Highlights from Global Immersion Trip to Brazil - UCLA Spring 2018

I had an opportunity last month to go on a global immersion expedition organized by UCLA Global Management center of excellence to Brazil with 40+ awesome UCLA MBA students across the program. This was my first time visiting South America. During the trip, we visited top notch companies - large and high potential startups, UCLA alumni in country, cultural heritage sites, universities and culinary experiences. I have come back richer in experience and in awe of life in Brazil. I wanted to share what I saw with a brief summary.

Cultural Immersion

UCLA had organized for city tours for the full Brazilian experience. Sau Paulo markets were full of colorful artisan products.

The visit to Beco do Batman aka Batman Alley was just spectacular with phenomenal graffiti and full of life.

Cristo Redentor

The visit to the statue of Jesus Christ in Rio de Janeiro, Brazil was an experience no one can forget. The ultimate symbol of Christianity across the world overlooking the city from a top most peak in Rio truly deserves its place in one of the seven wonders of the world.

Company Visits

Where the session with macro-economist presented big serious issues in Brazil, the company visits to the Brazil's best showed a very hopeful vibrant perspective. Given the conditions, each of the hand selected companies in the tour, showed there is always a way to make a difference and provide value to your community.

Natura - Brazil's No 1 Cosmetics Brand

This was the first company we visited. Natura is a Brazilian manufacturer and marketer of beauty products, household, and personal care, skin care, solar filters, cosmetics, perfume and hair care products the company that sells products through representatives and in more than 3200 stores in 70 countries across the world. The company was founded in 1969 by Luiz Seabra, and became a public company listed on S?o Paulo Stock Exchange in 2004. Currently the company is the largest Brazilian cosmetics company by revenue.

Marcelo Behar, Natura's Corporate Affairs Director and Guilherme Leal, Chairman of Board of Directors of Natura made a fantastic company presentation. The company's motto is

"Bem Estar Estar Bem! - Well Being Being Well. "- Natura's Motto

They believe in being in harmony with nature, success through bio-diversity and maintaining a balance on what you take and give back to nature. Natura acquired The Body Shop in US and Aesop in Australia to gain a worldwide footprint in near past. Acquisition gave Natura complimentary regions and capabilities yet all three entities shared similar belief systems prior to merging. Natura today has 850 products, 10 Categories, 29 sub-brands and introduces 400 new SKUs introduced every year. Their Innovation Index is a record high of 65%.

Natura has dropped "anti-aging" altogether from their go to market.

"You are beautiful at every age. Natura has a line which is suited for skin at every age and we don't believe in 'anti-aging'."-Marcelo Behar, Corporate Affairs Director, Natura

Natura's biggest seller in Brazil is the 100% organic alcohol made perfume line. Being in a tropical climate, perfume is a must have in many households and sells well. As of 2017, they are processing 24 million orders an year; distribution process and operations are top notch. Distribution is inspired by the father of distribution - Jeff Bezos Amazon. Top leadership 33% women(SVP and above); Natura is committed to make it 50% by 2020 for gender equality

Natura Command Center

Most dramatic and advanced command center is used to monitor the pulse of the company operations. People from Sales, marketing, Customer service and Engineering were all represented in command center. If a customer is on the call with an agent for more than 10 mins, the manager is automatically dialed in. As the length of the call increased, more people are dialed in to listen and solve the problem. First call resolution is big on their list. The goal is to make it very easy for agents to complete demands. Key to success is they connected and listening to the agents. A lot of innovative ideas came from the agents on field. They know the customer, their families, birthdates, preferences, foods they like, flora in the community and make awesome recommendations.

Embraer - Brazil's No 1 Aerospace Conglomerate

Embraer is a Brazilian aerospace conglomerate that produces commercial, military, executive and agricultural aircraft and provides aeronautical services. It is headquartered in S?o Paulo State. This visit was just phenomenal and knocked it out the park for us. Boeing is said to be courting the company on 50% ownership deal (yet to be decided) for the commercial aviation business of Embraer.

John Slattery, Vice President of Commercial Aviation, Embraer shared his experience in selling aircraft to country heads, crème del al crème of the world. His passion for Aviation and aircrafts was evident as he spoke about planes with passion. He took through what it takes to make a sale.

"To be really good, you have to be bad!" - John Slattery, President, Commercial Aviation, Embraer

In this business, losing a deal could potentially be career ending not just for you but for the whole division. When your business depends on a deal to go through, it brings a different level of competency in your salesforce, marketing, engineering, operations and anyone engaged.

Embraer is one the best in the world and attract top talent from worldwide. John himself migrated from Europe to Sau Paulo. They are an epitome of diversity.

Creditas - Brazil's Fintech Unicorn with an angle on Secured Lending

Creditas is an online secured lending platform in Brazil. Creditas disrupted the Brazilian lending market by focusing on where the big banks were not looking. Brazil has one of the highest interest rates in the world. This is because it relies on highly priced unsecured categories. Creditas secured 19$ Million in funding from investors in series B.

