Serendipidade Paulistana

A CBS student decides how much meat he can handle at the opening dinner.

On Sunday, the GIP team arrived in São Paulo: Brazil’s economic powerhouse boasting a 20M population and a cosmopolitan vibe to rival New York’s. We were immediately welcomed with an all-you-can-eat meat festival (churrascaria) and rounds of caipirinhas exploding with lime. After dancing the night away to the Brazilian beats of samba and funk, we woke up bright and early the next day to begin our company visits in the city. We spanned diverse industries, ranging from finance and footwear to the emergent startup ecosystem. As we listened to presenters and volleyed them with questions, we noticed certain themes about the business landscape in Brazil…

Brazil is a continental country with a vast internal market.

First, Brazil seems to be a self-contained market. Domestic factors such as consumption mostly shape monetary conditions. This partly explains why Brazil was relatively insulated from the global financial crisis in 2008; in fact, their economy was strongest around 2010 only to later fall into recession in 2015. Moreover, while the importance of foreign trade to the Brazilian economy is growing, it is still relatively small compared to the entire economy. In 2018, exports were $239B USD and imports $181B USD versus $2T USD GDP. Where it’s large, it’s mostly in primary products. Finally, many Brazilians never travel out, very few Brazilians speak English, and the country doesn’t share a primary language with the rest of Latin America. Combined with the enormous size of the country (209M), the remaining room for economic development and ensuing market potential, it’s not hard to imagine why the economy is relatively inward-looking.


Professor Singh shows off his wares at the Havaianas store with a cheerful employee.

Companies stay local in Brazil. One impact is that with the large companies we’ve visited, globalizing has either not been on the table or is a complex challenge approached very carefully. Cielo is Brazil’s leading payment processing company (processing 10% of Brazil’s GDP annually) yet faces rapidly eroding market share due to loss of previously held concessions. As they fight to remain the leading player, they’ve chosen to innovate on their core business model rather than consider expanding into other countries. For Havaianas, the iconic Brazilian flip-flop company, domestic sales represented 98% of total, which is remarkable since Havaianas started selling in 1962. But why would they, since 73% of Brazilians touch Havaianas at least once a year? The wildly successful globalization of the brand is a major source of pride for Brazil, since they are one of very few Brazilian companies that has successfully globalized, and Havaianas brand seeks to embody the Brazilian spirit and values. Havaianas accomplished this by moving piecemeal country-by-country and establishing regional offices to accomplish something new.

Another impact seems to manifest in the distribution of sizes and types of businesses we see in Brazil. Many industries exhibit an oligopolistic structure historically dominated by a few large Brazilian companies. While the formal (and informal) MSME market is enormous, the market for start-ups is small and treacherous especially as they try scaling into mid-size companies. We learned from Redpoint Eventures, a formidable player in the nascent venture capital scene here, that lack of available financing is the biggest challenge for scaling: even more so than navigating the Kafka-esque systems required to launch a business. There is a lack of local investors with a VC-level appetite for risk. Even when there is foreign interest in investing, the available check size doesn’t match the real stage of development of the company in a Brazilian context. This makes it very difficult for start-ups to flourish and scale into mid-size companies with potential to disrupt large incumbents. More optimistically however, those start-ups that do survive the brutal incorporation and financing process at the beginning tend to emerge bullet-proof and extremely cash-generative. We were excited to learn how Redpoint Eventures took matters into their own hands by partnering with Itaú, a major bank in the country, to build an incubator and nurture the emerging start-up ecosystem in Brazil.

A sign at Cubo encouraging us all to take a chance on something.

Which brings us to another theme: serendipidade, or serendipity/luck/chance. When we visited Cubo, Redpoint & Itaú’s incubator, we all wondered why a bank and a VC firm would partner to launch such project without taking equity in the businesses there. Among other reasons, they simply want the multiplicative effect of bringing innovators under one roof. Cubo provides entrepreneurs the chance to meet someone and do something. Just like the simple production error that spawned a thousand SKUs at Havaianas, Cubo believes that the unexpected combinations of interactions there will spur growth of the Brazilian start-up ecosystem.


