NAFTA lead negotiator for Mexico visits Chicago Booth

On May 4 Dr. Herminio Blanco visited Chicago Booth for a fireside chat with Prof. Robert Topel. Even if you haven't heard Dr. Blanco's name before, you surely will have heard the name for which he became a national milestone in Mexico: NAFTA. Dr. Blanco, as chief negotiator for the three-party deal for Mexico, related through a guided Q&A the story of how one of the most cutting edge international trade agreements came to be. His appearance was particularly relevant given today's political scenario, and the criticism the agreement has received of late.

 

Dr. Blanco spoke about the troubles of coordinating across three economies, two of which are major not only in North America, but in the world. He also spoke about his perspective, working under the then-president Carlos Salinas, trying to consolidate Mexico's long list of requirements with those of world-class negotiators from Canada and the US. In particular, how Mexico had never entered an agreement such as this "and that my counterpart had been negotiating international trade agreements since before I was born" said Dr. Blanco (incidentally, he mentioned, because of this fact it is puzzling why today's US president would label NAFTA as "the worst trade deal in the history of trade deals, maybe ever.")

 

Dr. Blanco levied heavily on the failures of NAFTA, criticizing his own work as lacking in many areas of industry and many resolution mechanisms, and adding that were NAFTA to be re-negotiated (a point that Prof. Topel stressed), the resulting agreement would naught but fortify the positions of all parties. His thoughts center around how, in his position of int national trade consultant and think tank leader in Mexico, the governments of all three countries could shave areas in the agreement little used by anyone, and add areas that for a lack of expertise and time were not included in the original 1994 agreement.


Since NAFTA, Dr. Blanco led the team that negotiated the other 31 agreements that provided Mexico to be the country with the most international trade agreements in the world, which is just one of the many success stories Herminio has had along his 27-year career in international trade.

The New French Enlightenment

At his inauguration, President Macron stated “the integrity and unity of the EU will never be compromised”

At his inauguration, President Macron stated “the integrity and unity of the EU will never be compromised”

In 1715, more than 50 years before America was founded, the French people were already caught up in drama surrounding their political leaders. In that year, after the death of Louis XIV, an age of revolutionary ideas and philosophies ignited.

During the next century, against the classical teachings of the ruling monarchs and religious institutions, France experienced The Enlightenment: a time where a generation of scholars enacted ideas based on reason, developing societies based on the still-standing of liberty, tolerance, fraternity, and progress. These philosophies radically impacted the social, political, and economic development of Europe, and were used as the cornerstones to envision a free and independent America.

 

302 years later, in a time where the horrors of the world seem closer to our lives, the French have yet again shown their commitment to their original foundation ideas. As the world sees President Macron ascend to the highest position of power in France, we’re left to wonder how the election of a former investment banker without the backing of any conventional party, was the only hope for standing up for these ideals.

The main reason why people were excited for Macron was his value as the only alternative to Marine Le Pen and her different vision of the world. From Le Pen’s perspective, a perspective shared by more leaders these days, France is a country weakened by diversity of people, ideas, ethnicity, and cultural background. They hold a belief that the cost of globalization (e.g. people who have lost their jobs through the spread of automatization) is not worth the progress that comes with it. Given the spread of terrorism, the increasing competition in all areas of business, the exceedingly higher levels of skills needed, and the sprawl of revolutionary ideas, it’s simple to understand how much fear is behind their viewpoint. Their opinions are not based out of a corner of hate, but out of an instinctive need for a sense of security and protection from the winds of change.

 

No one can argue that there aren’t very tangible reasons to be fearful. Everyday, we get reminded of the threats of cyber terrorism, global warming, nuclear proliferation, religious extremism, and global health scares. But, in an era with so much ambiguity and uncertainty, the belief that any one country or culture can protect themselves against all of these threats without cooperation from their neighbors is myopic. The inter-connectivity of our worlds reminds us of how much we all depend on each other.


While the protectionist narratives we see coming from America have been regurgitated by some in Europe, France has, again, shown us the alternative. This presidential election was inundated with calls of how France should protect themselves from the threats of the world by isolating them from everyone else. But, at the end, the principles of liberté, equalité, and fraternité were engulfed in a new slogan of “Better Together”. France elected to work together to fight fear, giving light to the world.

Latin American Lessons on Populism for Business Leaders

By Leopoldo Gomez- Grassi

 

Leopoldo Gomez-Grassi, Class of 2017. Leopoldo is a Mexican American interested in finance and politics

 

 

On April 21, UoC’s Latin American Matters hosted former Mexican President (1994-2000) and current Director of the Yale Center for the Study of Globalization, Ernesto Zedillo, as keynote speaker of the 5th LAM Policy Forum. For me, Dr. Zedillo’s visit had additional meaning because I met the man of whom my father, who served under him, spoke so much about during my childhood. President Zedillo is widely credited for having strengthened democratic institutions and for an exemplary transition of power after his party’s 72-year rule.

