The Great Therapist, on dreams...

"No‐one can waken from a dream the world is dreaming FOR him. He becomes a part of someone ELSE’s dream. He CANNOT choose to waken from a dream he did not make. Helpless he stands, a victim to a dream conceived and cherished by a SEPARATE mind. Careless indeed of him this mind must be, as thoughtless of his peace and happiness as is the weather, or the time of day. It loves him not, but casts him as it will, in any role that satisfies its dream.
So little is his worth that he is but a dancing shadow, leaping up and down, according to a senseless plot conceived within the idle dreaming of the world. This is the ONLY picture you can see, the ONE alternative that you can choose, the OTHER possibility of cause, if you be NOT the dreamer of your dreams. And this IS what you choose, if you deny the cause of suffering is in YOUR mind. Be glad indeed it is, for thus are YOU the ONE decider of your destiny in time. The choice IS yours to make between a sleeping death and dreams of evil, or a happy wakening and joy of life."

JC tells us that what we think is our reality is not only a dream we dream, but a dream were we think we are in someone else's dream, and thus without control over it.
We are "here" to wake up, and help others wake up and escape the dream of fear. And the way we can help others escape from fear (or guilt) is by escaping ourselves. Our dreams of fear are the result of our sick minds. We need to heal our minds and our minds are healed through the attainment of peace. Peace and happiness are the same, and peace is attained by love. But love we can not understand. So we forgive, which is the closest thing to love on earth. By forgiving we free our brothers of the guilt for the things we think they did to us but they did not, and thus we free ourselves from our own sense of guilt and turn our dreams of fear into happy dreams, before we are ready to wake up.

My take on Twitter

A couple of posts ago I wrote about “My Take on Happiness” and today I will delve into my thoughts on twitter and how I believe it can have a direct impact on our daily lives – both on a personal as well as professional level, if we understand that what works well in twitter can also work very well when applied to our daily life. Without trying to be presumptuous I have decided to call this "Twife: twitter applied to your daily life!"

Twitter’s success is built around the concept of having an open & constant conversation between a mix of influential & anonymous people and therefore “somehow” designed to bridge social divides. The idea of transparency is its defining emblem.

Twitter can definitely teach us a lot about desirable behaviour in human beings and one can easily tell by the reactions of our tweeps (twitter friends), and by how much they decide to “help” us, join our cause or simply recommend us or retweet us based on the value of our tweets, as well as our good “tweehaviour” (did I just make that up? – this is how i call our behaviour in twitter or adherence to “twitterquete”).

So what works well in Twitter that if applied can also help us improve our daily lives?

1 – Be grateful and show it: no place better than twitter (or social media in general for that matter) to test the power of gratitude. Example: a few days back I was trying to get followers to my blog, inviting friends to follow me and thanking everyone that would kindly oblige. Then suddenly 2 things happened: I received a follow from a friend of a person I had just thanked, and right away another follow from a friend I had not invited yet (Esther); when I thanked her she said she found out about my blog when she notice I was thanking a common acquaintance for following me. Two important lessons to be learnt from this: a – those you thank will be happy to do more for you and recommend others to follow you, and b – those who see you thanking others will likely want to follow you or do something for you. It’s life’s law and the driving force behind evolution as society: reciprocity and collaboration

2 – Tweet value (as my tweep @pramitjnathan says): most people don’t care what you had for breakfast, so don’t bother filling their timeline with that, but if what you tweet is something they will find valuable, either because it helps them improve their lives or because it helps them find something they might have been looking for or simply because it’s funny, then very likely they will feel appreciative for your tweet and want to recommend, retweet or mention you so that others can also benefit from your valuable tweets.

3 – Do to others as you would have others do to you: and do it first and do it often. This will work like magic. In a Course in Miracles (a book I read) it says, and I quote: “teach what you want to learn” and “give what you want to receive”. I try to live by these 2 maxims more than anything else. If you want to elicit a favourable reaction or action from your tweeps or anybody in life, be the first to engage in said favourable action. Recommend people, credit their work, help them, share with them, praise them, thank them, etc... and do all this altruistically and from a place of honesty, generosity, enthusiasm, good vibes and transparency.

