Reflections on Argentina

It has been more than two weeks since we came back from Argentina. I spent 10 days in New York, packing up my life and getting ready to return to…

Since coming back to LA on Tuesday, April 29th I have been overcome by an uneasy calm. Neither Jaspar nor I know what’s next. He’s got graduation and trip to Israel to at least delay the inevitable nothingness. But I am smack dab in the middle of it now. I keep hoping that another idea will hit me. I’ll be walking down the street and see a women crossing the road hands filled with 8 different shopping bags, hurrying to make it to the other side before the light turns green and I’ll say, “Ahaa! That’s it...A bag carrying machine!”

What we found in Argentina was not what we were expecting. It’s not that we were surprised. You venture into the unknown knowing that it will not be as you have imagined it, so it’s pretty difficult to be surprised. But I was disappointed. Even after a month of research, a 40-page business plan, and 12 sheets of financial projections we found that we were wrong. There are a number of reasons for this and I won’t go into boring specifics, only to say our greatest challenges were pre-existing competition, Argentine’s resistance to change, and most importantly the precarious nature of the country’s economy. Ours was a retail concept which meant we would be earning pesos, and the peso sunk to it’s lowest level against the dollar in five years last week. Meanwhile the dollar itself is at its lowest level in recent memory against nearly every other major currency. With unofficial in inflation in Argentina at about 25% the peso is likely to continue to depreciate until the government gets its economic house in order. Which doesn’t appear likely anytime soon. Anyhow, this is all a long way of saying a retail business is about the worst business you could start in Argentina at the moment.

What is surprising is that we were completely aware of all these difficulties before we went to Argentina. Perhaps our fearless adolescent natures endowed us with attitudes of invulnerability, so we thought ourselves capable of easily surmounting all obstacles. In any case, after many conversations with Argentine locals and American’s who do business in the country we realized we had vastly underestimated the severity of these challenges. “Go into software!” We were told. Nearly everyone advised us to find a way to make dollars, euros, or pounds, while paying our workers in pesos. “That’s where the real money is!” Well there is only one slight problem with that – I don’t know the first thing about software and Jaspar knows even less.

So there you have it. We are now two young idealess entrepreneurs. On a mission to avoid a life of neck ties, twice-monthly paychecks, and performance reviews on the long road to a place called middle management, where people wait out the last two decades of their working lives dreaming of the day they arrive at retirement. Oh how glorious it will be when my 401K kicks in and I can sit on a beach or a golf course and…

I talked to my uncle over the weekend, and he had some strong words of advice. He said that my problem was I didn’t have a goal. In his opinion unless I picked a monetary figure that I was aiming for, my goal would just get larger and larger with every bit of success. Pick a number, get there and then enjoy it. But I am not after a number and I certainly am not after a life on a golf course or at a beach. I want to work! I want to work until the day I die. Of course I want to be rich too, but for reasons of security and ego not so I can spoil myself.

Which of course brings us back to the real problem. We don’t have a viable business idea. Any suggestions? Really, please post a comment or email me with any business ideas you have. The sooner I can get to work, the better it will be for everyone involved…

Domingo, 20 de Abril

This was the shortest day on our trip. After getting up at 3 p.m. we grabbed lunch in Palermo Soho and had a couple helados at Freddo for good measure. The Soho neighborhood was packed on the weekend, a stark contrast to the weekdays in which the area was pretty much vacant.

We went back to the apartment, packed, said goodbye to Nick, and got the deposit back from the lady who had rented us the place. While the apartment was a little old and the beds were uncomfortable, I was sad to leave it. It had quickly become home. We took a taxi to the airport, a fascinating drive through the poorer neighborhoods of greater Buenos Aires. Along the highway families had Sunday afternoon barbeques as their children rode dirt bikes and four-by-fours through the dusty hills and played a games of futbol on the grass. I really had fallen in love with this place. I had to come back.

When leaving from the Buenos Aires airport the most irritating part, worse than the long lines and lack of self-service kiosks we have become so accustomed to in the States, is the $18 (US dollar) tax every single person has to pay. But by the time we got to Duty Free I forgot about it. Here we found some incredible deals on wine, liquor and cigars, in addition to some of the most beautiful female sales people in all of Buenos Aires. I was tempted to stock up on sin but contained myself, buying just a single bottle of wine for my New York roommate’s family.