I hope that Brazil will continue to open up and invite more serendipidade through increased exposure and international exchange. There is a trend: exports have actually doubled since 2005 and imports have nearly tripled. While I was writing this post, Brazil eliminated US visa requirements. In my opinion, the more random combinations, the better. There is even some serendipidade in our own Chazen trip to Brazil. Who knows how the connections we’ve made and the learnings we’ll export back to our own countries will manifest in the future?

GIP Brazil: the experience is in our hands

On a cold March Wednesday night last week, our class met for the last time as a group before we all flew south for winter. Instead of Professor Medini Singh, the class was led by our TA and a program director from the Chazen Institute. Chazen calls these sessions “Pre-Departure Meetings”. They take place shortly before a group departs for their in-country visit. Not only do they provide a crucial information download about logistics and day-to-day realities of life on the ground, but they also require that students come together to author a social contract among themselves.  I helped lead one of these sessions when I organized a Chazen study tour to Indonesia this past January, so I am newly and deeply admiring of the people who led our Brazil GIP session.

“Roberto Burle Marx’s Copacabana Beach Boardwalk in Rio de Janeiro Brazil.” (from ModernDesign.org)

To kick off the social contract process, our TA challenged us to define what kind of expectations we have of each other. How can we co-create an experience that is pleasant for all of us? What are our individual and group goals for the trip? We came up with the following three principles:

  1. Understanding the local culture: by being participative and asking good questions to everyone we meet
  2. Understanding the political and economic context: by engaging with company visits before, during, and after the visit itself
  3. Always being inclusive: demonstrating an open-minded, welcoming attitude, as well as looking out for each other  

Professor Medini Singh said it best when he reminded us later in the session that “what we get out of this experience is in our hands.” I can’t emphasize this strongly enough: study tours with the Chazen Institute at Columbia Business School are incredibly powerful components of a global education. Our GIP class and CBS in general are both internationally very diverse. To dig into the trajectory and complexities of a country that we’ve been studying and discussing for weeks together is a beautifully unique and valuable opportunity to learn about the world.

And there is no better place than Columbia Business School for this. In our professor’s words: “…given our different perspectives, even our background, in the same meeting we see different things. What is our reflection of what has happened? I’m always interested. And that’s where most of my learning comes from.” I could not be more excited to spend a week unraveling the web of a country so beautiful and complicated as Brazil with Professor Singh and my diverse cohort of thoughtful and respectful classmates.

Até a próxima!

-Diana McKeage

Brazil Tour Conclusion

Joe Qiao ’17

Sitting in the hotel room in Rio and listening to the waves hitting the shore, it is hard for me to believe that our Brazil Global Immersion trip is over. Our 7 day trip was so packed that I felt I have been in Brazil for a much longer time. We ended up completing all 8 company visits and a site visit to Rio Metro Control Center. The schedule was intense but I think we achieved what we wanted for the trip. The company visits were well designed. Even with 9 visits, I can still tell what we have learned from each company.

To conclude how our trip went, I’d like to share with you our experience from 2 angles- the business professional aspect and the social/ cultural/ entertainment aspect.

I think the company visits were so well planned that I can hardly give constructive feedback (I probably still will come up with something so that Prof. Singh doesn’t give me a P on this class). I really enjoyed the Natura, Azul, Suzano, BNDES visits. These companies all have their presentations updated for our trip and the presenters were very knowledgeable about their business. I am surprised that we had good communications given the language barrier. Our peer classmates asked so many interesting questions that we almost always ran out of time during the presentation, not to mention Prof.Singh’s double-shot questions made it impossible to finish the session on time (kidding).

The big surprise for me was how well organized the companies in Brazil are. Before the trip, I imagined that for a developing country which is deeply into recession, the companies must be struggling to keep their forms. The reality was that the companies we visit acknowledge the recession but all had very long-term view on the economy and outlook. For example, Natura has a strong sense of being environmentally-friendly despite of the downturn. Azul has an aggressive growth plan and is looking to capture more market share. Suzano is innovating to be more efficient. I see a lot of potential in Brazil after the company visits. However, I also noticed many obstacles that Brazil has to overcome before it develops further.