4 – Share and collaborate with people’s work and initiatives: be it their thoughts (tweets or blogs), their work, their links, their retweets or suggestions. You see, people participate in social media because they want to be taken into account; people want to belong, they want to be missed and they want to be appreciated, even those you might think they don’t need any of that. Anybody that takes even the smallest trouble to tweet 140 characters or to blog about something, is because they want someone to take the time to read it and hopefully appreciate it and share it; guaranteed (I know I do)! And the only way they will know someone took the trouble to read it and appreciated it, is if that someone comments, thanks shares or retweets it. Do this for others and others will do it for you. Twitter works under the law of abundance: the more you share the more you receive in the form of retweets, mentions, recommendations, follows and the like.

Conclusion:

- In twitter, like in life, “altruism” is the name of the game; the more you do for others the more others will do for you. In point #6 of their excellent post on "Society’s New Values", Alf Castellano & Edu William highlight the importance of support among peers, collaboration and co-creation as a key traits of the New Model. I think this is indeed KEY, and social media is here to show us the way, as long as we are willing to listen and learn from it

- Valuable tweets (whether because you put some thought into them, or because you read a good article and decided to tweet it, or because you read someone else’s tweet or blog or related links and decided you wanted to share it) go a long way and it returns value back to you.

- Acts of appreciation elicit reciprocity and collaboration towards you, and sharing creates abundance: the more you give the more you will receive

One last thing: Don’t be afraid to ask for help (or recommendations, retweets, re-shares and the like); you’d be surprised how well many people feel when given the opportunity to help others. Just keep your “tweehaviour” agreeable to others (just like you would do in life); be transparent and honest and state what you need clearly. Keep it simple, don’t spam, don’t turn it into a bullhorn of new deals; don’t harass people. Rather give everybody breathing room and treat them with respect as you would like to be treated. And in the end always ask yourself before acting or tweeting: am I adding value, how can I serve or help others with my actions or tweets?

Don’t you think these principles can apply just as well to your daily life?

Cheers and your comments are most welcome!

Mind Mapping: What is it? by MindProject

The amount of information the human brain can store throughout a life time is unquantifiable, yet its intricate machinery is able to find the exact place for each concept, image and word, and interrelate each other brilliantly.

However, this does not take place in the same way on all human beings, for the information we receive is processed by either one brain hemisphere or the other, depending on whether they are numbers, codes, linear schemes, or concepts, daydreams, colors. Normally, each person develops one hemisphere more than the other, and neurons are to blame for this, for they are the receptors of the information we receive from the outside - through the eye - and responsible for transmitting said information throughout our brain.

Mind Mapping, graphical technique developed by London’s Tony Buzan, tries to improve this cerebral dialog, stimulating the neural connection through the development of the cortical skills from both the left and right brain hemispheres.

Next, we delve into this technique, and provide a spontaneous Mind Map exercise as a practical example. The objective is to enable us to efficiently manage the information we store in our brains and to be able to leverage it to accomplish both our personal as well as professional goals.

This was originally posted by MindProject in Spanish and I took the liberty to translate it into English (under their permission).

For more info on this and similar content visit www.mindproject.net

Mind Mapping: What is it? by MindProject

View more presentations from Pablo Mariani.

Key Happiness Factors

Below is a list of random things that make me truly (read: sincerely) happy and therefore i am grateful for when i encounter them (notice i did not write winning the lottery and i will go into that later). My intent in writing this list is to remind myself of what’s really important in my life and by sharing it, I hope to remind others of what could be really important in their own lives. For yourself, probably the best use of this list as your own self reminder would be to: a - leave the things that make you happy, b - delete the ones that don’t and c - add the ones i did not mention but that would make you truly happy. At the time of writing this note (new year’s day 2010), i am indeed going through an intense self-questioning period and trying to find my Dharma or real purpose / passion in life and hence my need to start observing my actions and choices - and the feelings / emotions they evoke - to make sure i am “on the right track”; I like to think that i am but i have sensed lately that my satisfaction level appears to be a tad below what should correspond to my level of achievements (not that these are that many or that high, mind you, but simply because they are enough to make any normal being at least happy if not necessarily fully self-realized).

The list is also intended to serve as a constant reminder of things i need to be grateful for and since this should be a dynamic document that can be updated, modified and improved, as circumstances and / or our perception of them change, i encourage you to comment and suggest at will.

Here it goes:

- watching my kids play, laugh & enjoy life

- watching my kids learn new stuff (their first time reading or first swim - wow!)