This time the flight was easy. I slept all the way through to JFK where I left Jas as he checked in for his flight back to LA. It had been one of the most educational, humbling, frustrating, and inspiring weeks of my life. For now I could only hope that we would do something with it. Air Train, E Train, down 8th, 235 and I was…

Sábado, 19 de Abril

It was going to be a long day. We were up at 9 to meet Monica at a location she had found for us in Recoleta. The spot was perfect – a corner site, in a residential and retail neighborhood with constant foot traffic. It was about the right size and was being offered at a good price. Before I got too excited I remembered that not only did we not have an investor, but that I had begun to doubt our concept myself.

Next we met with Henri, and detailed the week’s events for him. As a successful businessman I could see that he understood all of the challenges that we were facing. We told him that we were no longer sure that we had chosen the right business or even the right industry, but that the week had shown that there were definite business opportunities for us in Argentina. He offered some powerful words of advice and encouragement, and we said our farewells.
After a work out at the Alvear we headed to the Alamo, Argentina’s only American sports bar, to watch the NBA playoffs and have a beer. Basketball is arguably Argentine’s second favorite sport, behind futbol. But they tend to only broadcast NBA games featuring Argentine players, which essentially means only San Antonio Spur games with their star Argentine duo: Fabricio Oberto and Manu Ginobili. We came in for the second half of the Cavs, Wizards game. No Spurs, meant Sling Box. Sling Box is a device that can beam media anywhere in the world. Because this game wasn’t on Argentine TV, the bar was getting the feed via Sling Box from the Miami market. The picture was blurry and the image stuttered from frame to frame, missing some of the biggest plays of the game. As you can imagine this is just about the most frustrating way to watch a basketball game. When work out and the Quilmes had set in, we headed back to the apartment for a nap.

I never miss a chance to celebrate a Jewish holiday, and lucky for me it was Passover. For the Seder we went to Joe’s house. Joe is an old friend of Jack’s, who is a Sephardic Jew, always the most fun to celebrate with. He and his family were some of the nicest people we met our whole time in Argentina. They welcomed us into their house and treated us to a wonderful Middle Eastern meal, complete with delicious red and desert wine. My favorite part was the questioning, a passover tradition in which the man of the house goes around the party and asks every guest two questions. When is was my turn, Joe asked "Where do you come from?", "Egipto," I dutifully recited. "Where are you going?" "Israel!" I said in my best Porteno/Sephardic accent.

When we left around 1 a.m. we headed back to the apartment to meet Nick for a three-man pre-party. Our apartment had a giant sound system from the 1980’s that we somehow hooked up to Nick’s iPod to blast the latest electronica, trans and techno music. Around 2:30 we left to Pacha. Saturday’s at Pacha are packed with 1,500 plus people who consume much more water than alcohol. It was basically like being at a rave. We danced and partied, and I continued to unsuccessfully approach Argentine girls. Around 6 I left Jaspar and Nick and headed back to the apartment for some sleep. They hung around to watch the sunrise and when they left at 8 a.m. there were still over 1,000 people at the club.

Viernes, 18 de Abril

El humo (the smoke) came and went in waves since arriving on Wednesday night. But when we woke Friday morning the smoke was worse than ever, covering the city like a French duvet. Friday was a late state start. We had lunch and grabbed some of Argentina’s finest helado (ice cream) at Persicco in Las Canitas. Then we walked into the residential neighborhood of Belgrano, where the consultants our first potential investor referred us to had an office.

We met with the consultants for an hour, picking their brains about our idea. Did they think it would be popular? How many customers could we expect a day? What were there feelings on the macro-economic situation in Argentina and Latin America? Then they explained what they could offer in the way of developing a market study to test the actual viability of our idea in Argentina. All it would cost us was $12,000…U.S. dollars that is. We were prepared to pay a few thousand dollars to prove our concept to investors, but twelve grand was unreasonable and unaffordable for Jaspar and me.

