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La Palanca


 I have yet to hear anyone claim that doing business in Latin America in the seventies was easy. I am sure the system has changed since then but in those days the adjectives most likely to be heard were frustrating, impossible and bewildering. I would agree and from my own experience  would add a further word  – comical.

 
When I became a partner in The Wildcatter Club (see IO story, ‘When Lady Luck Smiles’, March2009) I began to notice that as well as diplomats,  oil-field crews and visiting businessmen, we had aselect few, Ecuadorian military officials as customers. Usually they had no money with them, so we would allow them credit and it became my duty to go to the Ministry of Defence and attempt to collect the debts. This being a regular occurrence, I soon developed invaluable contacts in the Club and at the said ministry.
 
 In the meantime, as well as managing the Wildcatter, I saw that there were opportunities to do other business in Ecuador and had formed a representation company with another Brit, who had experience in the aircraft industry and had been a contracts manager for a British aircraft manufacturer.
 
 Our first representation was for an English company, selling accessories to the local textile industry. Although neither of us had any idea about textiles, it was the best we could come up with. My partner looked after the administration and I was responsible for the sales and we began to collect other agencies in this field; many British manufacturers having no representation in Ecuador. Despite it being a flourishing industry the factories were mainly in the hands of third generation Lebanese or Palestinians and it was an uphill struggle for our newly formed, undercapitalized company. I recall my first sale was for the sum of seven pounds thirty shillings, from which we received a commission of ten percent.
 
 I was still the manager of the club and it was here that we picked up most of our initial agencies. One evening an American was perched at the bar, bemoaning the fact that he was getting nowhere in his efforts to sell aircraft to the Ecuadorians. But on being informed that some of the local customers, wining and dining their mistresses, were middle and high ranking military officers, he saw the possibilities and invited me for lunch the following day.
 
In the early seventies there was an oil boom in Ecuador. The Israeli-Egyptian crisis had forced the world oil prices to rocket. This sudden wealth had both the international businessmen and the inevitable con men flooding into the country. The military Junta was being inundated with offers for equipment, financial loans and drilling contracts. Many of the salesmen, who spent their time queuing for appointments at the Ministry of Defence during the day, were to be found propping up the bar of the Wildcatter at night.
 
 Over lunch the next day the American explained that Ecuadorian military was desperate for aircraft for training purposes and that he, as the broker, had a second hand squadron of Hawker Hunters to offer them. His problem was that he was unable to get past even the first hurdle, the guard post of the Ministry of Defence. Could I be of help?
 
 My partner, with his aviation background, was quick to spot the possibilities and suggested that we initially approach the Military Attaché at the British Embassy. The attaché confirmed that the Ecuadorians were in the market for this type of aircraft but he knew of no country that was trying to sell theirs. He gave me the name of the General who would be responsible for purchases of this description and I was able to arrange - through a colonel who was a regular patron of the Wildcatter – a meeting the following day.
 
 This in itself was quite an achievement. It was quite normal for salesmen to wait days if not weeks for an audience with top ranking officials. We were later to experience this ourselves with other future negotiations but more of that some other time.
 
 Our broker was impressed with the rapid progress, having himself been hanging around, achieving absolutely nothing for the past few weeks. I convinced him that it would be for the best if I alone handled the General and he agreed to leave all future negotiations to my partner and I. Should the sale be successful, he would pay us one hundred thousand US dollars commission. The price for the squadron of eight aircraft, with a couple of spare engines thrown in, was six million dollars.
 
 The next day I presented myself at the Ministry of Defence and was ushered past the dozen or so businessmen in the waiting room – some whom were Wildcatter customers - and into the General’s office. Prior to the appointment, my partner had given me a five-minute briefing on the basics of aviation industry negotiations, but apart from this I had no documents or catalogues to demonstrate to the General. His command of the English language was as limited as was my Spanish but I believe he thought I was from the British Embassy and treated me with appropriate respect.
 
 I am still unsure how much of my presentation he really understood but words such as, “Hawker Hunters”, “immediate delivery” and “six million dollars”, certainly registered. Confirming his interest and that we should remain in contact, I was ushered out. The meeting had not lasted more than five minutes and I was about as wise to their future intentions as I was when I went in.
 
 We were now in a high state of excitement and the broker realizing that telephones were not to be trusted, worked out a series of codes we could use. He would leave all the local negotiations to us and head back to where ever he had to meet with his contacts and organize things from their end. We were given his contact number and address in the USA and he departed the next day.
 
 Meanwhile, the British Embassy Attaché had been making enquiries as to which country was willing to sell off its Hawker Hunters. It was believed to be El Salvador or a South African country but this was never confirmed, at least, not to us.
 
 Nothing happened for a couple of days, apart from numerous telephone calls from the broker, desperate for information on our progress. On the third day, in the late afternoon, I was in my office above the Club, when one of the waitresses announced that there was a man waiting to see me in the bar but had refused to say on what particular matter. The waitress, a local girl who had a nose for intrigue, said that although he was in civilian dress he looked military.
 
 I joined him at the bar where he was the only customer. As is usual in doing business in Latin America he did not come directly to the point. A couple of whisky’s later and after all the small talk had been exhausted, he introduced himself as an Air force Colonel who had been elected, on behalf of his superiors, to make himself known to me as their official go-between. He then went on to explain the conditions of doing business with the military, which included the payment of what he described as a sort of discrete recompense, which even I knew to be bribery or in Latin American Spanish, la palanca.
 
 This, he suggested, should be around one million US dollars, as many people would be involved and they would all have to be looked after to ease the sale through. But we were not to worry as it could still be added to the price, so neither party would suffer any financial loss. The sale price was now set at seven million dollars.
 
 The game was getting interesting and we were learning fast. If the military could up the price by one million without blinking, then we could also increase our commission. But we would do this by claiming that the increase was all for the military, which would also allow us, retain our agreed commission of one hundred thousand. The price was now elevated to seven million, five hundred thousand dollars.
 
 Following the colonel’s visit there was no need for me to return to the Ministry of Defence for further negotiations. Technical details, the quality and condition of the aircraft appeared to be immaterial to them. But every time the colonel came to visit me the price had to be increased, and we would increase our commission. It seemed that more and more people were getting into the deal and would need to be looked after. Their main concern was not the quality of the goods but those “discreet recompenses”. The last price agreed was for the magnificent sum of eight million dollars.
 
 The colonel and I continued to meet because his main anxiety was about the honesty of the broker, who would have to be trusted, to ensure that la palanca would be deposited in the later to be designated, foreign bank accounts.
 
 Suddenly everything went dead and the colonel never reappeared. Our dreams of becoming overnight millionaires evaporated and for all we knew the broker probably, in desperation, committed Hari-Kari.
 
 It did not take long to find out that a British aircraft manufacture had beaten us to it, by offering their latest fighter s, with training programme and a very attractive loan and, as I was informed by the embassy, without the necessity of la palanca.  
 
 Well, as is well known, all’s fair in love and war. After all, it was only our first attempt. We almost made it. But if we did not come out of it with a pot of gold, we came out with a wealth of experience regarding Latin American business during the seventies and - the military continued to entertain their mistresses at the Wildcatter Club.
BRT

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