- realizing that i have helped my kids learn or achieve something

- love; in any way, shape or form (and that includes making it…)

- to see my wife happy

- having a fulfilling / meaningful career, feeling that you are part of something unique & extraordinary (and that involves both the type of activity as well as people i do it with and how i am serving others through it)

- playing Tennis, running, training

- reading a good (usually in some way enlightening) book

- going to the beach

- sailing

- the Caribbean islands

- the sea

- high achieving - this is a tough one to define but i will try: when i was growing up, as an athlete high achieving was for instance the first time i could slam dunk a basketball, then the first winning a of a championship; in my academic life it was getting my MBA, in my professional life it was becoming the head of Latinamerica for the firm i work for, and so on… but as you can see, all rather humble achievements since there is no Nobel prize there or anything like that

- friday afternoons & saturdays

- getting presents

- leisure traveling

- helping people

- spending quality time with good friends (like a nice dinner out with good friends)

- watching a good movie (Cohen brothers anyone?)

- listening to the music that i love

As you can see, most of these seem like rather simple and achievable things; winning the lottery would certainly make anyone temporarily happy but it has been demonstrated (a Harvard Extension School research by I. Cunha is just one example), that one has a certain predisposition towards happiness and some specific and / or dramatic events can swing you one way or another (you win the lottery you suddenly become utterly happy or God forbid a loved one dies and you suddenly become utterly sad), but a year orso later you go back to your old self regularly happy or regularly unhappy. So the things i mentioned before are events that most of us can encounter (specially Friday afternoons…) and if we become intensely aware and mindful about this, it could be the foundation of our true happiness; Wayne Dyer always says: “there is no way to happiness, happiness IS the way”. So the trick could be: a - pursuing these type of rather simple yet fulfilling moments and then b - being intensely aware in order to enjoy them to their fullest, be able to prolong them and share the feeling with our loved ones.

In his study, Cunhais notes that happiness does not depend on environmental or external variables but rather on internal variables such us Self-Knowledge, Emotional Intelligence, Reaction, Choice and Attitudes - it’s about putting effort, passion and energy on all the things that make sense in our lives, he adds.

So here goes what I would describe as the Key Happiness Factors:

a - control your thoughts - we are what we think about so we need to chose our thoughts carefully

b - find and follow your Dharma or purpose in life (with intensity and passion)

c - pursue knowledge - improve continuously as a human been

e - serve others altruistically (with compassion and unconditional love)

f - awareness and mindfulness - live the present and enjoy the journey

g - Gratitude & forgiveness - be grateful for all that you have, for love and for beauty and see guiltlessness all around you

h - develop good virtues - they raise your consciousness and help you live a better life

Simple enough?

Cheers and comments welcome.

Pablo.

Is airline & hotel loyalty missing the mark?

Airlines and hotels around the world are struggling to strike a balance between maximising revenue and ensuring long-term customer loyalty, according to research by loyalty marketing agency ICLP.

Almost one-quarter (24%) of those surveyed revealed that increasing the profit of their loyalty programme was their main objective for the next 12 months, yet 70% of respondents are potentially focusing their efforts on the wrong customer group. pmariani This article is copyright 2009 TheWiseMarketer.com).

Loyalty programme managers must always clear about their goals, and those seeking to increase revenue from the loyalty programme were split between increasing membership numbers (31%) and increasing spend from existing members (36%).

A surprising 21% of respondents cited "new acquisition of members" as being their main objective, demonstrating the strategic value of creating a direct and ongoing customer relationship and communications channel. Only 13% cited "improving programme ROI" as their key goal, showing that the value of a loyalty programme cannot necessarily be measured purely in terms profitability.

Stuart Evans, general manager for ICLP, said: "Airline and hotel loyalty programmes need to strike the right balance between maximising revenue and retaining their customers, but more important is to understand their overall contribution to company success."

The survey also revealed that 52% are focusing their efforts incorrectly, either on top tier customers (31%) or base tier members (21%). Neither of these sets of customers provide a significant opportunity to increase revenue, according to Evans, who suggests that middle tier members and non-loyalty programme members can provide a greater opportunity to increase revenue.

"Top-tier customers may be the most valuable but it is difficult to provide new incentives to them which will drive more revenue, mainly due to their saturation with rewards," explained Evans. "The focus should be on the less committed customers further down the programme who present a real opportunity to generate significant incremental revenues."

