Rodrigo Bitar – Overlooked Opportunities in Latin America (EP.442)

Two weeks ago, James Aitken suggested sharpening your pencil to find specific individual assets that have been beaten down, while Louis-Vincent Gave declared Latin America an attractive place to look. Combining these themes, I reached out to today's guest, Rodrigo Bitar, Co-founder of 3B1 Partners, to get his perspective on opportunities in the region. Rodrigo was a past guest on the show three years ago, and that conversation is replayed in the feed. Our conversation this time around covers the investment case for Latin America, 3B1's experience in Venezuela, lessons learned from operating in high-risk, illiquid markets, the value of bringing capital to the region, the necessity of patience, and a specific individual asset 3B1 is pursuing in Central America. Learn More Follow Ted on Twitter at @tseides https://twitter.com/tseides?lang=en or LinkedIn https://www.linkedin.com/in/tedseides/ Subscribe to the mailing list https://capitalallocators.com/ Access Transcript with Premium Membership https://capitalallocators.com/signup Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com https://thepodcastconsultant.com/)

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Ted Seides?

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• 3:32Ted Seides?

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• 4:18Ted Seides?

  Two weeks ago, James Akin suggested sharpening your pencil to find specific individual assets that have been beaten down, while Louis Vincent Gav declared Latin America an attractive place to look. Combining these themes, I reached out to today's guest, Rodrigo Bitar, co-founder of 3B1 Partners, to get his perspective on opportunities in the region. Rodrigo was a past guest on the show three years ago, and that conversation is replayed in the feed. Our conversation this time around covers the investment case for Latin America, 3B1's experience in Venezuela, lessons learned from operating in high-risk, illiquid markets, the value of bringing capital to the region,

• 5:02Ted Seides?

  the necessity of patience, and a specific individual asset 3B1 is pursuing in Central America. Before we get going, as we approach the all-important Mother's Day and Father's Day holidays, we have a special something to offer that special someone in your life. Academic studies show that experiences surpass things in creating happiness. So let's start there. Summertime brings opportunities for all kinds of experiences: a day at the ballpark, a trip to the zoo, a night at the ballet, or a weekend on a lake. All of those create valued memories and make for wonderful gifts.

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• 6:28Ted Seides?

  year of membership between now and Mother's Day. In case you're wondering, that discount applies to you, too. Thanks so much for sharing the experience of Capital Allocators Premium. Please enjoy my conversation with Rodrigo Bitar.

• 6:46Ted Seides?

  Rodrigo, great to see you.

• 6:48Speaker 02

  Great to see you, Ted.

• 6:49Ted Seides?

  I'd love to start by talking about the investment case for Latin America. And I guess we could break it down in a couple of different components, but let's just start with the economy.

• 6:58Speaker 02

  The economy in Latin America has been progressing nicely the past few years. We have always thought of Latin America to be very much in the sphere of influence of the US. So the trends toward democratic processes in the region, market-driven economies is what's dominated in the last few decades. Latin America has always been very close to the US. The US has always been an aspirational geography for Latin Americans. From a cultural perspective, a place to live, music, sports, we relate very much to that. And Latin America has been evolving very nicely. It's got its swings, its cycles, like every other country in the world, but it's been doing very well. In this new world that is beginning to get configured, like a multipolar world where the Americas begin to become a block, and Russia and China and Europe separately.

• 7:44Speaker 02

  The closeness that historically has existed between Latin America and the US, I think is going to become more relevant for the future. So when we think about investing, we believe it's a region that is attractive because it's close geographically, time zone-wise. Valuations continue to be very attractive compared to where the multiples are in the US. You have a very young population, growing faster than you grow in the rest of the world. And the classic concern about currencies has been actually pretty subdued. And if you look at the region in the last 10 years, it's become a much more stable region. So we believe it has always been an interesting investment case, but more so at the moment, given where the world geopolitically is going towards.

• 8:23Ted Seides?

  What's changed in the couple of months as Latin America looks at that geopolitical landscape?

• 8:30Speaker 02

  What everybody's talking about are the tariffs. And if you look at what happened in tariffs in Latin America, it was a region with which the US was very benevolent. So they are either in the 10% tariff range, or many of the goods that Latin America is exporting into the US are actually exempted from that. Many of the countries in Latin America had free trade agreements with the US. Central America had a free trade agreement, obviously Mexico did, Chile does. So the impact, if you look around the world, which are the regions who are going to be more impacted? Latin America falls under the category of minimal impact. It's part of the integration that we're speaking earlier.

• 9:02Ted Seides?

  Within Latin America, a lot of different countries, and the one you've historically focused on, Venezuela, doesn't necessarily fit, at least politically, in alignment with the US.

• 9:12Speaker 02

  It does not.

• 9:13Ted Seides?

  Would love to get an update from when you last came on a couple of years ago. We were talking about this very interesting risk reward in Venezuela and what's happened.

• 9:22Speaker 02

  We still believe Venezuela is a very interesting investment case. Our investment philosophy is that we look for opportunities that have asymmetric risk reward. We thought Venezuela was the case when we started like five or six years ago because it was a country that had undergone a macro shock. Venezuela is mainly a country that produces oil. Its oil production had dropped like 80% from the peak. And in the last four years, since we began investing, we got the timing right and we have seen growth in that oil production, up to a million barrels of oil. The economy has grown. Our portfolio has grown about 40% per annum the last four years, and we believe it still has a lot to grow. So it's still like a third of where it used to be regarding production.

• 10:06Speaker 02

  It was a situation where there was a perceived risk much greater than the real risk, in our view, and a country that was overlooked by investors for understandable reasons. And that created an opportunity where you could find very high-quality assets at very attractive prices and assets that are basically the basis of any economy in an emerging market. And we were very interested in that and we were very excited about that opportunity. And that's where we devoted a lot of our efforts in the past five years.

• 10:36Ted Seides?

  The high-level political risk seemed like it was getting a little better and maybe now not so much. How have you found the opportunities on the ground growing and working in spite of really not that much change in the political regime?

• 10:53Speaker 02

  So I would say that as there is uncertainty globally with tariffs, you have a similar situation in Venezuela. There are some questions that we don't know where its position is going to finish. So people, like mostly in the rest of the world, are a little bit in a wait and see attitude towards what's going to happen, let's say, in the geopolitical sphere. We work in the private sector and the development of that part of the economy mostly depends on oil activity, local consumption, and the growth of the wealth of Venezuelan people. You still find in the critical sectors of the economy attractive assets at attractive prices. It's a country that has very talented people and the management teams running these companies

• 11:36Speaker 02

  actually face challenges that are much greater than what you normally see elsewhere in the region with regards to currency volatility, logistics complexity to get goods into Venezuela, et cetera, et cetera. Very, very high quality people in interesting sectors of the economy that you can actually acquire at cheap prices and you have a lot of growth. You have had growth in the past four years and you have a lot of growth going forward.

• 12:00Ted Seides?

  We'd love to dive into what you've done in Venezuela since the time you last came on the show.

• 12:06Speaker 02

  We have focused on the sectors that we believe have to grow that are like the basic layers of economic activity. Telecommunications, health, basic industry, we're looking at food assets. So everything that you need when the population is beginning to become wealthier and they're seeking a higher quality of life and they want to be communicated with the world and they want to have better health. So those are the sectors that we believe regardless of the macro situation around the world, it's sectors that will have increasing consumption. That's where we're targeting and we've been successful at choosing the right companies in the right sectors.

• 12:39Ted Seides?

  Why don't you walk me through an example?

• 12:41Speaker 02

  The most recent one that we've invested in is pharmaceuticals. So pharmaceuticals in Venezuela is a very fragmented market like in many other markets. And since we come from a background of doing transactions, having the ability to transact companies is like a barrier to entry. We had been looking at the sector for many years and we finally found the company that we thought was a good platform to do a roll up. So it's an American playbook that we apply. Buy a platform company, do a roll up, do it organic and inorganic growth. And thus with scale, you get more efficiency and greater competitiveness. So we followed that playbook and we began acquiring a company that was the number six in the market. And in the span of a little bit less than three years, it's become the number two pharmaceutical manufacturer. So that's meant about a tripling or quadrupling of the size of the company in three to four years.

• 13:26Speaker 02

  Doing that in a sector that's so basic to people's lives is really unusual because normally it's not available. In most of the economies in Latin America where you go, these are like trophy assets that whomever the owner is normally families. They don't want to trade it. Having the ability to go into a market which is a little bit overlooked or an empty room, as you said in the last podcast, allows us to access those assets. So if you have the capability to transact, you have the management team to integrate and grow these companies. And you have the capital. It's still in Venezuela, clearly, it's a big, big strategic advantage to have access to capital and the rest of Latin America too, but not as critically in Venezuela.

• 14:05Speaker 02

  But if you had those pieces of the puzzle, capital, capacity to transact, understand the thinking of the families that own these assets and how do you make it attractive for them to partner with you at what they believe are low prices initially? Plus, you have a management team who can run it. Then you have a winning formula that we believe is what allows us to create growth and value. So local know-how, transactional know-how, dealing with families, access to capital. That makes a big difference and that helps create value. And that's what we've done in that sector.

• 14:35Ted Seides?

  In that case, I'd love you to tell the story of how you found the company and then how you worked with the management team.

• 14:45Speaker 02

  We found the company by talking to all the companies we liked. In all of Latin America, it's not a big community of the owners of the assets. We were looking at the pharma sector. We looked at the 15 top players in the market and we went to all of them and we had chats. Most of them are Venezuelan families. There are a few that were non-Venezuelan. There was a Colombian firm, firms from other countries, one or two Americans. So our first step was to find the right. Partner because when we invest in these regions, what we want is a local partner who can also operate, provide the capital, we help in strategy and other things. So we need somebody to operate. And we found a wonderful family after like two years searching. We began the partnership with them where they sold a piece of the company.

• 15:27Speaker 02

  They weren't super excited about selling, but we told them, look, if we deploy capital now in a period where nobody wants to invest or people are worried about investing in Venezuela, we're going to together create much more value. We are not the people doing the exit event to you where you're going to get wealthy. We're going to be a catalyst so that we together can create a lot of value. And then we get out in whatever timeframe where we create the big player. We believe that having scale in these markets in those critical industries provides an operating advantage, but also a lot of value strategically. So we did speak to everybody that helped not only in choosing the right platform, but also knowing who else we wanted to partner with and whom else to buy subsequently. All these dialogues take a long time because it's families, knowing how to deal with them

• 16:09Speaker 02

  and having the patience and then maybe at the right time, integrating them is part of the trick to make this thing work.

• 16:16Ted Seides?

  What were the characteristics that you looked for in the family or in the owners to drive the business forward?

• 16:23Speaker 02

  We wanted to see expertise in having done prior acquisitions. And actually this family had acquired a French pharmaceutical manufacturer like a year before we acquired them. We want to have a professional management team involved. We wanted to have super high quality reputation of the partner because it's small world in a way. It was a family that we had known for many years and they had been in multiple businesses in Venezuela. They had the hunger to execute a strategy when everybody else was taking more of a conservative tack. Having the right attitude was relevant because you don't want to provide a lot of capital to people who don't want to take the risk. So it took us a while. We were like two years having dialogues until we found the family that we liked the most.

• 17:02Ted Seides?

  The pharmaceutical manufacturing business, what are the nuts and bolts, the basics of how that business works?

• 17:09Speaker 02

  Most of Latin America is not like the pharmaceutical business when you think about it here in the US, so it's not R and D, creating new, very expensive drugs to treat certain diseases. It's more like a consumer product. So it's the sale of non-patented drugs, Atalenol, Paracetamol. And the two main categories when you're doing these drugs, it's either you have just a straight generic, or you have a branded generic. Branded generic is where the most of the action is because it's basically you create brands, the laboratories, manufacturers are really like brands that people trust. They go to the pharmacy and they buy different products from the same brand. Or you have a brand, like you have Atalenol here in the US for Paracetamol, we have some of those brands in Venezuela.

• 17:52Speaker 02

  So it's brands that people know, so you go to the pharmacy, you have a headache, you know which one to buy, you're gonna go for that brand. Or you have a stomachache and you go for the other brand. It's more like a marketing operation with production, little R and D, not a lot, and working with the doctors and with the patients to show the benefit of the drugs you manufacture. It's more of a consumer play than an R and D FDA approval play like you have here in the US. Still, they're very profitable, 30 to 35% margins, little capex, so they generate a lot of cash flow, which is also very relevant to us.

• 18:23Ted Seides?

  What most excited you about the opportunity?

• 18:26Speaker 02

  We love the sector. I mean, it's a sector that's been growing as people move from, let's say, lower levels of income to higher levels of income. Health is one of the priorities, and the rate of growth of that market has been 20%, 30% per annum for the past three, four years in Venezuela. It's an economy under recovery, but if you look at the rest of the region, there are also sectors that grow a lot. We also like it because it's a very liquid segment of assets. There's always multinational, larger multinational or regional pharmaceutical companies looking to take large positions in countries. You look at M and A in the last 20 years in Latin America, there's been a lot of M and A in pharmaceuticals. We think about liquidity going forward and exit, it's a very relevant factor for us.

• 19:08Ted Seides?

  So you spent two years doing the work identifying the company. When it comes down to buying, how do you negotiate price?

• 19:17Speaker 02

  We have developed a reputation in that market that we can actually provide a lot of support to the companies, be it helping them out with leverage. There's very little credit in Venezuela because of how the local economy works. We can help them optimize operations. We can help them in doing these rollups. We can help them think outside of Venezuela, which is re-linking Venezuela to the region is also one of the strategies that we follow for liquidity in the future and to reintegrate the economy to the neighboring countries. Price. We are convinced that we add that value. And I think the market, if you look at the case studies of what we've done in the past few years, that is the case. We look at multiples in Latin America. Obviously, we look at the risk premium in Venezuela.

• 19:59Speaker 02

  And the numbers that come out are normally not very interesting. So we need to sell our ability to help the company and the opportunity of having more capital to compete and to grow as a value creator. Most of what's happened in the last few years in Venezuela is that in order to grow, you need capital for working capital. And in Venezuela, the logistics are complicated. So you need more lead time to get your goods into the country. Suppliers worry about the risk of Venezuela. So they ask you to pay earlier. They give you less credit. All of that means more capital to grow. So having that capital is a competitive advantage. All of that together has helped us achieve positions in these companies where in the end, we do create value and they are happier, having had a larger company with

• 20:43Speaker 02

  a smaller position than having 100% of a smaller company.

• 20:46Ted Seides?

  So for a business, what you described, growing significantly, high margins, some question of providing capital, what do you end up having to pay when you bought the business?

• 20:57Speaker 02

  The multiples, strangely enough, have been coming down because the companies have all grown. In the midst of the more challenging time, companies were so much smaller than they were originally that you needed to pay a bigger multiple. Now, the valuations are sub four times EBITDA. Calux is a portfolio company that we have in Pharmaceuticals. We must have bought that like a three and a half times EBITDA. And then we subsequently acquired the assets of Pfizer in Venezuela. And then we subsequently, last year, acquired local assets of a company called VIVAX Pharmaceuticals. And the multiples were all around there, much lower than comps. And with the larger size that you were achieving, you could make those into very profitable operations very soon. So it was a very attractive. Value generation was important and the cash flow generation was important. Now the company can just grow itself and fund itself going forward.

• 21:44Ted Seides?

