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  • It seems like everywhere you go you can always spot a McDonald's.

  • There are 36,000 stores on every continent except for

  • Antarctica. In South America alone, there are 1,400 locations.

  • But there is one Latin American country that flat out rejected

  • Big Macs and McNuggets. Bolivia

  • In 1985, Bolivia experienced the most severe economic crisis in its history.

  • By 1986, hyperinflation drove up prices over 11,000 percent. So

  • Bolivia decided to do something drastic.

  • The country adopted a neo-liberal economic policy, which included

  • throwing its doors open for foreign investors.

  • By the mid 90s, international companies began to flood the market

  • which ultimately played a role in helping rev up Bolivia's

  • economy. On average the economy grew 4 percent between 1985 and 1997.

  • That's when McDonald's entered Bolivia. The first Bolivian

  • location opened its doors to the public in 1997, in the city of

  • La Paz and it was met with a lot of hype.

  • It was a huge social event.You had to go there with your friend.

  • You have to go there with your family.

  • And people were willing to spend significant amounts of time in

  • line just to get there and try.

  • It was interesting because it was a huge line of people standing.

  • And then the drive through, there were also like a huge line on

  • interrupting all the traffic on the street and then having to go into the side roads and things like that.

  • So even though it was extraordinary to see.

  • By 1999, the American fast food chain had six stores in the country.

  • Its menu was tailored to reflect Bolivian taste buds. McDonald's

  • offered things like "Ilajua" a believing hot sauce that was made

  • of tomatoes and Hot Chili Peppers.

  • McDonald's even tried to introduce the "McSaltenas" which was a

  • spin on the traditional Bolivian dish known as saltenas.

  • The saltenas are traditional Bolivian empanadas that can either

  • be filled with savory or sweet foods but it ultimately did not

  • reach the Bolivian market due to McDonald's safety standards.

  • But despite McDonald's initial interest from the Bolivian people,

  • lines from McDonald's grew smaller and smaller.

  • By 2002, McDonald's operation in Bolivia expanded to Santa Cruz

  • and Cochabamba in an effort to reach the country's middle class consumers.

  • But that effort to appeal to Bolivia's middle class failed to shore up sales.

  • And in the 2002, the American fast food chain shuttered all of its stores in Bolivia.

  • It specifically went after than most affluent group.

  • To say it was an affluent neighbor in the south side of La Paz, it was in downtown La Paz.

  • So it didn't go really into the areas that are more where more

  • indigenous. Probably that was a second step but the first step

  • of entering Bolivia was really to appeal to the more affluent

  • people, who have some type of exposure to McDonald's before.

  • The former vice president of McDonald in South America said that:

  • "We were having losses in the Bolivian market for several years

  • in a row and initial investments were not breaking even."

  • In the same year McDonald's exited Bolivia, McDonald's also close

  • 700 stores down in nine other countries.

  • So from what I understand McDonald's closed restaurants

  • in Bolivia because they were under performing relative to other places.

  • So why did McDonald's fail in Bolivia?

  • Well it's partly to do with the deep cultural rejection from Bolivia and its government.

  • Although President Evo Morales was elected after McDonald's

  • exit, his attitudes towards globalism reflected the long-held national sentiment.

  • Back in February of 2013. President Morales said this in a speech to the U.N.:

  • "The fast food of the west is doing a great deal of harm to humankind".

  • And "the major multinational food companies seek to control the

  • production of food and to dominate global markets by imposing their customs and foods."

  • The president even banned an American staple in Bolivia: Coca-Cola.

  • In 2012, Bolivia's president and the country's Minister of External Affairs announced the expulsion of Coca Cola in Bolivia

  • in favor of a traditional Bolivian drink.

  • But it wasn't just politics that led to McDonald's demise,

  • Bolivia's economy also played a role.

  • Bolivia's one of South America's poorest countries.

  • In 1997, when McDonald's first entered Bolivia, 63 percent

  • Bolivians living conditions of poverty and 38 percent lived in extreme poverty.

  • By the time McDonald's pulled out in 2002, the number grew to 65

  • percent of Bolivians living in poverty and 40 percent living in extreme poverty.

  • In 2002, the average Bolivian monthly income was about 622

  • Bolivians, that converts just over $83 a month.

  • So McDonald's was actually a relatively expensive food option for

  • Bolivians, especially if they wanted to grab a quick meal.

  • In Bolivia you can get a meal, full meal, with meat, rice,

  • potatoes all those things were $2 or $3 and that was a lot of

  • and that was about- I think the price of a combo or value meal

  • was around $4 or $5 at the time they arrived.

  • So it was a little above of what you could get elsewhere.

  • At the same time also, there were local burger chains that we're

  • offering exactly that value I think that Bolivian's

  • were expecting. Those chains are I still around and doing well

  • In the city of La Paz alone, there are upwards of 60,000 people working as street vendors.

  • These local vendors aren't just undercutting foreign rivals on

  • price. They are also beating the competition when it comes to

  • the menu. Street food in Bolivia includes local specialties like saltenas and antichuchos.

  • That's not to say that there isn't a market for burgers in Bolivia.

  • Instead of going to McDonald's Bolivians would purchase them from

  • '"Cholitas." A name given to the indigenous women working as local street vendors.

  • Or they could go to local Bolivian chains like Crafted Burgers or Che burgers in La Paz.

  • Bolivians are proud of their food and the tradition that surrounds it.

  • Bolivians treat food as something sacred and a modernized quick

  • service restaurant like McDonald's wasn't able to fully capture that localized flavor or its atmosphere.

  • CNBC reached out to McDonald's about the company's time in

  • Bolivia but they did not respond to any questions. As for

  • McDonald's in Bolivia its failure to take off in the country had little to do with poor preparation.

  • The company made a solid effort to allocate financial and human

  • resources to fully understand the Bolivian market before entering.

  • The one thing that they didn't anticipate was being rejected

  • deeply by Bolivian culture, politics and their love for local foods.

It seems like everywhere you go you can always spot a McDonald's.

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Why McDonald's Failed In Bolivia

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    joey joey posted on 2021/04/21
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