Evans admits that, while maximising short-term revenue is essential to the survival of many travel businesses, it is difficult to know through which streams revenue can come without risking customer loyalty. "For example, airlines could easily sell lounge access as an add-on, but this would run the serious risk of alienating loyalty programme members who in many cases have travelled the world for the privilege of using an airport lounge."

As a result, airlines and hotels simply need to ensure their loyalty programme is well managed and is aimed at generating long term benefits rather than short term profits. Customer behaviour must therefore be evaluated to gain valuable insights which can then be used to build relevant propositions that address individual needs without the risk of alienating other customer groups.

originally posted by www.thewisemarketer.com

Fidelisoft y el futuro de Loyalty

Sin caer mucho en la parte técnica, FideliSoft es básicamente una plataforma de transacciones de valor agregado que automatiza todos y cada uno de los aspectos de un programa de fidelización, desde la gestión y generación de reportes en tiempo real, hasta la entrega de premios y promociones via POS (Punto de venta) o a través de internet. Lo mas importante y revolucionario de esta tecnología propietaria es que permite la entrega de premios en el punto de venta versus via catalogo (Reward delivery at POS), a través de la integracion de su plataforma con los sistemas de punto de venta de los comercios. Todo pasa por el POS: acumulación, canje y redención de puntos de fidelización.

Se elimina asi el problema fundamental que enfrentan los programas de fidelización y premios de hoy en dia: la logística y su costo. Es decir la selección, adquisición, estoreo, mantenimiento y entrega de premios. A esto se le suma otro problema. selección limitada de items (las clásicas tostadoras, lapiceras y demás (quien necesita una tostadora anyways?) y el tiempo y costo que lleva entregarlos (2 a 3 semanas promedio). Solución? el comercio (tienda) se convierte en el catalogo (ilimitado y a cero costo adicional) y la entrega se hace en el punto de venta (real time)!

FideliSoft le puede brindar a un procesador de pagos (VISA, First Data - ChasePaymentech) una ventaja estratégica al posibilitar a sus asociados (bancos y comercios) reemplazar el catalogo de premios (y toda la infraestructura que se necesita para operar un sistema de entrega de premios) por la tienda / comercio. Es decir que un miembro de un programa de fidelización podría obtener en el mismo ticket de la tarjeta de crédito (impreso por la terminal o POS) un resumen de su balance de puntos y canjearlos en el instante si deseara y en la misma caja (registradora) por cualquier producto de la tienda o bien aplicarlos contra la compra (se convierte en un descuento).
Seria el equivalente a tener cash en la mano. Este es básicamente el Value Proposition de FideliSoft: Rewards delivery at the Point of Sale. Or may be i should say: Cash like rewards delivery at the point of sale. Porque cuando los puntos acumulados pueden ser canjeados por cualquier producto del comercio adherido, es como si fuera cash.

A esto se le suma el beneficio adicional de poder crear (y dirigir) promociones personalizadas que también son impresas en el mismo ticket. Estas promociones son desarrolladas a partir de la capacidad que brinda el sistema de monitoreo de FideliSoft de obtener (y conservar y minar via DataMining) data acerca del comportamiento y perfil del consumidor, no solo en virtud de su comportamiento respecto del comercio operador del programa sino también de los demás comercios adheridos.

Imaginen que el Faena y Etiqueta Negra podrían hacer cross deals donde por cada traje que te compras en Etiqueta Negra te sale impreso en tu ticket que te ganaste una cena gratis en el Faena!? se imaginan el valor que tiene para el Faena poder atraer a los clientes de Etiqueta Negra, que es su target, sin tener que invertir un peso mas que estar adheridos al mismo programa de fidelización? y asegurarte que a todos los que gastan mas de x les llegue tu promoción? priceless! Este es el futuro de la fidelización. y ni hablar de que el cliente va a volver a Etiqueta Negra (o el Faena) por mas...

Investing in Argentina - Wineries

I have been doing some research lately in the wine industry and here are some of my findings.
1 - The wines and vineyards market is in very high demand in Argentina and it is no small feat to find an operating winery/vineyard with "Brand" and presence in the foreign market for sale. It is possible nevertheless to find vineyards with wineries that need some work (refurbishing) or vineyards without wineries and then invest in the winery.
Adapting a winery to elaborate premium wines can cost close to U$2/lt, thats is to say between U$100,000 and U$150,000 based on your production requirements of 50,000 to 100,000 bottles per year. In addition, you need to add that cost of the Oak Barrels which depending on origin can cost between U$900 and U$1200 for a 225 lt barrel (U$4.5 to U$5.5 per lt). If you would want to park (age) the wine for 2 years, you would need 670 barrels = 600k to 800k, which would be outrageous. This is only done by those who have an established brand in the premium market. If you start from scratch, you have to go slower and sell part of the wine with less aging through a "second brand". Besides there are ways to add the oak flavour without the need for the oak barrel. All this to say that with a little bit of "know how" there is no need to have in advance a fully operating winery  and it is possible to start in the business with a smaller investment.
2 - The size you a lot small investors are looking for (50,000 to 100,000 bottles/year) is a bit small and works only for operations that produce premium wines U$10 per bottle in the local market and U$4 FOB export market).
3 - Well located vineyards (Zone 1 = Agrelo, Perdiel, Lujan de Cuyo, Tupungato) and planted with high quality vines are priced anywhere between U$35,000 and U$50,000 per ha. In San Rafael (you want to start becoming familiar with the different regions) vines planted in areas of good soil and with anti ice pellets net installed are around U$25,000 per ha. If the goal is to produce premium wines, specially if it
includes champagne (sparkling wines) and white wines, San Rafael is an interesting alternative. If the portfolio of products will be focused on super premium red wines, specially Malbec, you need to stay in Zone 1.
4 - For wineries adapted to make premium wines the price is between U$1 - U$3 per ltr of capacity, depending on installed equipment. Large and old wineries, set up for regular (non premium) wines are priced much lower but they also require a lot of (expensive) investment.
5 - With a good vineyard, operated to produce quality wines, the yield is about 9000 to 9500 bottles of premium wine per ha. So in order to reach the goal of 100,000 bottles as per your requirements you do not need a large establishment. 15 - 20 has ought to do it. We need to add to this the cost of the winery.

The business in wines today is to produce premium (vs regular or intermediate) wines. Based on all the above info, find below the opportunities i have been able to find, to wit:
- A vineyard in Tupungato, 80 ha total, 60 ha planted 5 to 6o years ago (Cabernet, Merlot, and some Malbec), drip and furrow irrigation system, U$33,000/ha.
- A vineyard in Tupungato, 294 ha all planted, U$43,000 ha.
- 60 /120 ha in Alto Agrelo (excellent for Malbec, next to well know wineries Septima and Ruca Melen), at U$14000 / U$16000 ha. no plants and with wells and irrigation systems in place.
- A winery looking for equity partners, but not sure you are interested in equity investment instead of acquisition.

As per my experience, the most difficult task is to adequate the initial requirements of most small investments to the reality of the local wine and real estate market (one is inexorably affected by the other one) and to the logic and time frames of this business activity and the business cycle. I think that if you
believe that the project is feasible (given your own assessment), even if you might not start with a turn key project there is still a lot of opportunity because there are many properties available.

Cattle Industry update

Even though the ban has indeed been partially lifted, there are still 4 or 5 other measure the government took during the last 12 months that continue to keep the prices depressed about 40% for cattle that is not being exported (our case).
From March 06 until now mainly 5 measures where taken by the government that went in direct detriment of our investments: raised export duties by 10% and remove a subsidy (reimbursement) of 5%, exports ban, imposed a minimum slaughtering weight of 280 kilos that then was changed to 300 kilos (i will come back to this later because it was very impactful) and finally they simply intervened the spot market with a list of maximum prices. Last but not least the price of corn (thanks to ethanol, bad
weather in the Midwest of the US and who knows what else) increased exponentially
(corn was the main input). all this happened in the span of just 6 months. In an industry where you need time to plan, where the minimum fattening time is at least three months if intensive and 8 -12 months if extensive (which is the stage where your cattle was at the time of the measures) the way these events took place makes it impossible to predict said events which would have allowed an investor to have enough timely information to make decisions.

