Why Bolivia Allows KFC and Starbucks, but Bans McDonald's

McDonald's (NYSE: MCD  ) failed in Bolivia. It operated in the country for 14 years and eventually closed all of its locations by 2002 amid cultural rejection from locals and the government. 

Aside from Cuba, Bolivia is the only Latin American country without golden arches. This failure was a surprise, since Bolivians love eating hamburgers. Turns out they just prefer to buy them from local street vendors instead of giant fast food chains. 

Anti-American government
Following the McDonald's failure, Bolivians elected Evo Morales as their President in 2006. He has deep anti-American sentiments and is extremely cautious on allowing western products, brands, and culture into the country. His strong stance specifically against giant US fast food chains even included a plea to the United Nations in which he called their influence "a threat to humanity." 

These are pretty strong feelings. Even Venezuela, an ally of Bolivia with similar political and ideological beliefs, has around 140 McDonald's locations. 

Bolivia rewrote its constitution in 2008 with specific measures to protect the country from foreign interests and place a focus on local businesses and investment. It also included measures to protect the country against large-scale industrial agriculture. 

Inverted clock in La Paz, Bolivia

In fact, the government is so anti-Western that the clock on the constitution building in the city of La Paz is anti-clockwise. Yes, you read that correctly--the clock has inverted hands. Bolivian Foreign Minister David Choquehuanca calls it the "clock of the south," saying that the country is being creative and does not have to obey or follow Western principles.  

It's the end of the world as we know it
In August, 2012, Bolivia even proposed banning Coca-Cola from the country in an effort it called the "end of capitalism." The ban would take effect on Dec. 21, 2012, which just so happened to be the end of the Mayan calendar (remember all of that end of the world talk?). However, after a few months, the country had not made the ban formal or enforced it. 

Two western giants entered the country at around the same time. This unprecedented move came as more of a surprise to investors than if the Mayan apocalypse actually happened. What's the reason for the sudden change of heart?

Changing policy?
Many investors were taken by surprise last month when Starbucks (NASDAQ: SBUX  ) announced that it would soon enter the Bolivian market. It will have a small presence there, as it will only add 10 locations over the next several years. Earlier last week, Yum! Brands  (NYSE: YUM  ) announced that it will enter the country as well and attempt to do what McDonald's could not: create a profitable fast food business that appeals to locals.

A local partner is the key 
Starbucks will open its first location in the commercial business center of Santa Cruz via its subsidiary Delosur. The company has had a relationship with Latin America since it opened its doors in 1971, as it buys coffee beans by the ton. It only makes sense for Starbucks to build a presence in the region after decades, which includes Panama and Columbia as well.

Yum! will open its KFC branches with Delosur as its franchise partner as well. It will open a location in Santa Cruz and has another one planned for later this summer.

In the Yum! press release, Delosur CEO Sergio Hanna stated: 

Chicken is extremely popular in Bolivia and consumers are excited about the new restaurant. We're committed to serving our customers delicious products, providing excellent customer service and growing the KFC brand in Bolivia. 

Foolish takeaways
Regardless of the size or success of a company, it can only enter certain markets by finding and working with a local partner. Opening a handful of new locations will not move the needle for any of these Western giants, but it is an important step toward building long-term relationships in new markets.

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Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 18, 2014, at 10:09 AM, rbrockmann wrote:

    I don't know why, the notion that “Bolivia said no to McD” is spinning around many internet media outlets over the last couple of years. This story is simply not true. Bolivia never said "no" to McD, but rather the other way around. After some 3-4 years of permanence (not 14) In 2002 McD took the corporate decision to withdraw from Bolivia and other 18 countries (Turkey and Belgium among them) where it wasn't earning revenue above a certain percentage. It wasn’t going broke, but far from it. It was making money, but not as much as they expected. I know this because I was a Coca-Cola executive in Bolivia at the time and McD was our most important client. On the other hand, all this blablabla about the Bolivian diet being so marvelous is just that: blablabla. Just like any other country, Bolivia has its own and very peculiar cuisine, with its ups and downs. Nothing to flip over about. And then again, McD is one of the very few global fast food chains absent from the Bolivian market (yes folks, even socialist Bolivia is a marketplace). You can eat about any other pizza, burger, sandwich that your heart desires in a very global-nondescript looking food plaza in almost any Bolivian major city. Luckily, there are plenty of tasty local foods too. Freedom of choice is always a good thing to have.

  • Report this Comment On July 27, 2014, at 10:29 PM, paulrab wrote:

    Dear Mike,

    Just a few facts about fast food and franchises in Bolivia. Mc Donalds was not kicked out, but left a couple years before Evo Morales became president. Burger King has worked in Bolivia for a long time and so has Subway. The Hard Rock Cafe franchise opened last year, and KFC,Sbarros , and Cinnabom, are serving their ¨food¨ in Santa Cruz, Bolivia. This year Starbucks and Cafe Juan Valdez are opening in Santa Cruz also. This is no sign of contradiction, it just shows the consume market is growing, specially in the city of Santa Cruz. The whole Coca Cola ban issue was a symbolic comment made by the Foreign Minister which was interpreted literally by the media. Come on guys, Bolivia might have an anti capitalist rhetoric for FDI in energy, transportation and public services, but the consumer market is and always will capitalist.

  • Report this Comment On August 17, 2014, at 4:01 AM, mikefee wrote:

    Thanks for the feedback. While MCD might not be officially"banned" it would certainly have a difficult time if it ever tried to return.

    Also, MCD *was* operating within the country for 14 years.

    Without getting into the politics too much, the fact that "even socialist Bolivia is a marketplace" is obvious. I would note that even communist China has "freedom to choose." Of course no country would be forced to eat specific foods, that would be silly.

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Mike Fee

Mike Fee is originally from St. Paul, MN and has been working and attending Webster University in Bangkok, Thailand. He has been a Fool since 2009. You can follow Mike on Twitter at @mfee02

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