Shalom from the Very Center of Business

We officially kicked off Chazen Israel (Group B) this past week with our first social to get to know everyone.  A very delicious lunch of falafel and hummus was bought from the very creatively named restaurant, The Hummus Place.  (I’m sure their creative team took a while to come up with that one!)

The Chazen Israel organizers this year very generously opened up a second group after high demand for this trip and I was one of the lucky people on the waiting list to make it.  Even though it doubled their work load, we’re very excited to get the opportunity to go now!

Although the company visits aren’t finalized yet, we do know that we will be meeting with a tech/VC company, an Air Force base, a winery, and with a politician somewhere in the mix.  All very exciting things!  A quick look at the itinerary (and clarification from the organizers) taught me something new already: the work week in Israel is not Monday – Friday like the majority of the world, but Sunday – Thursday.  Friday and Saturday are their days off with the majority of businesses being closed on Saturdays in Jerusalem, but probably open in a larger city such as Tel Aviv.

With just one more week of class before Spring Break (at least for us second years – good luck on midterms first years!), I’ll be saying shalom next time from Israel!

-Teresa Lee ’16

Kick-off: 2016 Chazen Korea Study Tour

Today marked the official launch of the 2016 Chazen Korea Study Tour, with a pre-departure meeting taking place in Uris Hall. For weeks, participants have been anxious to get all the juicy details on logistics, accommodation, company site visits, and (arguably most importantly) the food situation in South Korea.

Everyone was pumped up as they walked into the classroom to receive their Chazen track jackets and were welcomed with a diverse assortment of South Korean snacks. I must admit that I am usually accustomed to Strokos pizza, so it was a welcome surprise to see this rice punch:


We covered all the basics such as things to pack, important phone numbers, the agenda, and transportation details. Among the companies we are scheduled to meet with: Kia, Samsung, and The LOTTE Group. There was particularly a LOT of excitement when we heard that we would be visiting the Korean Demilitarized Zone (DMZ), the buffer zone between North and South Korea. Students sat in groups according to the specific company they were assigned to; each group will deliver a short presentation on the respective companies we visit in order to enhance the Q&A discussion. Professor Wallen also encouraged students to reach out regarding preparing company specific questions.

The organizers have done an unbelievable job ensuring people are completely comfortable and all individual requests are addressed. From dietary restrictions to international visas, it’s challenging to accommodate every request and everyone has really appreciated all the hard work they have done thus far. There is no doubt students will be wearing their Chazen South Korea track jackets proudly in the coming weeks leading up to the trip!

– David Batt ‘16


Chazen Argentina: Lessons Learned

Upon reflection, our experience in Argentina taught us a number of lessons related to the true state of political economy and macroeconomics in the country. It is no secret that Argentina has had a complicated and tumultuous history related to the consequences of its economic policies instituted by its political leadership. Argentina has defaulted on its debt twice since 2001 and has had limited access to the international capital markets since then. Moreover, high inflation, approximately 25% inflation each year, has also been a part of the Argentine narrative. Given these factors, we expected to see a much different political and economic climate than we observed. Below are our takeaways:

High inflation and Argentina’s tough economic climate is part of of Argentina’s narrative but does not define Argentina. When we toured the country, many of the individuals (everyday citizens, business leaders, politicians) all agreed that inflation and a more stable economic climate is a major goal for Argentina. However, this is not at the forefront of the national psyche on a daily basis. To us, Buenos Aires and Mendoza did not appear to be in a state of crisis and individuals proceeded with their daily life similar to countries with less severe economic crises. I think this was eye-opening for us as the picture of Argentina painted internationally does not always reflect the reality of everyday Argentina.

Optimism and change are a major theme throughout Argentina. The election of President Macri in late December has been met with a new wave of optimism throughout the capital city of Buenos Aires. During our company visits, business professionals expressed excitement about the possibility of a better environment for business in the country. Moreover, Argentina remains close to resolving its outstanding debt and many are looking forward to Argentina’s future participation in international capital markets.

The Macri Government has the potential to change the way Argentine government operates. Chief of Staff Marcos Pena spoke about opportunities to reign in fiscal spending and creating government budgets that provide more benefits to Argentine citizens. The overall goal is to spend money more efficiently moving forward. These type of policies are both business friendly as well as friendly to the individuals who also need more public services.

Looking back, our visit to Argentina reflects a country that appears to have a promising future. While Argentina does have considerable challenges, it should not be defined by them as the Argentina we saw reflected a more nuance picture. Our opportunity to be fully immersed in the culture, speak with major business leaders and government officials has allowed to see Argentina as it should be seen – a country with major potential to be a prominent international player once again.

Reflecting on Cuba – Key Takeways

On Friday, two weeks after returning from Cuba, we held our final class where students presented their analysis of an industry within Cuba and we discussed our key takeaways from the trip. Ultimately, all students agreed that Cuba is in a period of transition but must overcome many major hurdles before it can move towards stabilizing its economy.

Non-State Enterprises

As I mentioned in an earlier post, the Cuban government is working towards shifting employment away from state-owned enterprises with a stated goal of non-state enterprises representing 45% of employment in 2017. Today there are 200+ categories of non-state owned enterprises that are permitted by the Cuban government. While many non-state enterprises were formed in the 1990’s, a majority of them were shut down in the early 2000’s. The failure of the businesses can be largely attributed to un-economic overregulation (many of which are ideologically driven laws), lack of formal business training for entrepreneurs and dearth of investment capital (both from investors and banks).

Disparity of Wealth

The Cuban Government wants Cuba to prosper but is worried about prosperous Cubans. Following the 1959 Revolution, the gap between the poorest and the wealthiest Cuban citizens has been quoted to be roughly 4x at its peak. As one could imagine, this gap has rapidly expanded since 2010 when Raúl Castro took action to allow more private sector jobs in Cuba. In order to mitigate wealth disparity, the Cuban government has placed significant restrictions on entrepreneurs’ ability to own multiple businesses, to gain scale and to gain foreign investment. For example, entrepreneurs are only permitted to own one type of each business (e.g., a restaurant owner can only own one restaurant).

The Importance of Tourism

While tourism in and of itself is a critical industry to Cuba’s economy, tourism is also integral to nearly every other industry that operates on the island. Although there is economic equality amongst Cuban citizens, they represent an extremely minor portion of Cuba’s GDP. The average Cuban citizen earns $30-$80 per month whereas we spent roughly $100 per day on the island (excluding hotel accommodations). As a result, nearly every business on the island is focused on selling to tourists given that selling to Cuban citizens is not an economically viable business.

Foreign Direct Investment & Ownership

Cuba realizes that its future economic development is highly dependent on foreign direct investment. That said, while Cuban law does not explicitly prohibit total foreign owned assets, there are only six today (as of August 2015). Further, the U.S. and Cuba do not currently recognize court judgements within each other’s jurisdiction.

Financial Market Infrastructure

Cuba currently maintains a dual currency system. Furthermore, the banking system complicates even the most basic transactions (e.g., deposits and fund transfers). Today, Cuba lacks ATMs and the ability to widely accept credit cards; this creates a large challenge for any consumer facing industry, forcing businesses to rely on cash transactions.

As a result of these issues, many investors and multi-national corporations are patiently waiting on the sidelines until they deem the risk-reward tradeoff in Cuba to merit investment.

-Michael Echemendia ’16