  We're going to take a quick break in the action to tell you about Brookfield. Brookfield invests in the thing behind the thing behind the next big thing. Their focus across infrastructure, energy, real estate, private equity and credit is helping to build the backbone of the global economy. Brookfield combines deep operational expertise with disciplined, long-term investing, uncovering value and partnering alongside clients to shape tomorrow's economy today. Invest in the businesses that shape tomorrow. Learn how you can own what's next at Brookfield.com/own.

• 22:22Speaker 03

  This is not an offer to sell or investment advice. Investing involves risk, including the loss of capital.

• 22:27Ted Seides?

  And now, back to the show. So what's happened over the last couple of years since you bought and did these additional acquisitions?

• 22:36Speaker 02

  The company has quadrupled. Margins have increased. I think this year may be the first year that we distribute dividends because we've been using the money to pay for the old acquisitions and fund working capital. We may do another acquisition. We're now number two in the market, 1% market share away from number one. We're evaluating, should we just continue in organic growth or do we do the last acquisition and then just let it continue? It's a beautiful case study because in a very short timeframe, two years, three years, we've built the second largest pharma company in the country and we're seeing the fruits of that effort.

• 23:08Ted Seides?

  How do you think about the exit strategy from here?

• 23:12Speaker 02

  For Venezuelan assets, what we believe is the necessary condition for exits is that it becomes a geography where foreign investors are willing to come back in and acquire these strategic assets. What we're looking to do is build those strategic assets in anticipation of that event happening, which we think is not in the short term, it's probably in the long term. What we focus at the moment is we create value in the meantime and we generate as much dividends as we can so we can reduce the amount of exposure that investors have to the country. But we're very happy. These are very strategic assets in core sectors of the economy and we see the growth happening and we see the brand strengthening, the management teams getting better. We're very satisfied with what we've done.

• 23:51Ted Seides?

  You mentioned you most expect going in to any investment in Venezuela, there's going to be risk, there's going to be volatility, there's currency, all different kinds of things. What have you seen happen that didn't go according to your expectations in the last couple of years?

• 24:05Speaker 02

  The main factor that actually we did not anticipate and has been very benevolent to us was the speed of the adoption of the dollar as can anchor currency in the country. We began doing these investments in 2018 and starting in early 2019, an informal process of pricing local assets in dollars began. Venezuela has always been very much linked to the dollar because there are exporters of oil, mostly to the US. So there's always been dollar currency in the country and people think in dollars and they price in dollars. But what began to happen is that you would go to the supermarket and the prices would be in dollars and that created a lot of stability. And that actually was the beginning of the growth phase in Venezuela. And we did not anticipate how quickly that happened.

• 24:46Speaker 02

  Within the scope of a year until today, in fact, all of the pricing of all of the assets is dollarized. They may not be listed in dollars, but the underlying amount for pricing everything is in dollars. People transact dollars and they transact the bolivar, but that has created a stability and has allowed people to provide credit to clients and that put the wheel of internal trade going, which was stuck without anybody providing credit to anybody because you had a hyper devaluation, a hyper inflationary environment that didn't allow for that.

• 25:16Ted Seides?

  So that sounds like a good thing.

• 25:18Speaker 02

  It was a good thing.

• 25:19Ted Seides?

  How about any things that were tougher than you thought?

• 25:22Speaker 02

  Bad thing, okay. We were of the view that the US had a strategic interest in accessing Venezuelan oil to keep prices low in the US. And the other strategic interest the US had was to solve some of the migration issues that they had in the US and they wanted to return people from Venezuela back to Venezuela. So in the last few months, that route of, let's say, pragmatism to achieve what the US was seeking, more oil and less migrants, was what was driving the policy towards the US. And in the last month or two, there's been a shift in that, more towards restriction of the sale of Venezuelan oil to the US.

