Day 6 March 28
March 28, 2008 – 4:52 pmToday we took a 20 minute bus ride from our hotel to a local Industrial Park to visit the Latin American headquarters of ARAMARK. We heard two presentations this morning. The first, given by Mr. Jose Luis Ibaibarriaga, the CFO of Central Restaurantes, ARAMARK focused on the economic and political outlook for all the countries in Latin America. ARAMARK has operations in Peru, Argentina, and Brazil (among others) and services industries as diverse Mining, Education, and Health Care.
Mr. Ibaibarriaga explained that countries in Latin America represent very different markets and the importance of knowing the culture of each country before entering the market. As an example of this, ARAMARK often uses very short term(one month) agreements/contracts with their clients, due to the uncertainty in the political and economic landscapes across many of the Latin American countries. He also explained that, unlike Chile, there is a trend in many of these countries today away from free markets, and back to populist policies, which means a greater threat of instituting price controls and nationalizing industries. Of course, the biggest political threat rests in Venezuela, with President Chavez. No one can accurately predict how many countries will follow Venezuela’s lead.
These types of discussions drive home the advantage of having long term stable political systems. Assessing business risk is difficult enough to assess, but in many of these markets one must add the political uncertainty to the decision making process. As an example, although Chile’s inflation rate has been relatively low and very stable since 2000, Chile’s inflation rate in 1973 was 1000%-which presented a real a challenge for any business’ pricing decisions.
Mr. Pablo Achurra, the General Manager of Central Restaurantes, ARAMARK gave the second presentation. Mr. Achurra focused on the specific challenges ARAMARK faces in each of its service and geographical markets. Mr. Achurra believes one of ARAMARK’s greatest strengths is that it first learns the market in which its clients operate and then brings its expertise in food service to that client.
The mining industry, for example, is first and foremost concerned about safety. Some of the cantinas operated by ARAMARK in this business must be located underground in the mine itself, as it takes workers an hour to reach the surface. These locations present real challenges for ARAMARK to insure the safety not only of their employees, but to maintain the appropriate sanitary conditions in the food service operation that is underground. Workers in the mines work 7 days straight and then have 7 days off. Obviously, these challenges are different than those ARAMARK faces in operating the concessions for the Eagles and Phillies (although, one might argue that when the Cowboys are in Philadelphia, the risk factor is equivalent).
Most workers are unionized, but unions are structured very differently in Latin America than in the US. Unions are typically associated with a company, rather than a trade, making negotiations complex, given the large number of companies served by ARAMARK.
Tomorrow we head home, and will be leaving the hotel at 6:30 for ride to and a tour of a copper mine. After a late lunch, we will be heading to the airport and are scheduled to arrive in Philadelphia at 10:30 Sunday morning.
Chile is an amazing place-the people have been very hospitable and warm, the food has been excellent and we’ve learned a great deal. We must thank those alumni whose contributions made this trip possible.
Carolina presenting gifts from LeBow expressing our thanks to Mr. Achurra and Mr. Ibaibarriaga:
