Yanqui, Si! : Indiana Dairyman Finds Fun and Mucho Profit in Bolivia

September 25, 2007

ANDERSON, Ind.-Question: Why should Dallas Hardacre, a successful, conservative dairyman, suddenly decide to invest a substantial part of his personal wealth in an attempt to bail out a floundering dairy concern in South America?

Answer: Because he figures he'll make a pile of money.

And if he's successful, he'll have demonstrated that a small businessman lured by the profit motive can help underdeveloped nations more efficiently than can big corporations or big Government foreign aid agencies.

The venture isn't without risk, of course. The Bolivian town of Santa Cruz, site of the dairy plant, is developing rapidly, but it remains deep in the interior of one of the hemisphere's most forbidding countries. It's also just a short trek from the area where Che Guevara, the guerrilla leader, was recently captured and executed after a long campaign apparently aimed at turning Bolivia into a Latin American Vietnam.

But Mr. Hardacre and an organization called Programing for Utilization of Resources Inc. (PURI) believe the dairy can succeed. Though PURI tries to avoid the impression it's interested only in small projects, its organizers feel a small-business approach and a "common sense" attitude can make foreign ventures profitable for the small independent investor. This appeals to Mr. Hardacre, whose family has used its common sense for the past 46 years to build East Side Jersey Dairy, of which he's vice president, into one of this state's largest independents.

A Good Start Though some may think his approach naive, Mr. Hardacre has a lot going for him in Bolivia. The dairy, Industrias Lacteas, S.A., which opened in January after his investment of $45,000 permitted completion of building plans, makes the only commercially produced hard cheese in the country. Soon it will sell the only ice cream. It's the only maker of "dulce de leche," a popular Bolivian treat that used to be made at home or imported, and soon it will produce the only pasteurized milk in the Santa Cruz area.

What's more, competent workers toil faithfully for about $1.50 a day, compared with the average $25 daily Mr. Hardacre pays each worker here. Bolivian laws, which seek to encourage investments like Mr. Hardacre's, offer tax exemptions and protection from imported competing products. It's not hard to see why he can predict a profit of almost 30% for the first year's operations on sales of about $300,000.

Flexibility is also an advantage for the small investor unburdened by corporate or government bureaucracy. Mr. Hardacre arranged his Bolivia deal in a whirlwind 24-hour trip to Bolivia (one of the few times he's ventured far from Anderson) after a long-time friend, Joseph Gallagher, who's executive vice president of PURI, suggested the idea to him.

Indeed, points out John Keesing, PURI chairman, for big corporations, red tape at home may gum up such projects more than red tape in the foreign country. "When the man can go down there and commit himself on the spot," with no need to return and consult with a board of directors, red tape has a way of dissolving, says Mr. Keesing.

Americans 'Too Sophisticated' Perhaps most important, Mr. Hardacre finds the outlook of the small businessman more suited to participation in the developing economy. Many North Americans, he observes, tend to think in terms "too sophisticated" for the emerging country. "They want to spend too much money" on monumental installations, he points out, before understanding the country or the level of its economy.

In Santa Cruz, he says, "we're talking about a 1920 market, not a 1968 market," and he figures the experience of his family, which began building up the Indiana dairy in 1922, equips him well to handle problems of expanding the Bolivia dairy. "You have to keep from thinking of doing everything in the modern American way," he says. "If you can make a profit, give the consumers a decent price and get the job done, that's all you need to do."

It is of course too early to make a conclusive assessment of the chances for Mr. Hardacre's dairy venture. Further, this kind of investment is not suited to every small investor. Mr. Hardacre's prospects certainly are helped by his apparent ability to understand life in Santa Cruz well and to get on favorably with his Bolivian partners. Such compatibility isn't possessed by everyone.

Similarly, it is too early to endorse the two-year-old PURI organization, whose total investments amount to only a tiny drop in the bucket of international finance.

But the idea bears watching: Profit-motivated small enterprise might succeed at advancing the basically humanitarian business of helping developing economies, especially when many big enterprises have failed at the same task.

Indeed, a certain idealism sometimes tinges the conservative Mr. Hardacre's statements, as if the profits he hopes to earn and the people he might help aren't at odds at all. "If I could be just a little part of starting up a needed basic industry down there," he says, "that would be quite an accomplishment."

He's even counting on protection from Che Guevara's sympathizers, should they grow active again. An insurance agreement he is negotiating with the U.S. Agency for International Development would protect his investment in the event of political turmoil.

There's only one catch: The deal is a partnership. Mr. Hardacre and PURI own 51% of the dairy concern s stock; a group of Bolivian investors who started the plant with a $20,000 investment own the rest. Under the terms of the agreement, after five years the Bolivians may buy back one percent and the company then will operate under joint management. To Mr. Hardacre, this isn't any catch at all. "I have a lot of fun with those fellows," he says of his Bolivian associates, whom he expects to visit four times yearly.

Apart from his chances of making money, however, Mr. Hardacre's venture is intriguing because it's apparent his chances for success are enhanced for the very reason that he is a relatively small investor.

In recent years infusion of foreign capital by big investors or governments in developing economies has become a matter of some delicacy. Bolivians have ample reason to mistrust powerful foreigners interested in developing their resources. Bolivia is a landlocked country of staggering geographic extremes. The vast majority of its people have always lived in miserable poverty. And during the first half of this century, foreign capital played an important part in exploitation of Bolivian minerals, the country's only major claim to wealth. Bolivians were left with little to show for their labors; predictably, a leftist revolt in 1952 was at least partially successful.

But Bolivians would seemingly have little reason to mistrust the diffident Mr. Hardacre. His ambitions rise no higher than building a competent small business and turning a nice profit for both himself and his Bolivian partners.

Furthermore, unlike some big outside investors, he's as eager as the Bolivians to see immediate positive benefits of his investment fall to the people of Santa Cruz. Such benefits can only lead to better demand for dairy products.

The plant is staffed by 15 local residents, and one of the Bolivian investors, Julio Prado, is resident manager (weekly reports are sent to Mr. Hardacre). Products are made from milk brought in by local dairy farmers, and the plant could expand demand for their output dramatically. One nearby farmer, Mr. Hardacre relates, now sells 1,000 liters of milk daily to the plant, while previously he was only able to unload 250 liters daily in and around Santa Cruz. And the plant will provide children in the area with their first uncontaminated whole milk.

Tags: foreign investment, small business, Bolivia, dairy

Like this article? Support our work. Donate now.