• 26:07Speaker 02

  In prices, what it's doing is pushing it to China, which is odd because that would seem counter to the US objectives. That was a development that we didn't anticipate. And although there has been no negative impact to date, we're just monitoring closely what happens. Nevertheless, we believe that Because of the refining infrastructure in the southern US, which is, you know, has been built for Venezuelan crude. That's a natural relationship that should endure in the future. But there's many geopolitical things that are shifting around tariffs, et cetera. That, again, we're in a wait-and-see mode like everybody else is regarding tariff and other geopolitical matters.

• 26:43Ted Seides?

  When asset prices are that cheap in the private markets in Venezuela, how difficult is it to get someone to sell to you?

• 26:53Speaker 02

  Not easy, is the answer. It's about finding the right partner in an industry where you can actually make a difference. Because they need to be absolutely sure that in taking your money, they're going to create more value than in not, even despite the price. And we're transparent about that. We say, okay, look, global comps are here. The discount that Venezuela commands is this one. This is a resulting multiple. We're going to give you more than that because your company is a high-quality company, which is normally the case. And then they have to fall in love with us a little bit and think that it's going to work and that we're going to do things together. We're going to help facilitate the exit in the future. And then we bring new things to a table. Venezuela is a particular case. It's been a little bit like abandoned. So you come, you provide support, you inject them with energy, with positivity, like how, you know, let's capture market share.

• 27:37Speaker 02

  That in the end is valuable to them. And it's work. It's not easy. It's not like at higher prices, obviously, you can buy whatever you want. But that's not the objective. You have to be disciplined. We feel that we're very conservative financially, given the risk that we take geography-wise.

• 27:51Ted Seides?

  How have you thought about exploring opportunities outside of Venezuela within the region?

• 27:57Speaker 02

  We always think about the integration of Venezuela to the rest of Latin America and to the world. I mean, Venezuela was always very integrated and it's become less so in the last few years. We're always looking at how do we integrate these operations in Venezuela to operations outside of Venezuela? Because that would facilitate an exit in the future. That may also mitigate risk of having assets with more diversified geographies. So we look at the rest of the region permanently. And as you know, my career has been all around Latin America, not just Venezuela. We constantly look at other regions to see how we can do collaborations with Venezuela, how we can expand the business that we have there outside of Venezuela and the capabilities that we've developed there. How do we use those outside? And where do we have similar circumstances than how we had in Venezuela?

• 28:39Speaker 02

  An overlooked region with necessity of capital, with complex operating environment, et cetera. Central America is a little bit like that. And we're looking very much into that region at the moment.

• 28:50Ted Seides?

  So now that you've gone into Venezuela and dealt with the particular challenges that country, how do you think about what's next?

• 28:57Speaker 02

  We try to think about what have we learned in Venezuela and what have we learned to do right there and where do we find opportunities that have similar characteristics to the challenges that we face in Venezuela. What have we learned? One, we can operate in complex environments. Number two, we can transact. We're able to acquire assets in environments that are challenging from families that is normally a challenging transaction to conduct. And doing a roll-up, how do you use fragmented markets and create more dominant players? When we look at the rest of Latin America, Central America has been a region that we've been intrigued by. It's not like Venezuela, but it's very fragmented. It's multiple countries.

• 29:40Speaker 02

  It's hard to operate in the region because of the same. You have separate countries, each with their own regulations, their way of doing things. So doing an operation that's across a region is very challenging operationally. Capital is available, but it's not the place where you would think a lot of capital goes to. Even for the rest of Latin America, Central America is like a lower priority. It's a little bit overlooked, similar to Venezuela, and for us, that's a big opportunity. In pharmaceuticals in particular, where partners in our portfolio company have a separate company that they own that operates across of Central America. They were the number six player in the country in Venezuela, they're the number seven player in Central America. So we believe that is very similar to the challenges that we face in Venezuela and the

• 30:24Speaker 02

  knowledge that we have there, we can apply it here. So we have a good platform company with sufficient scale to do a roll-up. We have a very talented management team. It's a related management team to the one that we have in Venezuela. It's a place where our ability to transact is relevant. It makes a difference. Our ability to attract capital is very relevant. It makes a difference. And this team has also conducted some acquisitions in the past, so they know how to do roll-ups, they know how to grow the company organically. And interestingly enough, Central America is a fast-growing region, very good demographic profile, healthcare is growing like 10 to 15%. Percent growth annually, which is very attractive to us. The increasing wealth in the region, people are improving everything that has to do with quality of life,