The slaughtering weight limit changed the business model almost completely. the whole model was based in fattening cattle up to about 260 kilos. The market for this category called "bolita (little ball)" which was between 240 and 260 kilos approx was eliminated overnight with the strike of a (presidential) pen. This meant that the feedlot model (intensive corral corn fattening) which is based in a "conversion rate formula" suddenly was no longer possible because that conversion rate (of 8 kilos of corn per each kilo of beef gained) is only profitable up to around 260 (+-) kilos. beyond that the animals start eating more corn to produce the same kilo of beef but the costs of the extra corn eats away the margins.  So all the plans now had to be rewritten and figure out a way to make the best out of this situation. The operators (Ganadera Mallin y Piedra) then decided to take all the animals to the
open range for extensive breeding which takes at least eight months but can last for up to 3 years depending on the age of the cattle but it needs no feed except for the grass. In the meantime the prices in the market have collapsed and the expensive (now sunk) costs that were incurred to feed them (corn and concentrate and the like) can not be recuperated at these price level. While all this was happening and while
everybody involved in the industry was hoping that this was the last intervening measure, new measures would come into play and would make things worse. Should operators have informed investors while all this was happening? probably, but nobody expected this to unfold like this and so fast.

So what happens now? it appears the storm has passed and now its time to rebuild. A couple of weeks ago the Agriculture Minister was sacked (due to the conflict between the government and the producers) This is the first good news in almost a year and a sign that there is political will to change the situation, may be because it is election year and they don't wont the farmers against them?. There have been attempts to re-establish the talks and they announced some measures that if and when
implemented they should have some positive impact in the cattle industry. Said measures have to do with increasing subsidies and reducing intervention in the Liniers spot market (price controls and such) but have not addressed neither the export ban issue nor the high retentions (export duty) just yet, which means that we have to wait an see how much will this changes really impact on the prices. For now they are still very depressed and there have been very little change. not enough to justify selling anything yet. It could take a year before prices accommodate again. But it is also true that these whole ordeal has been a disincentive for a lot of farmers and those who could have switched from cattle to grain, which in the long term should mean lower supply of beef and higher prices.

In my opinion there has been no negligence from the part of the operators but rather a very unexpected and unusual set of measures (war like) from the government against a sector of the economy that has (unfortunately) a high impact on inflation. The whole industry has seen their profitability gone this year due to this very adverse conjuncture.

I nevertheless agree and empathize with investors opinion with regards to this entire ordeal. I am not going to repeat in this report the plethora of attacks the Industry has had to endure in the last 12 months because i have gone in great detail in previous reports about it and at this point i think you are fully aware of the complexities of this entire industry wide situation (operative words are: industry wide). This is not a problem exclusive to one investment in particular.

The life cycle of cattle growing is at least 3 years (from the moment they are born) if you want to eat young steer and can go up to 5 years if what you are selling are cows. This means that the cattle can still remain in the farm for quite some time before it needs to be sold.

Before these set of events cattle fattening was indeed a great opportunity and nobody in his right mind could have ever predicted that the government would start a war against it. This is to say that investments have been lost. it will just require a bit of time and patience to get it back.

For now it appears investors will have to wait a few months before the cattle can be sold at least at close to break even prices.

Cattle Industry lock-out

A few weeks ago the cattle industry finished an unprecedented 9 day "lock out" and second strike of the year - the first one was last July-, due to the disorientation and preoccupation - caused by the continued official interventions in the cattle industry -, that has suffered in the last few months, the exports ban, a depreciation as consequence of the ban of 35-40% in the price of the kilo vivo, reduction of the slaughtering weight, and maximum prices imposed by the interior commerce minister, Guillermo Moreno, in the (supposedly free) spot market (Mercado de Liniers). In short, the market is intervened.

The paradox is that what would have been a blessing in any other industry or market, the fact that raising international prices would result in higher prices (and profits) for the local breeders, ended up being a curse. What happened was that the government understood that the export boom in beef was responsible for pushing inflation higher, due to the high weight of beef in the Consumer Price Index CPI, and decided to clamp down on inflation by implementing anti market measures against the cattle industry such as the elimination of the 5% reimbursement of the export duties, the increase of export duties from 5 to 15%, the exports ban, etc...

Here is a chronological table describing in detail the interventionist policies implemented by the government in the last few months and which resulted in loss of profits and the impossibility to operate under normal and predictable circumstances in the Argentine cattle market and which had a direct impact in the returns of our investments. I put next to the event the approximate effect in the industry returns, from said measures.

Reimbursements and Export Duties:

- 21/12/05   The then minister of finance, Roberto Lavagna, imposes the minimum slaughtering weight at 260kilos and 10 days later he suspends the 5% reimbursements n export duties. Impact on industry profits = -5%
- 18/01/06    The government decides to increase beef export duties from 5 to 15%. Impact on industry profits = -10% due to the fact that this increased duty meant a disincentive to export and therefor increase supply in the local market pushing prices down.

