A contact in Santiago reports some damage to older homes and buildings in the capital. Deaths in the area seem to be because of a collapsed highway on the west side of the city, as one goes to the airport. The airport also was affected. (It took us more than an hour to go through customs on Feb. 13, so its design is familiar to me.)

An MBA class from Thunderbird, the Glendale, AZ. business school, is actually still in Santiago looking to get out. A story in the Republic notes they were to leave today. Ironically, they are staying in the same hotel we used, the Atton Hotel in the El Bosque section of the city. It’s on the east side, in a tourist/business area.

***

Before moving onto Peru, I wanted to share a few observations on pre-quake Chile. These seem superficial and trite in view of what’s happened, but here they are:

• The first thing that strikes you about Santiago is how European it looks. The city’s streets are fairly wide and tree lined, and the sidewalks are clean. The architecture is incredible; designers have seemingly tried to outdo each other with unique designs, the use of large hollow spaces in office buildings, different shapes and varieties of glass.

  There are many condo high-rises, with attractive terraces filled with shrubbery of some sort.

  

  

• The public transportation is amazing. The subway is safe, clean, well-lit and free of graffiti. It costs about $1 to ride, and it’s fast. Buses run down major throughfares.

• It was really hard getting used to summer in February. Phoenix in February can be warm and sunny, but this was summer. Temps in the 80s, kids running around because school wouldn’t resume until March 1, and folks strolling down streets and shopping. I wonder what Christmas is like.

  

• The “downtown” area of Santiago is the center city. There is a “Wall Street”-like area and government buildings nearby. The presidential palace has a prominent spot, with plazas in front and in back.

  Seeing the palace, surrounded by multi-story buildings, it is difficult to imagine the military coup that took place in 1973. Gen. Pinochet’s forces grabbed the government from Marxist Salvador Allende and planes bombed the palace. You just ask, how? It’s like trying to bomb the White House – one building in a large city. Allende committed suicide, and a statue of him stands outside the palace.

  

  

• The Catedral de Santiago is an impressive edifice several blocks from the palace. It dates back to the late 1500s and now boasts a Gothic design.

  Whenever I see such grand structures, I’m always amazed how populations centuries ago saw them constructed amidst so much poverty and need.

  

• The best place to see the city is from Cerro San Cristóbal in the Parque Metropolitano, which includes hills just north of downtown. A funicular – those of us who have been to Pittsburgh call them “inclines” – is a vertical railway that takes you straight up the main hill. Midway up is a zoo. At the top is a tall statue of the Virgin Mary and a small amphitheater, where church services are held.

  From there, you have a 270-degree panorama from an Andean glacier in the mountains to the east across the city to flat expanses to the west. A silver dome in the distance is an arena, where Beyonce had a concert while we were there.

  

  

• The Mapocho River flows through the city. It was not flowing much in the summer but what was flowing was a gross light brown.

• Chile is a country with Spanish roots. Very few people spoke solid English, even in the hotel. But everyone was nice and patient.
• Places like McDonalds, Dunkin Donuts, Burger King and Pizza Hut are present.

• Chile, like Peru, seems to have a “full employment” policy. Many Chilean workers mill around, from a young woman standing next to the trash can at McDonalds waiting to throw your wrappers away to men in bright orange jumpsuits that fill gas tanks. I guess it’s better than the alternative.
• We visited the Undurraga Vineyard. Chile places great emphasis on its wine capabilities, and the tour guide at this winery about 20 miles northwest of Santiago explained the subtleties of the operation, from the differences between grapes planted at different angles to the sun to the use of oak barrels from the United States to minimize dispersion of the wines’ flavor. They are known for their Cabernet Sauvignon and their sparkling wines.

• Last but not least, a word on Chilean nightlife. As told to me by my colleagues, the club/bar scene does not get started until midnight, and it’s more like 1 am before it hits its stride. Some classmates went out at 11 and found bars empty. The dancing goes on until 3 or 4 in the morning, which reveals why – when the earthquake struck at 3:20 am – so many folks were quickly out in the streets.

Chile was hit by an 8.8-magnitude earthquake this morning. The epicenter was 200 miles south of the capital, Santiago (above).
Reports said that some buildings in Santiago collapsed and power was out in some areas. The airport was closed. A tsunami warning was issued for the Pacific islands.
Having just been there, I wasn’t surprised that folks went into the streets at 3:30 a.m. The clubs and bars are closing about that time, and folks stay up late.
Hope for the best.

http://economictimes.indiatimes.com/news/politics/nation/88-magnitude-earthquake-hits-central-Chile-sets-off-tsunami/articleshow/5623948.cms

One of the visiting speakers to the Universidad del Desarrollo in Chile was Santiago Grage, the corporate finance manager for Empresas La Polar S.A., a Chilean retailer.

La Polar has an interesting story. It was created in Santiago in 1920 as a tailor shop. In the 1950s it expanded into merchandising and apparel. It grew to 12 stores.