Our stay in both Rio and Sao Paulo was good. We went to fine dining and did sightseeings. However, after talking with local tour guides, I realized that what we saw in Brazil was just a tiny piece of the pie. We did not really feel how the “regular” Brazilians live. Some of the old and deserted buildings in downtown area reminds me that the country is not equally developed. Many parts of the city is so well-developed that if you told me that I was in California, I would believe it. However, looking up into the mountains, we saw favelas. That immediately reminds me of the famous movie- City of God. We probably will get a more balanced view of Brazil if we watch the movie after the company visits. I think the inequality really created a world of problems to Brazil- violence, a lack of spending power despite a decent average income level, and poverty. There is also another problem with Brazil (similar to Greece) – expensive pension and labor protection. The country pays too much to workers and the high labor cost stole away the companies’ profit. The labor protection also kills people’s motivation to thrive.

Overall though, I do think that Brazil will continue to grow in the long-run and remains an attractive investment choice for international investors. You can either pay 27 times P/E for a company listed in the US or you can pay a 5 times P/E for a company in Brazil. I would place my bet on Brazil!

 

 

 

Brazil Company Visits

Joe Qiao ’17

I would like to first respond to my presumptions from my previous blogs. One of my observations during the weekend was that Sao Paulo was a quiet and calm city. I wanted to see if the city will become hectic on workdays like other similar size cities around the world such as Tokyo or Shanghai. After two days touring around the city, my observation tells me that Sao Paulo is indeed a calm city. We had traffic but nothing like those in New York. We saw people on the street but nothing like those seen in Beijing. We see some high-rises but nothing like those in Hong Kong. Like I said, Sao Paulo has its unique charm from the relax and calm environment. I do have a question. Where are the 20 million people? !

The second observation was that Brazil does have a large income gap between the rich and the poor. Brazil’s GDP/ Capita is slightly over $10k, which is almost doubling that of China. However, the rich part of the city looks like any developed countries around the world whereas there are still many slams in and around the city. I can see why it is such a priority for the Brazilian political leaders to address the inequality problem in the society. I was told that Sao Paulo and the Southern states are considered the wealthiest part of the country. The Northern states and Northeastern states are in very bad shapes.

Back to the topic of company visits. I have previously attended world tours in a few cities but I have to say that the company visits in Brazil so far are the most professional and well-prepared. The company presentations were full of interesting content. For example, we had so many questions during our Natura and Suzano visits that we run over our schedule in almost every session and had to rush through our plant tour. Sadly we didn’t even get to shop at Natura after all the talks about their all-natural and environmentally-friendly products. We had a great time regardless. I was pleasantly surprised that the companies were so willing to receive us and spent a lot of effort giving us the best experience. The CEOs of both Natura and Suzano gave us warm welcome and high level company officials gave speeches and took us on the tour. We asked so many questions during the presentations. Of course the best questions always came from Professor Singh’s “I have two questions for you”.

My favorite experience was seeing the wood logs turning into packaged A4 paper at Suzano’s factory. Learning about how the company became so efficient made me wonder if I still want to work in Finance after graduation.

We also had a great time at Ambev and learned a lot about beer market in Latin America. We had a happy hour in their office and enjoyed some good food and beer. One of my takeaways was the Zero-Alcohol beer taste just like a regular beer!

And of course, I have to show off my favorite picture from today!

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Great experience so far and I look forward to seeing Rio tomorrow! Stay tuned.

First Day in Brazil- Downtown Sao Paulo & Best Steak in town

Joe Qiao ’17

After 6 hours of flight from Bogota, I arrived in Sao Paulo International Airport. It was 12am and I found the ATM machine in the airport charging an eye-opening 24 $R fee for withdrawing cash… Not a good first impression, at least not yet.

Our group met up at 2pm and went on a city tour. I have to say that Sao Paulo is far more calm and charming than I expected. Maybe the Bogota experience was too hectic but I found Sao Paulo is like a relaxing giant. The streets are busy but not overly crowded for a city with 20 million population. I will have to confirm my feeling tomorrow since today is Sunday.