Dr. Zedillo spoke about the lessons that Latin American populists’ regimes could teach a developed world currently experiencing a notable rise of this kind of politicians, both on the left and right. Zedillo identified common threads, including a tendency to blame others (especially foreigners), advancement of conspiracy theories, and a knack for exploiting nationalist feelings to advance an economically retrograde agenda that invariably has a sad or catastrophic ending.

However, it was his diagnosis of the dynamic between populists and the elites that I found particularly timely and persuasive:

Populists establish themselves in power by finding support from citizens with resentment, frustration and anger towards the economic and political elite. Once in power, rather soon the populist leaders, and at least some part of the elite, pursue mutual accommodation. For a while the populist leader and the elite play with one another a “useful idiot” game, in which members of the elite bet on manipulating the populist leader by pampering his narcissistic and messianic inclinations, even becoming willing to support some policies that they have traditionally opposed and that could possibly go against some of their interests- but they do it with a view to preserving, on balance, their “capture” of the system. In turn, the populist leader likes to believe that he has achieved early surrender from the elite and sets about using this group to advance his agenda. [This game] lasts while the economy stays out of deep trouble…

Earlier this year Harvard University’s President Emeritus Lawrence Summers expressed fears that something along those lines is taking place in the US.

As populism spreads beyond the tropics, it seems prudent for MBA students to be vigilant and outspoken of corporations and business leaders when they are cozy with populist regimes. It is not only incongruent to enable those whose policies conflict with an institution’s corporate social responsibility agenda, but also necessary to oppose those who seek greater authority to the detriment of economic and political systems around the globe.


Perhaps a sensible response to the blame that the “The Golden Passport” (D. McDonald, 2017) places on business schools for their role in the prevalence of greed and lack of moral compass parts of the business community, would be that students demand that CEOs use their position and resources to condemn and oppose attacks on minorities, the environment, cities and allies. After all, the long-term economic benefit of those actions outweighs any temporary gains from being in good graces with an ill-fated populist.

The Evolution of Fintech in West Africa

by:

Alero Echegile

Alero is a 1Y Nigerian student passionate about Entrepreneurship in Africa and Nigerian Jollof Rice.

 

 

Do you remember in late September, when you had to dress up for a costume party in Lake Geneva? Your cohort had just a few days to find outfits, so you turned to Amazon Prime. 2 days later, your package arrived. You inspected the package to make sure that your Trump face mask was not swapped for a Hillary face mask, before paying the delivery person in CASH. If this shopping experience does not sound familiar, you probably haven’t gone online shopping in West Africa.

The West African online shopper is typically an untrusting customer – willing to give this new technology a try but fearing that the product may never be delivered or his or her financial information compromised. As a result, Fintech companies focusing on providing payment solutions have sprung across West Africa.

One of the early players in the payment solution space was Interswitch. Launched in Nigeria in 2002, Interswitch became the payment processing platform that supports the majority of ATM/Debit cards in the country. Subsequently, the Central Bank of Nigeria launched a campaign to reduce the amount of cash-driven transactions nationally. This cashless policy pushed e-payment adoption into full gear, birthing a host of supporting technology. Many Nigerian entrepreneurs market their products via social media – Whatsapp, Blackberry Messenger, Facebook, etc. Since these entrepreneurs cannot afford to build websites, payment solutions like VoguePay have sprung up to enable these business owners to request payment via email.

Beyond payment solutions, the potential for FinTech in West Africa is enormous. The combination of a huge unbanked population, scarce information on credit history, and separated African economies create challenging, but profitable, problems for FinTech to solve. Opportunities include:

Financial Inclusion: According to a McKinsey report, 80% of the 326 million Sub-Saharan African adults don’t use financial services. Most of these people live on less than $5 a day, making serving their needs an unattractive investment for many financial institutions. Enter FinTech start-up Paga, which serves Nigeria’s unbanked population. Armed with a basic text-enabled phone and a phone number, you can send or receive money from anywhere in the country.

Access to Credit: Although most traditional financial services in West Africa are improving, lending is lagging behind. It is still difficult for most people to secure business or personal credit due to a lack of credit history data. Therefore, most people rely on their social reputation to secure loans from family and friends. However, Nigeria’s Sterling Bank is using social media to build credit profiles via its Social Lender app. Social Lender uses information from a customer’s social media profile to generate a Social Reputation Ranking that determines the maximum credit a person deserves.

