Merco Ranking - Interview to Luis Pagani
Solution. According to the entrepreneur, to solve the crisis “we need political, economic, social, and religious consensus, without political biases”.
“We Need a Broad Consensus among all Sectors”
By Damián Kantor
“I’m an optimist by vocation”, anticipates Luis Pagani, Arcor CEO and President, before answering if the current crisis can be solved. The entrepreneur is aware of the difficulties experienced at this moment in time, and predicts that this is “a hard recession” that it will last until April. However, he underlines that “the most important thing is the strong support of the world: the IMF, Trump and several countries of Europe. After being locked up during 14 years, this is an opportunity that Argentina has to seize,” he stated in a long interview with the newspaper's economic supplement.
For the ninth consecutive time, Arcor and Pagani led the Merco rankings of the most reputable companies and business leaders, respectively. Pagani knows that his words have weight. And he sharply states as follows: “The crisis has a solution, but for it to be definitive, we need a basic consensus among the political, economic, social, and religious sectors, without political biases,” he pointed out.
Arcor Group is the main food company in the country (it produces 3 tons of products every day). It has 21,000 employees, 47 industrial plants (37 in Argentina, 5 in Brazil, 3 in Chile and the remaining in Peru and Mexico) and expects to open another plant in Angola, pending approval of the Angolan government. Last year, the multinational company billed US$ 3.1 billion (US$ 300 million more than the previous year), but Pagani himself clarified that this is more due to the foreign exchange lag than to an improvement in the activity. “I take the volume into account, and there was not a big difference in it,” he stated.
Does the peso devaluation improve exports?
- It helps, but not everything is resolved with the devaluation. There is a need to improve the infrastructure, and the tax burden complicates everything. Nevertheless, with the latter, the productive sector, all the production, is contributing to overcome the crisis.
Are we condemned to recurrent crises?
- It is a shame that we have to go through another crisis, which began with a bank run and today we do not know if it is coming to an end or at which stage it is. It is painful, because there were signs. This government inherited an economy with severe distortions and chose the path of gradualism, which I believe was the correct one, but they postponed certain corrections, and made diagnostic errors as well.
Is it partly due to inheritance and partly due to malpractice?
- I think so. The Central Bank has not managed to rise to the occasion.
Would the Congress approval of the budget be a good sign?
- More than the budget's approval, I believe that we have started to go along an important path. I note that there is a vocation in most of the governors, and that the opposition is also accountable for this.
How is the situation impacting on consumer food products?
- In the case of Arcor, there were no distortions until June of this year, but in August there was an important drop: 2%. It is the most significant drop since 2002. I speak about this percentage, because today the Company is handling a much larger volume.
Do you think that the issue of the “notebooks” and corruption have an impact on business?
- I undoubtedly think it is a topic of special relevance, which is also having an impact on the country's situation. It is an example of the failure to strengthen institutions and the lack of confidence existing in Argentina, which is exactly what we need to rebuild.
Are you evaluating the opening of any new market?
- We are awaiting an approval to build a plant in Angola. Arcor has been more than 30 years in that market and today there is a project to industrialize that country. This opens up the possibility to manufacture confectionery, chocolates, cookies and crackers. I see the African market as an opportunity. Africa and Asia, especially the “Asian tigers”, are markets that will have an important growth; particularly in Africa. Therefore, it is important to settle there now. It is a market to develop, with many natural riches, more influenced by China than by what Europe is doing.
What is the goal of the plant in Angola?
- To supply the market of Angola and neighboring countries. Arcor is present in all the continent, from Egypt to South Africa, which has an enormous potential. It is true that they are countries with a lot of political and economic instability, civil wars, but Argentineans are accustomed to instabilities.
Is there a chance to develop Asian markets?
- Yes, especially in Malaysia and Japan, but it is very difficult to enter in China. It is a difficult market, where everyone wants to be in, and it takes time and effort. But exports to Japan open many doors due to the high quality demands.
Last year, Arcor took control of 38.4% of Mastellone (La Serenísima), and the paper mill Zucamor. This year you teamed up with Bagó to launch a line of nutraceuticals and also ventured into the world of pharmacies. How is this business going?
- Argentine people appreciate that two national companies form an alliance to win markets. This is a project that took more than three years to be developed and allowed us to venture into the pharmacy business. It is a very particular and valuable experience because for people, the pharmacist is a sales advisor. We already have a line of products in the market and we intend to add other products in the future, probably in the first half of next year. With Bagó we started to know the pharmacy segment, and in turn, we contribute our experience with kiosks. It is very interesting.
How has the public responded so far?
- It's a very recent launch. We presented it in March, it arrived at the pharmacies between May and June, but for now we are exceeding our expectations. By the time, we are attempting to establish ourselves in the pharmaceutical channel. Our future goal is to reach the world of gyms and fitness.
How is Mastellone's business progressing?
- With Mastellone, we got into the dairy market. Now, we penetrated the pharmaceutical segment, so the business portfolio is being diversified. We are also thinking of many new products for the snacks segment.