• 31:08Speaker 02

  including food, including better housing, personal hygiene and healthcare. Those are the sectors that are really growing in that region and we like that a lot. Very stable currency, two of the five or six main markets there already have the dollar as a currency. Overall, we see a region where we can help create that in the North of South America. You can create a large regional player in pharmaceuticals. The multiples in Central America are certainly higher than Venezuela, but still interesting from a market perspective, so below market. And what we have seen is that if you create a regional player of sufficient size and diversity in countries, you can command the multiple. When you look at the latest transactions in the past five, six years in Latin America,

• 31:50Speaker 02

  all these regional guys have gone from like 10 to 14 times EBITDA. And the going in price for these assets is like seven to eight times EBITDA, with a growth, you know, of 10 to 15% per annum. So you buy cheaply, you have a lot of growth internally while you do the roll up and then you can exit at a very high multiple. And that's what we believe you can execute and we have the right capabilities in our view to execute there.

• 32:13Ted Seides?

  From a business perspective, structurally, when you start with a Venezuela-focused fund, how do you then pivot and say, okay, we started Venezuela, but now we have this management team that can do this in Latin America?

• 32:26Speaker 02

  We're trying to smoothly transition or expand. So we see opportunity in Venezuela going forward and we would love to do more investing in Venezuela. We still have, actually, we're still investing in Venezuela. So that opportunity, I think, exists. We love that situation, we'll continue there. Nevertheless, if we have these opportunities where we believe that we have an edge, either because we know the markets, we know the local families, we have an operational team. Many of the companies that we're looking at in pharmaceuticals, I've known from prior work that I've done in pharma in Latin America, putting all the pieces together, it's really not an impossible thing to do. We have the capacity, we have all the pieces and we have the capacity to put them together and want to take advantage of that. I would characterize ourselves as we are opportunistic investors,

• 33:08Speaker 02

  focused on finding situations where we can create a difference and where we can create a lot of value for the risk that we're taking. We have been exploring different spaces, there's a new one that we've found. So we will begin an expansion into that and then we'll see where that takes us in the future.

• 33:24Ted Seides?

  What are the biggest risks that you worry about, both in Venezuela and broader in Central America?

• 33:30Speaker 02

  The biggest risk that I see is illiquidity. You need to be patient. Therefore, you need to have high-quality assets that are yielding assets. So, for example, if we can have Venezuela yielding 20% per annum, we don't mind waiting, and that's the objective that we have. We think that we can do the same in Central America. So our main concern is how do you create a base of investors who are at ease with waiting because they have a strategic asset, but it may take time to generate the liquidity. It's less a concern in Central America than it is in Venezuela. But still, that's a concern.

• 34:01Ted Seides?

  When you go out and talk to investors today about the empty room of Venezuela or broader in Latin America, what are you hearing people's feedback?

• 34:09Speaker 02

  When we speak to people about Venezuela, eight out of 10 will say, like, after the first few words, like, "Oh, I don't know. This is a little bit too much." Listen to the story. Listen to the story. The amounts of immediate nodes for Venezuela is very high. We learned that we just had to very targeted group of investors. You have to be patient because it's breaking, let's say, the common sense of how people see the opportunity. When we began speaking to investors about Central America, the eight now became two. So we're like, wow, this is amazing. Latin America is always like an educational process to investors because it's not the place where people look most at. And we believe the fundamentals are there, and these are interesting opportunities. We have the patience to dialogue with investors, develop investors, develop their comfort.