“One African Currency”: Due to the fragmented political landscape across Africa, a single African currency is far from being a reality. Nevertheless, people are finding ways to go around currency exchange. Flutterwave, a Y-combinator backed startup[JB1] , a Nigerian entrepreneur is able to transact business with a customer that has a Visa card in South Africa, MPesa in Kenya, or a bank account in Ghana, without anyone having to physically convert currencies.  

Questions of Morality for Business Leaders

The “Navigating the Grey” series featured many enthralling speakers that brought their perspectives to some of the most difficult questions of life and business. How do you define success? How do you make trade-offs in line with your values? Where are you going and not somewhere else? The most fascinating speaker might have been Steve Preston, former CEO of Livingstone International and Former US Secretary of housing during the crisis who delivered his message that only ethical businesses are truly sustainable.

It was clear that the matter was personal to Mr. Preston given his long career in finance and the public service where he was frequently faced ethical breaches. First, in his role as a banking associate right after graduation, he witnessed firsthand a rising star manager being led out of the office, handcuffed, for insider trading. He was a CFO during the period preceding Sarbanes-Oxley where widespread fraud and unethical behavior destroyed the public’s trust in US companies.

Steve Preston, secretary of housing during the financial crisis, was speaking about morality at Chicago Booth

Steve Preston, secretary of housing during the financial crisis, was speaking about morality at Chicago Booth

In addition, as Secretary of housing, he had a front-row seat to the financial crisis. While most people just blamed the crisis on the banks, Steve argued that the cause was due to moral failures that were far more widespread in the system, including lawmakers, mortgage providers, credit agencies, in addition to the home buyers themselves.

So what lessons did Mr. Preston take away from these anecdotes? First, people and organization don’t go from ethical to unethical in one full swoop. Rather, it is the slow erosion of principles over time that results in the kind of unethical behavior that we are increasingly seeing. Individuals and organization usually have plenty of time to realize their moral drift and correct the trajectory. Unfortunately, the slow and progressive divergence is both hard to notice and doesn’t inspire action even when noticed. There is a sense of urgency in a boat sinking that one can hardly find when oceans are rising, even though the final result is the same.

So how do we protect against this moral drift? The first step would be to start noticing it when it happens, which requires being conscious and deliberate about our values and principles. Intentional moral principles serve as an anchor, but also as guardrails while unspoken and implicit ones can be carried away by everyday busyness.

As the reader of this article will most likely be in a position of responsibility in the future, it is worth asking the question: What values do you stand for in your professional life? Is there anything your company can legally do, that doesn’t impact you and for which you would consider quitting your job? What is it that is so fundamental to your sense of identity that you could not work in an environment that does not provide it? Those are the values you are willing to stand for. Knowing them is half the task of standing for them.

By Ziad Abouchadi, Class of 2017. Ziad is a second year MBA with questionable ethics

Upcoming French Elections Pivotal for Europe’s Future

By Ziad Abouchadi, Class of 2017

By Ziad Abouchadi, Class of 2017

Many thought that the 2012 French presidential elections could not have been any more dramatic, with the front runner Dominique Strauss-Kahn arrested in New York for rape charges. Since France will be holding its tight elections in eight weeks, deciding the future of both Europe and what remains of the liberal order, the stakes are high and tension palpable in the markets and elsewhere.  

There are two things to know about the French presidency. First, presidents are much more powerful in France than they are in the US as they can and have dissolved other branches of government in the past. This power gives the presidential election a vital importance. Second, French elections are unique in that they are decided in a run-off voting process. People vote among dozens of candidates in the first round, only to be given a choice between the two winners of the first round in a second round of voting. This is critical to understand the dynamics of the coming election as the candidate with the most supporters doesn’t necessarily win.

Marine LePen (Front National) is the clear leader in the polls even though her party has never won the election in 44 years of existence. Her populist nationalist anti-immigration and anti-EU political line rings true with one out of four French voters. If she were to win, she will have a clear mandate to have France exit the European Union and to implement Trump-like policies.

But while Ms. LePen’s large and loyal supporter base all but guarantees that she will win the first round of voting, it remains to be seen whether she will be able to convince voters beyond this group of core supporters to give her a chance in the second round.

LePen (left) and Macron (right) want to take France and Europe in completely opposite directions.

LePen (left) and Macron (right) want to take France and Europe in completely opposite directions.

The two contenders for the remaining spot on the second round are Emmanuel Macron (En Marche) and Francois Fillon (Republicains). Mr. Macron is a former investment banker who put in place his own political party to run for this election. He is supported by a little more than 20% of French voters, mainly young urban ones, for his socially liberal policies. He is the only unapologetic advocate of Europe, free trade, less regulation and a balanced budget.