We had done everything right: set up the lawyers, suppliers, and had a few good prospective locations. But the investment was proving the real challenge. I was no longer sure we had chosen the right industry. There were definite opportunities in Argentina. But we were trying to enter a highly competitive industry with a new product. Doing this generally takes a large balance sheet to finance a marketing campaign. During this week it became clear we did not have access to these kinds of resources. We had also chosen an industry in which we would be selling to Argentine’s, and thus earning pesos in a historically unstable economy. I began to ask if there wasn’t a better business for us to start in Argentina…

Friday was Tyler’s last night. Saturday morning he was taking off for a two-month journey through out South America. To celebrate Nick, Jaspar, Tyler and I went to La Cabrera a classic parilla in Palermo. Here we ate more lomo and bife de chorizo, and I tried morcilla, Argentine blood sausage. That night Jaspar and I called it early once again, as we had a 10 a.m. meeting the following day.

Jueves, 17 de Abril

Thursday was our only non-working day that week. After lunch Jaspar and I parted ways. He went to meet with a club owner friend of his who wanted to show him Buenos Aires hottest new night spot – New York City Club, and I went for a long walk.

I made my way past Plaza Serrano and through Palermo. Walking down the crisscrossing, diagonal streets. I ended up in the square in front of the Basilica del Espiritu Santo, and people watched for half an hour before continuing my walk. I passed Av. Santa Fe and wandered past a park. Eventually I got to Av. Libertador, figuring out exactly where I was for the first time. On Libertador I walked past the Museo Nacional de Arte Decorativo, a gorgeous old palace, that intrigued me so much I wandered in. I am not sure whether I was supposed to pay or not, but security was so lax I just kept walking. There were three levels of tapestry, sculpture and wood-work from the 15th century to modern day. After I was done taking in the art I went outside and sat in the museums beautiful cobblestone courtyard. When I finally got to the Alvear for my work out, I had fallen in love with Buenos Aires.

That night Jaspar and I went to Sucre for a hetero-date. Sucre is an overpriced, design laden, restaurant, reminiscent of New York in both concept and price. Afterwards we met up with Tyler and headed to Bar Limbo in Plaza Guemes, and then on to Lost for Buenos Aires hottest hip-hop night. Success in approaching only American foreign exchange students and Argentine minors (with braces) ended our night.

Miércoles, 16 de Abril

Wednesday we had lunch at a nice spot in Palermo Soho and then headed to a meeting with our second potential investor. This investor had not reviewed any of our material prior to our meeting. All he knew was what Jack told him – Jaspar was in Buenos Aires to start a business.

With in an hour we pitched the concept, start up costs and financial projections. The investor disputed our costs a little, noting that we would likely need more reserve capital. This he was right about. Then he said he liked the concept and thought it would work in Buenos Aires. But whether he would invest was an entirely different question. In this meeting we encountered one of the greatest challenges to raising capital in Argentina. While, there a plenty of wealthy people in the country, very few have the kind of official money or “white money” to single handedly back a start up.

Next we grabbed lunch and went to the most important meeting of our trip. Two American’s in there mid-twenties had come to Argentina a few years prior to start a business of there own. They had succeeded in a similar industry, and were the perfect people for us to turn to for advice. For two and a half hours they detailed every obstacle they had faced: from getting someone with a DNI to cosign on every contract signed by the business, to dealing with degenerate employees who were protected by Argentina’s socialist labor laws. Perhaps most importantly they pointed out the challenges that were inherent with the industry we had chosen and the fact that we would be earning the historically unstable Argentine peso.
They told us to be prepared to make no money for at least a year, and very little money for sometime after that. If we were lucky enough to be in business three years down the road we could expect a modest return, maybe. But the kind of money they were describing was nothing when compared to what we could be earning in entry-level positions in the U.S. It seemed the way most Argentine’s got rich was by not having to spend much money because of the countries low cost of living.

We left the meeting stunned. Neither one of us spoke for a while, and when we did it was mostly to reassure each other we hadn’t gone mute. After a silent work out at the Alvear we emerged form the hotel to find the city covered in a blanket of smoke. 70,000 hectares were in flames north of the city. Rumor had it that disgruntled farmers had lit the land ablaze in protest of the government’s recent increase in agricultural export tariffs. Classically Argentine.