• 34:53Speaker 02

  And I think for the first time that we hadn't heard earlier is many investors are saying that although they would not have looked at emerging markets or at Latin America a few months ago or maybe a few years ago, now they're open to seeing how they can diversify their portfolio that are, at least the investors that we speak to, are mostly focused in the US. So there is an openness to looking at Latin America. And I think, again, like we said at the beginning, this multipolar world, Latin America will certainly be together with the US, and that will mean further growth, integration, opportunities. For example, Central America, 20% of many of these countries' GDP are remittances from the US to the countries. There is a very strong linkage to start,

• 35:37Speaker 02

  but I think that will continue to develop if the world becomes more multipolar.

• 35:41Ted Seides?

  What are you hoping to achieve over the next couple of years with the business and this investment strategy?

• 35:46Speaker 02

  I have an emotional attachment to Venezuela because I lived there as a child. And I feel that we do good things for people. So our employees in the companies in Venezuela, I think we've contubled the average compensation since we began four years ago. Better healthcare, better benefits. Obviously, you see the social impact of what you do and provide people well-being. And I think these geographies and countries and opportunities, even for the families who own these assets, it feels great to bring capital and help them grow and create because these are talented people. So create larger players, regional players, big competitors. In Latin America, we will feel that we're a little bit at a disadvantage from the capital point of view. When you're able to provide that and you see that these teams execute successfully and they do interesting things, we are very proud of that.

• 36:31Speaker 02

  That gives me a lot of satisfaction.

• 36:33Ted Seides?

  All right, Rodrigo, I want to ask you a couple of closing questions that I didn't ask you last time. What was your first paid job and what did you learn from it?

• 36:41Speaker 02

  I think my first job in school, I had to work as a laborer. I worked at a factory that manufactured fabrics. I was an electrical technician, would clean the lamps, walk around the place, look at the machines. It was educational to see different roles that you have in making things work, even from the most basic things are needed for these large factories and businesses to work.

• 37:07Ted Seides?

  How's your life turned out differently from how you expected it to?

• 37:10Speaker 02

  I thought I was just coming to the US for like, I'll do my degree and then I'll stay two years and maybe just get to New York and go back to Chile. We've fallen in love with the city and the opportunities and the things that we've been doing and our four kids have been born here. We have these discussions with my wife, Paula, what are we going to do? Are we staying here? Are we going? Are we going to live maybe here, apart in Chile, et cetera? We're here and that's been lovely and unexpected.

• 37:34Ted Seides?

  What's a mystery that you wonder about?

• 37:37Speaker 02

  My children have grown more thinking about how we help their lives, how is life going to be for them, the finality of life. It's not like it doesn't overwhelm me or I'm not thinking about it permanently, but you begin to think about it a couple of years ago. We're invisible, we would live forever. And now, you know, the kids grow up and then they make you think about these things. I wonder about that.

• 37:58Ted Seides?

  All right, Rodrigo, last one. If the next five years are a chapter in your life, what's that chapter about?

• 38:03Speaker 02

  The change that I've been thinking lately is with all the information overload and all the production of media and whatever, I stopped reading a couple of years ago. We become less connected to history, to literature, to culture. So I decided, very little electronics at the end of the day, and also reading again. I began to read, I had piles of books, including yours, beginning to read. Literature, history, stuff that interests me from a business perspective, because I feel the danger that we live in is that we are losing connection to history with all the devices, social media, et cetera. And I see it in my children. In addition to what they study in school and read in school, how do you make them continue having a curiosity and having the ability

• 38:46Speaker 02

  to read more, connect themselves to the culture, to the history, to philosophy? I hope to become wiser in the next five years. That's the conclusion. And all these things that I think you go through life and you're like looking at things that I really want to do that, I really want to read that book. And I keep buying books and oh, I really want to know about that.

• 39:07Ted Seides?

  No, Rodrigo, thanks for sharing this update on this maybe slightly less empty room.

• 39:12Speaker 02

  Thank you, Ben. It was good seeing you.

• 39:15Ted Seides?

  Thanks for listening to the show. To learn more, hop on our website at capitalallocators.com, where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more. Have a good one and see you next time.