculture in Peru wants to convert coca fields to other crops, but is facing quite the opposition. Juan Manuel Benites, Peru's Minister of Agriculture, wants to have 2,000 hectares of coca leaves converted to alternative crops in 3months - quite the ambitious goal. 

Peru is the largest cocaine producing country in the world. Because much of the country is densely filled with lush jungle forests, it is optimal to grow coca. In many lawless, jungle regions drug traffickers not only own and operate large coca farms, they act as if they were the local government. 

The total spend of the projects is $300 MN financed by Banco Santander. What was most interesting to me was to learn that Chile imports 60% of the energy it consumes. Which I found fascinating as Chile has the second highest GDP per capita in all of South America, yet is a net importer of energy. In my opinion, these projects will also be a net positive for the Chilean labor force. As more energy projects are pursued in the country, one would expect more education to focus on these more skilled labor tasks - thus improving the overall competitiveness of Chile's labor force.

The mining sector portfolio of projects in Peru is quite diverse. In a country with a $6.5 BN GDP, one would think their projects would be concentrated in a few sectors. In Peru's mining and metals investment guide, prepared by EY, 54 projects are underway in the mining and metals sector. Copper, gold, iron, polymetallics and Zinc projects - with Zinc being the only commodity where the amount invested is less than $1BN USD ($816 MN). 

A recent economist article discusses Peru's current president, his lack of conviction, support, and inability to accomplish positive economic & structural reform. As a cautionary note - it is a very one sided, opinionated piece. What is striking about the article is that the reforms that we would consider a president would try to make, improve access to and the quality of education, decrease the barriers for companies to employ workers etc. are not the reforms Humala seems to have attempted. Instead, he has focused on transportation. His approval rating has dropped to 30% and Peru's largest export - copper - has fallen dramatically in price. While the Economist article is quite negative, in my experience, the situation they describe is actually above average compared to other South American country politics.

The article concludes with the below quite which I found quite profound

"Reforms require conviction, communication and the mobilisation of the potential winners, usually a more diffuse group than the losers. On these counts Mr Humala is letting Peruvians down."