Meanwhile vast majority of Brazilians are debt free. Here Creditas made a move by introducing secured loans against assets at an interest rate 10 time lower than the market rate.

Sergio Furio, Founder and CEO, Creditas swept us way with his brilliant offering and moved from NYC with his Brazilan girl friend (now wife) back in the day to change the fate of many Brazilians.

When asked what is the end game, he replied - "As an entrepreneur you found a company work immensely hard to sell the company for a fortune and live on the beach. However this journey has changed me and I believe we are something more and our purpose is far reaching. I want to continue evolving the company introducing new services and expanding Creditas to more Brazilians."

Key to success find a niche and do it 10 times cheaper! - Sergio Furio, Founder, Creditas.

Creditas conference room was one of the most chilled out places we visited.

Nubank - Brazil's Fintech Unicorn; Online Lending; Secured 80 Million Dollars in Funding;

Vitor Olivier, Partner and Lead at Nubank Brazil presented the company to us. The company had a very young vibrant, silicon valley feel. Coming from California, many felt at home as we entered Nubank.

Nubank has successfully streamlined the underwriting process and introduced a zero fees credit card. Default rates are way below market for Nubank. Competition responded to them with better app, zero fee credit lines. But central bank is pro competition in Brazil. They backed Nubank to make a bigger presence. Sequoia, venture firm setup shop in Sau Paulo and soon decided that Brazil was not the market they wanted to be in. Luckily for Nubank, the partner in Sequoia,wrapping up shop, made the decision to still invest in Nubank because his experience opening a bank account in Brazil was painful.  

Nubank's strength is customer services backed by intelligent automation. They respond within seconds on your application to get a loan. Complicated cases maybe a day. Members get more members. Service is a big hit in Brazil. Their app changes 12 times a day. If it breaks, they have a failback mechanism to quickly revert back. Their biggest challenge is attracting more technologist. Brazil isn't producing enough. There organization is structured as squad teams focusing on specific business areas than horizontals working as an all inclusive unit focused on customer eccentricity. People love Nubank.

"Our mantra to success is be anti-fragile! Change, adopt quickly, listen to your teams!"- Vitor Olivier, Partner, Nubank

GloboTv Hollywood of Brazil

It is a Brazilian free-to-air television network, launched by media proprietor Roberto Marinho on 26 April 1965. It is owned by media conglomerate Grupo Globo, being by far the largest of its holdings.

Their content is sold in more than 130 countries in 30 languages. They have many copartner productions with USA, Mexico, Portugal and Argentina. Their telenovas are recognized across the world. They believe in presenting both sides regardless of political views and have gone to length to provide a neutral platform for audience. Joan Pedro Bastos and Carolia Souza, Communication made the presentation. 

"How far can dreams take us? Far beyond our imagination. Opportunities appear to those who never stop dreaming; Be the factory of dreams. ........Believe in the dream and build reality ! .........Brazilian way is key to success- respect diversity." - Carolia Souza, Globo TV

Their goal- Entertain and inform-differentiates them from competition. During the visit, we also had an opportunity to see the production set of the Brazilian game of thrones. Very fun visit to the Brazilian glamour and fame is created!

Petrobas - Brazilian Petroleum Cooperation

Headquartered in Rio de Janeiro, the company ranks 58 in the most recent Fortune Global 500 list. It is considered the world's fourth largest energy company. It is state run and engaged in oil and gas exploration, refining and supply of crude and oil products.

It also happens to get recent bad press for scandals. This visit was more focused on what makes Petrobas competitive. It has strategic partnerships with statoil, total, BP, CNPC and ExxonMobil. They are market leaders in deep water production with access to abundant oil reserves.

Insolar - Brazilian Solar Power - Funded by Shell #maketheFuture

Henrique Drumond, CEO, Insolar gave an awesome presentation who is bringing prosperity by saving money in Brazil’s fevalas with solar panels.

"Key to success- earn the trust of the community and make them a part of the story." -Henrique Drumond, CEO, Insolar

If you can get people excited about the idea and it benefit them and the community, money will follow. Also tech will work only if the community takes care of it. Always listen and observe the people you serve and adapt to make it better. They introduced solar panels at no cost to subsidized to paid as the community grew and become financially capable. Money found them.

They have their goals aligned with the 17sustainable development goals of UN.

Many far reaching side benefits were achieved - the solar charging umbrella bringing communities together, tinted buses to reduce heat for daily commenters, clean water at site at a height, gender equality, financial independence. In the beginning the business plan was “whatever WORKS!”

BNDES (Banco Nacional de Desenvolvimento Econ?mico e Social)- Brazil National Bank 

 BNDES is the National Bank for Economic and Social Development is a federal public company associated with the Ministry of Development, Industry, and Trade of Brazil. Visit to their company left us very optimistic about the opportunity in Brazil for companies helping break barrier in the country and promoting real development.