Exports:

- 08/03/06   The government imposes a ban on beef exports to stop the increase on beef prices and their effect on inflation. Impact on industry profits due to oversupply in the local market = -20%

Do not buy beef!

- 14/03/06     Kirchner asks the Argentine people not to buy any more beef unless prices go down, Impact on industry profits = 0% nil. Argentines consume beef just as much or even more than before.
- 27/03/06     First rural demonstration, in Salliquelo. Days later another one takes place in Trenque Lauquen.
- 06/04/06     Government agrees with producers, slaughterhouses and meet packers on reduced prices for 11 popular cuts.

Meet Moreno:

- 13/04/06   Gulliermo Moreno, Interior Commerce secretary starts implementing control measures to curb the price increases. Imposes maximum prices below producers break even. Impact on industry profits = -5%

- 26/05/06   Government starts freeing up the ban to export beef. impact on industry profits = +5%

The first strike:

- 12/07/07     CRA announces the first rural strike against Kirchner's administration.
- 17/11/06     The government intervenes the beef market again and new maximum prices list are imposed. Impact on industry profits = -5%

In short, the battery of interventionists policies imposed by this government have cost the producers (and us) a loss of profitability between 30 and 40%. Just to have an idea, in todays Argentina to produce 555 kilos per hectare , the costs are U$440. With this scheme, which yields a net income of U$416.3 , there is a negative return of U$23.8 per hectare. When producers obtain negative returns that means the operators can not cover their fix or infrastructure costs. These costs are however
inevitable if they expect to continue with the enterprise. This means they operate at a loss until the prices increase enough to justify start selling cattle again. Selling before this level would mean the loss of capital and hence the investments. This is why most operators have tried not to sell any cattle and the reason why most investments have been paralyzed.

Foot-and-Mouth disease outbreak in Argentina

As some of you may already know, authorities in Argentina have reported an outbreak of foot-and-mouth disease near the border with Paraguay. This same thing happened to Brazil last October 2005.
The National Service for Food Safety and Quality said it had found some 70 cattle showing signs of the infection in a district in the province of Corrientes, Argentina and they said that the latest outbreak was isolated and that its origin was still unclear. Because of this outbreak, more than 3000 heads have been sacrificed and they have sealed off a 20 sq km area to contain the disease.

For those of you who are not entirely familiar with Foot-and-mouth, it is a highly contagious (for animals) illness that affects cows, sheep, pigs and goats. It does not harm humans, but it can definitely  hamper the meat trade between nations.

The question all of us who are involved in cattle growing must be asking right now is: How is this going to affect our investment?

To understand the real implications of this, we need to take a look at a few numbers, to wit:

Argentina, the third largest exporter of beef in the world, exports around 20% of its yearly production equivalent to approx. 600,000 tons of beef out of the 3.2 million tons of beef that are produced every year. The other 80%  of course is consumed locally at an average of about 70 kilos of beef per capita a year. Argentina is by very far the largest consumer of beef in the world on a per capita basis. Second comes the US at a much lower 43 Kilos per year (per capita).

Argentines complain regularly (it is in every newspaper's front page) at the current price of beef. Which means that if the price was lower, demand would be even higher than the 70 kilos per year.

The 20% that Argentina exports per year represents to the national economy U$1.4 Billion approximately or 0.7%  (less than 1%) of the yearly GDP of approximately U$200 Billion.

Out of the total Argentine current beef exports, approximately 2% comes from the province of Corrientes.

Now, most of Argentine's beef largest foreign buyers have decided to "regionalize" the 6 month ban imposed on beef trade (same as they did with Brazil) and limit it to the 1 district in Corrientes where the outbreak was discovered and the 7 districts that  could have been affected (where the 3000 animals where slaughtered). The only exception was Chile, which was the only country not to regionalize the outbreak.
Chile buys the equivalent to U$50 million a year. Corrientes accounts for less than 2 percent of Argentina's overall beef exports. Meat from other regions of Argentina which are free of FMD can continue to be exported.

Now one may wonder... why would any country (Russia, EU, Israel, etc..) decide to regionalize the outbreak and accept beef from the rest of the affected country (be it Argentina or Brazil)? The answer is twofold:
First, they trust that the problem has been properly dealt with, duly informed and contained in a very timely manner (as opposed to concealing info about the outbreak and letting the world try find out and decide what measures should be taken). The EU Commission praised Argentina for having taken "rapid action" to prevent the disease from spreading into other areas. Second, beef is a limited non-fungible commodity. There is only so much of it and there are almost no other countries that could pick up the slack (when a country like Brazil or Argentina falls off the market) and supply beef to the rest of the world overnight. Cattle growing is a biological business and the cattle cycle takes 3 years so if these things are not planned ahead, there is very little that can be done to compensate for the shortage.

