Economy

Uberization v. Red Tape, Digital Economy Drama On Streets Of Chile

For all the economic accolades they've earned over the years, Chilean authorities are dragging their feet when it comes to market-changing technologies.

Taking in slow in Santiago
Taking in slow in Santiago
Janan Knust

-OpEd-

SANTIAGO — I was stunned to find myself, upon arriving at Santiago's Arturo Merino Benítez airport, in the midst of an altercation between taxi drivers, police and fellow passengers. Emerging from the tumult, I did eventually manage to get a cab. But the driver was one of the people who'd just been involved in the melee, which meant trouble.

"The government is to blame for all this," he told me, referring to the unresolved conflict between taxis and Uber cars. All I could think of at that moment was to say, "Sir, this is a fight you cannot win." Infuriated, he stopped his car and told me to get out. It took me just three minutes to call another car on my smartphone.

Whether we like it or not, tensions between governments and technology are on the rise thanks to new inventions or radical changes made to existing models — things that used to be the stuff of science fiction. These are natural developments in technology, and it's important to see them as an opportunity to progress as a society, safely and efficiently. So why do we find it so hard to regulate technology in our favor? What are the legislative challenges in modernizing the logistical industry?

Call it a kind of Uber of politics.

This is not just a problem here in Chile. In the United States, firms like Uber, Amazon, Space X, Google, Facebook, Dropbox and Tesla, among others, have spent more than $40 million lobbying for necessary changes to existing laws. An example was the noisy row between Tesla and car retailers in Virginia and New Jersey who wanted to sell Tesla vehicles directly to customers.

In Chile's case, the current administration can't see the forest for the trees: All it does is react to events. As for the opposition, all it seems to care about are poll numbers and the upcoming elections. What lawmakers (from both the right and left) ought to understand — and voters too, for that matter — is just how important it is to adapt our laws and regulations to the world's technological evolution.

On that point, I noted recently that there is a new political party in Chile, Todos.cl, that uses technology to represent citizens. Call it a kind of Uber of politics. Its members include people like Nicolás Shea, the founder of StartUp Chile; and Gabriel Gurovich and Julián Ugarte, entrepreneurs and graduates of the Silicon Valley think tank Singularity University who are running for senate seats and proposing legislation based on technology and crowdsourcing.

Changes are long overdue. Even the country's customs and transport systems have yet to be fully digitalized. Chile, in fact, is the only South American country, and one of just three in the world, where the customs authority operates independent of the transport operators and government-run logistical bodies. And for now, at least, the state hasn't shown any interest in changing things — perhaps because every bit of paperwork, with its stamps and signatures, means money. Through fines and procedural or bureaucratic corrections, Chile's customs authority earns itself tens of millions of dollars a year.

Must entrepreneurs clamor for Amazon's arrival to make changes around here?

Solutions range from simple digital signatures, to blockchain technology and user-friendly systems, all of which would encourage economic growth. The country's agriculture and livestock authority, SAG, is just one example of an agency that has yet to follow the lead even of countries like Peru and Colombia and digitalize simple procedures for approving documents online.

The tax authority, for its part, has made some headway with its Integrated Foreign Trade System — SICEX, for short — which is changing procedures in all state ministries, organs, and among merchants and shipping firms. The benefits are limited so far, but it is a step toward digitalization. Still, since it began in 2013, SICEX has done little for the users it is meant to serve: firms and businesspeople demanding less bureaucracy and more decisions based on the needs of consumers and providers. Must entrepreneurs clamor for Amazon's arrival to make changes around here?

As Gandhi said, first they ignore you, then they laugh at you, then they fight you, then you win. Unfortunately, when taxi drivers start fighting, it affects us all. We end up being thrown out of a taxi even if — thanks to Uber — it's a problem that's easily solved. I say, long live technology.

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Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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