They have a concept of BNDES Card which enables small businesses to inventory to establish/run their businesses by funding those pre-approved products - eg. Trucks, agricultural equipment etc. This significantly streamlines the process and makes assets and capital available for communities across Brazil. They have lots of partnership with financial institution to take their product to masses. Their headquarters in Rio had one of the best views of the city.

Korin - Brazilian First Organic Chicken Producer

 Brazilian company founded in 1994. Its corporate vision is based on the concept of Nature Farming developed by Mokiti Okada, which is focused on the perfect balance between preservation and use of natural resources. Korin was established with the purpose of contributing to a healthier life, in harmony with the environment throughout the whole country.

The company is a pioneer in the development of a number of products such as Sustainable Chicken (antibiotic-free) and eggs with animal welfare certification. It has become a benchmark in the development of agricultural technologies and animal husbandry. Luiz Carlos Demattê Filho, Industrial Director, Korin shared the companies vision and current global footprint of Korin operations.

"What a foolish thing! Today's man is polluting the earth 's precious soil which produces the treasure vitally important to food. " - Mokichi Okada (1882-1955); Korin is based on his philosophy and farming techniques.

 Current challenge Korin produces 24000 birds a day vs two biggest companies in Brazil which produce 5 million birds a day. There isn't enough to cover market demand today with organic products. Interestingly, the company's sales hit peak when there is a scare in market like avian influenza, swine flu,food diseases and most recently weak meat in 2017.

Macro-Economic Perspective of Brazil - The Big Challenges

Insper, one of the top universities based in Sau Paulo offers many higher education courses including MBAs and is one of the top universities in Brazil. The campus was very modern, many free spaces to meet and study, engineering labs and cutting edge design labs. There motto is "Inspire, Belong and Transform" the most amazing thing about this university is that is funding through individual and private sector donor. The university is a testament that the new generation of Brazilians are taking charge and changing fate of the emerging nation.

We also had an opportunity to hear from two top Macro economist in Brazil at Insper - Macros Lisboa and Alexandre Schwartsman. They shared the history, political and economic perspective on the country and spoke about the challenges Brazil is facing today. Key challenges -

• It is very tough to get reform introduced given they have 40+ parties in congress and 18 of them are quite big. Getting consensus is long road with corruption deep rooted.
• The unfortunate thing is they have a legal way of blocking competition and in the constitution making it very easy to establish monopoly in a category not only for international but also for domestics companies. Classic example of where government should not be interfering and have a free market have a play.
• Traditionally, the country policy has been to promoted "Brazilian made" to an extend where foreign trade could prove non-competitive in a Brazilian market. This now has changed and Brazilian have now adopted a more forward looking approach where you recognize your strengths and strengths of other countries/regions and bring best of all worlds home. However the previous run and bias on Brazilian made has kept the country in "middle ages", cut off from the world and there is a long road to catch up.
• Brazil as an economy has gone through some steep climbs in inflation and back and has the world's most sophisticated financial banking systems to respond. 
• Brazil has also now realized that retirement age of 54-55 is not sustainable.
• A new plan was being worked on which focuses on the next generation by providing the education and change the fate of the next generation. If you are 30-40 years of age without a college degree, there is not much that can be done other than providing better housing and low tier jobs.
• Lending is a challenge for Brazil. Given the inflation, collateral doesn't work anymore. Need for a new bankruptcy law. 
• Very tough to establish a business in Brazil. Corporate law is very complicated. If you want to build a product in Brazil, there is a whole complicated list of things you have to consider. What can be imported, what needs to be domestically procured, there are nuasances and guidelines to get through would take you upto an year.

Brazilian Made Case Study:

Macros spoke about a very interesting case study that was done on Patangonia as example of indecision. Back in the day, there was a threat from Venezuela that the locals were facing and wanted to protect themselves from war. So they decided to setup camp in middle of Amazonian forest which weren't accessible by road, air and sea. This lead to a community of 2 million people living in middle of nowhere which the government needed to take care of and create jobs. So as a solution to this, they decided that they will ship boxes of motorcycle parts to middle of this place from Sau Paulo (still no road exists to reach the village). The people in the community will assemble them into motorcycles, package it back and send to Sau Paulo where they would further sold/traded. Based on the study done by economist, they found for every person who lives there, Brazil was generating 50K Reais and for every person living in that community Brazil was spending 200K Reais- yikes! And yes it was Brazilian made and yes once they got the package, they were one of the fastest most efficient people to put the bike together. Question - You can't ignore 2 million people and put them out a job by closing operations immediately just on economics - who would rollout a plan with such controversy,so what do you do; How do you improvise? 

"Advice to President Trump," said Macros, President of Insper, ending his lecture ," Don't be Brazil of the past. Learn from our example and be pro trade, immigration and embrace diversity. We have pivoted!"

Summary

To me and many who took this program with me this feels like a dream. For many, this was our first exposure to South America. Lessons learnt invaluable, experience unmatched, new friendships and connections forged irreplaceable.