That night we met Penny – Jaspar’s family friend – for dinner in San Telmo. La Brigada, is a classic old parilla (pronounced par-ee-ja by Portenos). Here we ate great lomo and bife de choizo and drank an awesome Argentine cabernet. After dinner we went to the mansion that Penny was staying in. San Telmo was a somewhat dodgy neighborhood so my expectations were low. Again, I was blown away. The mansion had all the glory of the Alvear, with charm reminiscent of some of the nicest New York brown stones I have seen. There was a garden in the back, complete with a pool, and a two level roof deck with views of the entire city. If this property were in Recoleta or Palermo, Ralph Lauren or Nike would have paid millions (of U.S. dollars) for it to house their Argentine flagship locations. But San Telmo, home of tango, is a some what lower class neighborhood of recent. The story goes that in the first half of the century San Telmo was one of the richest areas in Buenos Aires. But when a plague struck the area the people moved out to Recoleta and Belgrano, never coming back to glorious old mansions like this.

That night we went out with Tyler and a few of his friends to a cool restobar called Banglore, and an open-air bar in Palza Serano. El humo (the smoke) was so terrible by the time we left around 3 a.m. that my eyes and throat stung.

Martes, 15 de Abril

Tuesday morning was tough. I was tired and hung over from the mix Quilmes (the national beer of Argentina), champagne and red wine the night before. At 10 we were picked up in front of the Alvear by Monica and the female taxi driver from the day before – apparently she and Monica had such a good time the day before that she agreed to drive us around again today. Monica had set up appointments for us to see a few different locations. The area of the locations was nice but they were all too big for what we needed. Some featured upstairs bedrooms and balconies, great for a house but not for our business.

Monica and the female cabbie dropped us at a middle class Argentine apartment, otherwise known as home for the next five days. The end of Jack and Babette’s stay meant the end of the Alvear and so Jaspar and I had rented a weekly apartment on one of the many Buenos Aires short stay rental websites. $375 (US dollars) bought us three bedrooms, one and a half baths, a full kitchen, cable TV and internet, not bad by American standards. But we had to pay $750 ($375 plus a $375 deposit), which meant a trip to the bank.

Our trip to the Banco Galicia was the low point. Banks in Argentina are open from 9 a.m. to 3 p.m., which means a half hour line all day long. Inside it was sweltering hot, at least 85 degrees Fahrenheit, without the faintest hope of air conditioning. We tried to use the ATM but found that it did not dispense dollars – the preferred form of currency for the housing deposit. I waited in line while Jaspar called to find out if we could pay for the apartment in pesos. Ten or fifteen minutes passed as I sweated out Quilmes and inched through the line. Thankfully Jaspar returned to say we could pay in pesos, which meant we could use the ATM. At the ATM I tired to take our $1,000 (pesos), and the machine informed me this was not possible. Next I tired for $700, again not possible. $600, $500, $400. Finally trying for $300 I received three purple $100 pesos bills. Then I tired for another $300 which machine happily dispensed. Two more goes and I had my $1,000 pesos plus four 95-cent transaction charges from Banco Galicia, and of course four $5 charges from Bank of America.

After we dropped our bags at the apartment and paid the woman who owned the place, we got in a taxi and headed 30 minutes east of the city center. Here we met Eduardo and Hugo two potential suppliers for our business. We spoke with them at length about the business and wholesale prices for supply. They were both extremely nice and in classic Argentine fashion the meeting lasted two hours. Next we went down the street to meet with a guy Eduardo called la Doctora – an old Porteno, wearing black-rimmed glasses and a white lab coat, who spent his whole day developing chemical compounds. Eduardo explained our idea to him and he said he could develop our product. At the end of the meeting Eduardo was kind enough to drive us all the way back to the city center, where we met Babette for a late lunch at the Hyatt before she left for LA.

That night we were both beat. We went for dinner at Green Bamboo – a high fashion, Thai restaurant in Palermo Hollywood. Awesome food and overpriced super sweet cocktails ended the night early.