Mr. Fillon is a more classical figure and represents the status quo in French politics. He languishes at a third position after being investigated for misuse of public money. He is a true Christian conservative, advocating state reforms and family values. Many see him as France’s Margaret Thatcher, which is not always a compliment.

Ms. LePen and Mr. Macron plan on revolutionizing French politics in different directions, ending decades of a two party system. The mere fact that they are leading in the polls suggests that business as usual will not be an option after this election. France will most likely either embark on a mission to consolidate its position in Europe and revitalize its job market or will exit the European Union with all the risks that that entails.

Thinking about the Tech we use

By Rafael Tuachi, class of 2017

By Rafael Tuachi, class of 2017

It is said that some college students figured how to simultaneously jot down notes in a shared Google document. As opposed to each person having his or her own notebook, every person contributed notes to the same online resource, editing each other's annotations, answering questions and adding their own insights to the class. This revolution allowed students to be engaged in the class, and it also provided the ultimate study resource by the end of the term, leveraging technology to pool individual notes.

Technology changes how we interact and experience the world. For instance, how often have we been able to communicate with a recruiter thousands of miles away?  When I first arrived at business school, I was surprised at how prevalent and widespread the use of technology was, and how we employ every opportunity to connect every student to the rest of the class. Take Microsoft’s GroupMe, for instance. Were it not for it, coordinating communication would be much harder, whether about finding free pizza in the student lounge, carpooling, etc. The point is that we have learned to leverage technology to our advantage in our daily lives, be it for hanging out with friends, or for getting  jobs via online interviews.

Furthermore, we should be grateful that our the university’s administration has extensively adopted information technology and regularly invest in new tools to facilitate the learning process. We don’t think about it and probably take it for granted. Even though I realize the Canvas website doesn’t inspire awe, I still find it amazing that schoolwork, grades and faculty communication can be managed from the comfort of my couch. As a result, we are more productive, both at home and at work. The limit between these two worlds is suddenly weakened even if our physical circumstance says otherwise. Adding up all of our increased contributions, our community strives for an enhanced scholastic medium. In layman’s terms: we become smarter.

To conclude, I believe that the way we have adopted different technologies in our student lives is astonishing and worth noting. I find it inspiring how the combination of a screen and an internet connection allows us to enhance relationship with the people around us, from other students, teachers,  recruiters, and the general community that is Booth.

Rafael Tuachi ‘17 is not a techie, but is thankful he’s able to interview wearing a suit jacket and sweatpants.

Is heaven really in other people?

By Ziad Abouchadi, Class of 2017

By Ziad Abouchadi, Class of 2017

After a week focused on health and wellness, the coming one will see the University of Chicago Booth School of Business host its annual “Navigating the grey” series. In this context, professor of behavioral science Nicholas Epley set for himself the task of convincing Booth students that they should seek happiness in social connections rather than by more self-centered means.

During his talk, Professor Epley made the point that humans, often, underestimate the power and effect of social connections on their mental and physical health. As a result, and Booth students are no exception to this, they tend to avoid creating new connections unless necessary. We have all experienced long elevator or train rides where people stick their nose in their phone or newspaper in an attempt to ignore other people. We also generally avoid creating connections with the poor fellow in the middle seat on a long flight. Is this the best course of action?

In the purest Booth tradition, Professor Epley presented several scientific experiments that supported the idea that we are biased against creating other connections. As a result, while it is excessive and unnecessary to try to connect with every new person ones meet, it is also a pity and a waste when we never do so with anyone. In an attempt to avoid awkward conversations, we end up being less happy and fulfilled than we could easily be.

2016 Navigating the Grey prompted student and speakers to share their perspectives on life, faith and values.

2016 Navigating the Grey prompted student and speakers to share their perspectives on life, faith and values.

This brings us to professor Epley’s second point, which is that awkwardness and shallowness are not inherent in conversations with strangers, but rather in our way of conducting them. We tend to avoid meaningful subjects when meeting new people and prefer to stick to superficial subjects. We prefer to talk about class schedule rather than happiness, of job search rather than family and successes rather than failures. We have programmed ourselves to avoid appearing vulnerable, especially in our first interactions with strangers. We overestimate how much people are going to judge us when we put ourselves out there and expose our vulnerabilities. Research seems to suggest that, contrary to our beliefs, people generally tend to feel entrusted with that new connection and reciprocate in kind. This results in more meaningful and less awkward interactions.

While we can certainly discuss the magnitude and extent of this phenomenon, the fundamental idea behind it appears powerful and credible. Given that meaningful social connections or the lack thereof can have such a disproportionate impact on our welfare and wellbeing, it is certainly worth giving a try to the latest findings of behavioral sciences.   

Ziad Abouchadi is second year student and soon to be ex Chibus opinion editor.