Seed Money

An Argentine comes home to make a bold investment--wire every classroom to the Internet.

SPANISH TELECOMMUNICATIONS ENtrepreneur Martin Varsavsky says he will never forget the poor education he received as a student in Argentina's public school system.

He says it was so inferior that he recently decided to donate US$11.2 million so today's Argentine children can avoid the same fate. The recipient of this nationally unprecedented act of charity, which amounts to $1 for each student, is a government-run Web site, www.educ.ar, that aims to push Argentina's antiquated educational system into the Internet age.

In a nation where only 2% of all students currently have access to the Internet, Varsavsky's goal is an ambitious one. But the idea is clever enough that it just might work: pool together students as a target market, develop an educational portal they can use and then let private businesses duke it out for the right to own the portal. The proceeds from the eventual privatization would then be used to wire every classroom in the country to the World Wide Web.

Although Argentina still boasts the region's highest literacy rate--94%--the government hopes the partnership with Varsavsky will instill a modernizing spirit into a decaying public education system.

Easier said than done? It probably would be if not for the participation of the 40-year-old Varsavsky.

Varsavsky describes himself as a serial entrepreneur, able to convince investors to finance his ideas and then move on to new projects. In the past 14 years, he has created six successful companies, ranging in focus from real estate to AIDS research. His best-known venture is Jazztel, a Madrid-based telecommunications firm he founded in 1997 with $5 million in seed money. Jazztel today has a market, capitalization of $2 billion.

"We stopped doubting him ever since he tried to win us over in grade school with a lecture on nuclear physics," says Raul Chevalier, a childhood friend who now works for Jazztel in Spain.

Those who know Varsavskys past might think extending his Midas touch to Argentina is a peculiar decision.

Varsavsky fled Argentina at 16 with his family after his father, Carlos, a Harvard-trained astrophysicist, was forced out by the military regime. The generals believed the elder Varsavsky was spying for the United States because of his work and extensive contacts with U.S. citizens. The family packed up and moved to New York, where Carlos found a job as a university professor.

Even in exile, Argentina's so-called dirty war affected the Varsavsky family. A cousin, David, became one of an estimated 30,000 desaparecidos. Varsavsky's father never recovered from the sense of betrayal for having been accused of espionage by his nation's leaders; he died a few years after arriving in the United States.

"In some ways, this [donation] is an homage to my father," says Varsavksy. "I want to make sure that the many intelligent and motivated Argentines like him never have to go through the same turmoil."

In 1997, Fernando de la Rua Jr., son of the Buenos Aires mayor who later became president, traveled to Madrid to ask Varsavsky's advice on how to start an Internet venture. When De la Rua returned to Argentina, he abandoned his plans to become a Web entrepreneur to help his father's campaign. After his father became chief executive last November, De la Rua Jr. returned to Spain with another question for the Argentine expatriate.

"[De la Rua] told me that his father was worried about the growing digital divide between Argentina and the First World and asked me whether I had any ideas about how to solve it," recalls Varsavsky.

PC bust. In a flurry of e-mails between Madrid and Buenos Aires, Varsavsky developed his project based on the premise that Argentines needed a compelling, non-economic reason to buy PCs en masse. After all, a steady decline in computer prices had done little to boost the country's number of Internet subscribers currently 800,000 in a nation with 36 million inhabitants. He reasoned that many people could afford to pay monthly installments, because 55% of Argentine homes currently shell out $36 a month for cable television.

Varsavsky determined that the appropriate stimulus would be to appeal to their children's future. Varsavsky soon created Educ.ar, a play on words of the Spanish verb "to educate," as the project's portal. Like the handful of educational Web sites that already exist in Latin America, Educ.ar's principal goal is to serve as an information clearinghouse for educators and students. But the site's official status means that it has built-in advantages over its competitors.

Educ.ar eventually will serve as a mega-portal to the more than 500 Web sites that individual public educational institutions already operate. It will also be the primary vehicle for educators to teach students how to navigate the Internet. Those advantages, believes Varsavsky, mean Educ.ar will become the most popular site in Argentina, attracting millions in advertising revenue. The proceeds would then be used to achieve the project's major goal--connecting every classroom to the Internet by 2004, an idea the De la Rua administration estimates would otherwise cost the public $500 million.

To be sure, not everyone is convinced that Varsavsky's plan is a selfless gesture. Philanthropy is not common in Argentina, and most donations are made directly to foundations or hospitals. Rarely has a corporation or rich individual given money directly to the government for a charity project.

Some newspaper editorials speculate that Varsavsky plans to eventually acquire Educ.ar, or, at the very least, use the donation as a political vehicle to expand his telecommunications empire to his native country.

Philanthropist or capitalist? Varsavsky scoffs at such notions, arguing that even though Jazztel has lured clients away from Spain's giant Telefonica, it would be difficult to do the same in Argentina where, he says, regulations favor current Internet providers. "I'd rather give my money away than waste it," he says.

The criticism, however, hasn't deterred the cash-strapped De la Rua administration from showcasing Varsavsky's donation as a much-needed model between the government and private sector. "Varsavsky is setting a trend that we hope continues," says Education Minister Juan Jose Llach.

In fact, U.S. heavyweights Cisco Systems and Microsoft, along with Nasdaq-traded Argentine firms Impsat and El Sitio, have followed his lead, donating their services to Educ.ar. Llach, an economist by training, also hopes to see Varsavsky's example duplicated in a $50 million program to create educational projects proposed by the nation's teachers and financed by corporations.

For Varsavsky, linking public schools to the Internet could help curb the brain drain of some of the nation's most qualified workers. Most important, it would be a chance for Argentina to recapture its former economic prestige of the early 20th century.

"It's a choice between barbarism and civilization," he says, paraphrasing his Argentine hero, Domingo Faustino Sarmiento, the 19th-century father of public education. "We either give kids access to the new technologies from an early age or Argentina ends up caught in the trap of poverty and violence."

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