By Chad Olson, Staff Writer
Early this past summer, I had the opportunity to travel to Quito, Ecuador as part of a consulting team organized through the Global Consulting Lab here at Thunderbird. Our team was partnered with a local food and beverage producer that was heavily reliant on a government program that provided subsidized meals to school children. This company wanted to diversify their offerings so that they would have other major sources of revenue if they were to lose this government contract. To this end, our project was focused on developing a world-class commercialization process that they could implement for new products. My time in Quito was incredible. The city was absolutely amazing, and the people were all very warm and welcoming.
Fast forward a few months, and my experiences in Quito are now overshadowed by violent protests and a government fleeing for its safety. Since the announcement that the government would no longer provide subsidies for fuel, anti-government protests have taken the center stage in Ecuador’s capital. Violence had reached such an intensity, that the president and the government as a whole fled the capital in an attempt to regain security. Reading about the current events in Ecuador has made me realize just how quickly the international business environment can change.
What does this mean for the company that I worked for over the summer? What does this mean for companies that wish to operate through government channels within Ecuador in the future? Because these questions exist within the world of business, analysts are constantly trying to forecast political risk so that organizations can better prepare themselves for such uncertainties. Such assessments are publicly available through outlets such as Transparency International, the Economist Intelligence Unit, and even the CIA World Factbook. What these analysts don’t describe is the speed at which unrest truly occurs. That can only be experienced by taking a close look at the day-to-day changes within a country.
Within one month, the reason why this company brought our consulting team to Quito became abundantly clear. The reaction to the rising prices of fuel in Ecuador promoted a “quick” reaction from the government. After 11 days of protests that involved ransacking government offices and sabotaging oil installations, the government finally crafted a deal that would bring an end to protests. The deal brought an end to the proposed austerity package and a led to the withdrawal from cooperation with the International Monetary Fund (IMF). The protests were led by indigenous leaders in Ecuador who had already contributed to the fall of three other presidents.
A quick recap of events shows that it took one month from the time of my visit for the government to increase fuel prices, one day for protesters to take to the street in opposition to these changes, and eleven days for the government to stop cooperating with the IMF. In a highly globalized business environment, these events can create uncomfortable choices for companies. Managers must understand the risks associated with entering new countries and apply strategies that protect them from those risks.