In 1998, following problems started in Latin America by Mexico’s peso shock, La Polar went into bankruptcy. Its demise reflected problems it faced in credit and receivables, the wrong mix of clothes, and too much debt. It was taken over by banks.

A private equity firm risked $20 million to purchase the company, which had revenues of $62 million, and began a reorganization. Mr. Grage came on board as part of the management team. The firm took on the company’s personnel and leases but not its inventory or client base.

The first thing the company’s managers did was assess the market. The leading department store was – and still is – Falabella. Two other companies seemed to be having success serving high-income clientele.

So the new La Polar decided to serve the middle- to lower-income market. Managers visited residents’ homes. They took a look at what people were wearing, how they decorated their homes and what they wanted. They decided to triple the sizes of their stores to about 20,000 square feet, to offer apparel and durable goods like furniture, and to open two stores across the country every two years.

They created their own labels, purchasing items from the same factories in China that produced Ralph Lauren products. They introduced their own credit card. They made a decision to limit “alliances” with complementary businesses. They allied with a chain of pharmacies, the Santiago public transportation, and home-gas suppliers, who shared the same customer demographic. Its market share rose from 4% to 13%.

Since 1998, the value of the company has risen to $1.4 billion. Its revenues are now $437 million and growing at 20% a year. It has 40 stores in Chile.

Mr. Grage said that 2009 was “a difficult year” because of the global economic downturn. The company’s stock price – it went public seven years ago – fell from $5.45 to $1.70. (It’s back up to $5.) Management halted projects, did not fill positions opened by departures, and looked for efficiencies to get through the trough. It looked at its credit policies and – knowing its clientele – refinanced the debt of 30% of its credit users.

It intends to open two stores this year and is eyeing expansion to Colombia, where the company believes consumers are underserved.

The lesson: Identify your customers, know your customers, serve your customers, operate with a profit in mind, and don’t go overboard with debt. Not bad!

It’s kind of unsettling to get lessons in federal fiscal prudence from individuals from Chile.

The long and thin South American country along the Pacific Ocean – picture Texas squeezed into a 100-mile-wide strip from Los Angeles to New York — has been ruled by the center-left since 1990. Prior to that, a military dictatorship led by Gen. Augusto Pinochet had run things since the 1973 coup that featured a bombing of the presidential palace in downtown Santiago and the suicide of Marxist President Salvador Allende.

Over the last decade Chile – a country of 17 million – has seen steady growth, for the most part spurred by exports of natural resources like copper and timber. Yet, knowing its recent path, it kept federal spending to a minimum and avoided social re-engineering to “make things fair.”

Dr. Manuel Sanchez Masferrar, a Stanford-educated economist at the Universidad del Desarrollo in Santiago, explained that Chile had to address the issues every country around the world faced when the economic turmoil began in 2008. As major banks failed, the country saw trade fall and commodity prices drop. Fewer export dollars came in. Rather than jump in with deficit spending to maintain the status quo, Chile’s government lowered interest rates, cut taxes and provided a stimulus for small businesses and housing. It had also set aside some money when the copper price went over $3.

Now, Chile isn’t the United States. It has unemployment among the young and old, and, the professor noted, probably spends less than it should on health care, education and pensions. But the government sees its role as fostering commerce through monetary policy and maintaining low inflation, not attempting to cure every social ill.

Another professor, Eugenio Guzman of the university’s School of Government, said Chileans have come to see government as a tool for society, not the engine of commerce. Like some colleagues who have joined center-right President-elect Sebastián Piñera’s administration, he believes government should liberalize business, expand labor flexibility and encourage investment. “Leave people alone,” he said.

The incredible growth of the U.S. deficit – estimated at $1.35 trillion for 2010 – has spooked countries that have seen problems on a much lower scale. The previous high deficits for the United States were $455 billion in 2008 and $413 billion in 2004.

Government should avoid dabbling in income redistribution, he said. Instead, if it wants to help the poor, it should offer services. He notes that the “poor” in Chile don’t resemble their counterparts from 1970. Many are obese and have personal items like shoes and clothes.

Carlos Capurra, a Chilean who works in the mining division of the U.S. Embassy in Santiago, said the 500% inflation at the time of 1973 coup taught his countrymen that there are some things government should not oversee. He related the story waiting a year to get a car under the Marxists, seeing it break down after a year, and having no parts available to repair it. High tariffs prevented foreign automakers from selling vehicles in the country.

After liberalizing higher education, the number of universities grew from six to almost 70. More individuals are pursuing professions, which is expanding the middle class. The country has an A+ credit rating.

Chile still has challenges, he said. There is underemployment, low GDP per capita, low productivity, and higher labor costs. The government is focused creating consortiums to handle projects like tunnels and allowing private organizations to manage entities like ports and hospitals.

Robert Moreno, investors and strategy relationship manager for Banco Santander, a leading Latin American bank, said financial institutions there also took the precaution of maintaining higher capital limits than their U.S. counterparts. It required discipline to manage risk, maintain a solid balance sheet, and control costs, he said.

Economist Manuel Sanchez Masferrar of UDD spoke to the ASU Executive MBA class on Feb. 15, 2010.