What does all this info mean to us? According to the Argentine government it means that, for the next 6 months, there could be a decrease of approximately 15% in beef exports which could translate in a decrease in the price of beef of about 5%, that might or might not be transfered to the final consumer. After the 6 month ban period (standard in this kinds of outbreaks), and provided the Argentine government does a good job at recuperating the credibility and trust of the foreign markets, trade should go back to normalcy (same as it was before the outbreak). This means that we could expect a small decrease in the returns we should obtain in the next 6 months or so. Said returns should recover after the ban has been lifted.

Can the ban last longer than 6 months or can the buyer countries decide to go with their money somewhere else? Could be, but this scenario is very unlikely. There is a deficit (shortage) of beef in the world, hence its high price, and the world market can not afford to lose the 1st and 3rd largest exporters of beef in the world (Brazil and Argentina) even if it is one at a time, let alone both at the same time (specially now that new outbreaks were discovered in Brazil's Matto Grosso as recently as this week). There is simply no other countries that can supply the shortage. In addition to this, the world is starting to get seriously hit by the Bird Flu (aka the Chicken Curse), in Asia and now also in Europe. Unlike Bird Flu, FMD does not affect humans and is much easier to contain.

Russians and Europeans will have no choice but to lift that ban as soon as possible unless they expect their people to either eat potatoes for the rest of the year or have them pay 100 euros the kilo of beef. Both highly unlikely scenarios.

Those investors who decide to stay put and let the 6 month ban pass might have an opportunity to recover any decrease in their returns from this round due to the FMD.

Article in Welt

23. März 2006, 00:00 Uhr

Von Christian Thiele

Argentiniens Präsident ruft zum Steak-Boykott auf

Walter Ribero sieht nicht aus wie der personifizierte Volksaufstand. Aber aus Sicht der argentinischen Regierung hat der gemütliche Mittvierziger gestern Morgen gegen halb zehn Uhr zivilen Ungehorsam begangen: Ribero hat Fleisch gekauft. Gut zwei Kilogramm argentinisches Rindfleisch, für den Grillabend am Wochenende. Dabei hat doch Staatspräsident Nestór Kirchner zum Steakboykott aufgerufen.

Im Kampf gegen die Preissteigerung hat sich Kirchners Regierung die Fleischproduzenten als Lieblingsfeind ausgesucht. Seit letzten Herbst attackiert sie mit immer neuen Methoden die Industrie: Mal läßt sie das Mindestschlachtgewicht für Kälber erhöhen, mal die Exportsteuern verdreifachen, mal ein neues Ausfuhrregister einführen - bislang ohne jeden Nutzen. Schließlich ordnete er einen sechsmonatigen Bann für einen Teil der Fleischausfuhren an. Da das aber die Preise immer noch nicht signifikant gedrückt hat, geht Kirchner der Branche jetzt direkt an die Gurgel: "Lassen wir sie die Macht der Konsumenten einmal spüren, damit sie nicht mehr zu jedem x-beliebigen Preis verkaufen", schäumte der Präsident letzte Woche in einer Fernsehansprache.

Die Fleischpreise sind im vergangenen Jahr um fast ein Viertel gestiegen, die Inflationsrate lag bei zwölf Prozent. Kirchner, der sich nächstes Jahr wohl zur Wiederwahl stellt, zwingt deshalb viele Branchen zu Preisabkommen. Nur mit dem Fleischmarkt hat das bisher nicht geklappt, deshalb die Brachialmethoden.

"Kurzfristig wird er damit auch etwas bewirken", sagt Pablo Mariani, der Rinder züchtet. "Nur darum geht es Kirchner: Um die Schlagzeilen des nächsten Tages." Langfristig aber werde das Angebot sinken, weil die Viehzüchter auf andere profitablere Produkte umsteigen, sagt Mariani. "Das ist wie mit den Mietpreisobergrenzen im New York der 20er Jahre: Erst sanken die Preise, dann baute keiner mehr. Heute kostet ein Apartment drei Millionen Dollar."