The downtown Metro Catholic Church is a landmark. I was surprised that such a beautiful historical district is deserted. It is different from many of the “Plaza de Armas” in other Latin America countries. It is calm and beautiful. Our tour guide Lee did a great job explaining the history and how coffee made a huge contribution to the wealth of people in Sao Paulo.

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We also went to the Batman Alley (Beco de Batman). Many street arts, bars, and tourists gave Sao Paulo a more lively image and strong contrast to downtown area. We spent half an hour taking the perfect pictures here.

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We had dinner at well-regarded Figueira. The steak was amazing and I really regret having had a heavy lunch. I still managed overdosing both beef and watermelon though. The dinner ended with a few of us playing some high-intensity drinking games. Overall, a great start and we look forward to the first day of company visits (not so excited about getting up at 6am).

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Chazen Brazil GIP Read more

The Spirit of Chazen #Brazil2016

What is Chazen? 

“In 1991, our founder, Jerome A. Chazen, MBA ’50, recognized the need for a new kind of leader: one who understands cross-cultural issues and their impact on business. That vision led to the creation of the Jerome A. Chazen Institute of International Business, which serves as the hub of global activity at Columbia Business School.”

(cheesy nationality jokes aside)

When I step back to reflect, it’s truly remarkable how globally diverse our cohort of 30 students were, representing 14 nationalities (here we go: Netherlands, Italy, India, Israel, Lebanon, Peru, China, Japan, Brazil, Turkey, Canada, Greece, Malaysia and good ol’ USA), but also surprisingly diverse business backgrounds: 

Visiting the Suzano Paper & Pulp factory – who knew that Martina Carbone CBS ’16 would pepper the speakers with R&D questions, given her chemical & bio-engineering background?

Who knew that Audrey Stewart CBS ’16 spent time in Taiwan working on nuclear weapon detection for the US Army?

Traveling abroad with a group as awesome as this is a natural catalyst for conversations about … religion, politics, family, and hey, even hair type (Beleza Natural, Operations Management 101); conversations too taboo within the confines of a classroom, yet somewhat organic and free-flowing when you’re chilling in a bus with the lush forest of Rio as your backdrop.

For me – these conversations are the ‘deep and meaningful’ that help us know each other better; the real forage for international and cross-cultural capital that makes us more informed and educated business people.

That’s the Spirit of Chazen.

IMG_5014 (Edited)

 

#Brazil2016 – In Anticipation

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Reuben Gan, MBA ’16

 

As the child of travel entrepreneurs, I’ve had the privilege to visit many countries from an early age. Yet with that comes a slight lack of awe and wonder with revisiting previous destinations. The same cannot be said for BRAZIL – a country that I’ve never set foot in, the stuff of films and popular culture and with its own set of stereotypes.

 

“Brazil is one of the only countries in the world where I truly feel that I am not being seen for my colour” – Professor Medini Singh, our Chazen tour lead. Indeed, what we’ve learnt in the 6 weeks of in-class discussions leading up to this trip is that Brazil is a melting pot and spectrum of ethnicities that like America, stems from a past of slavery. What differed in the development of the two countries (of similar geographical size and population) was the ethnic ratio, level of cultural integration and development since their respective industrial revolutions.

 

As we learnt, understanding this socio-cultural context is crucial to understanding all of Brazil’s business and political issues – from the fluctuation of the Real currency (vôo da galinha, “flight of the chicken”), the contrast of Sao Paolo and Rio’s riches with that of its poor Northeast, to Lula’s successful reign vs. Dilma’s more challenging tenure. (Status: Dilma is currently fighting back corruption charges against her, against a backdrop of political uproar and protests for democracy)

 

To understand a country in its entirety requires more than a week in Sao Paolo and Rio de Janeiro. But with our trusty TA and SP native Vitor Selles as well as our Chazen in-class learnings we’ll certainly have a better lens to observe the country with.

 

In the words of our immortal TA, “As the weekend approaches, I start to imagine people arriving in Brazil and being dazzled by Rio’s beauty and Sao Paolo’s ugliness” – Vitor Selles, MBA ’16