Sunday, Oct 22, 2017
Industry & Trade | South America | Argentina

Doing Business in Argentina

‘We are going from being a red-tape to a red-carpet kind of country’


10 months ago

President of the American Chamber of Commerce in Argentina, and Regional Managing Director for CH2M Latin America
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Manuel Aguirre

President of the AmCham Argentina & Regional MD for CH2M Latin America

With Argentina’s opening up to the global economy, foreign investors are seeking out new opportunities with prominent companies eager for investment in new projects. Contrary to belief of the country’s recent opening to the world, The Worldfolio speaks with an Argentine businessman who has experienced first-hand the bedrock principal which has been a trademark of the Argentine economy: human talent. As the first Latin American to sit on the board of global engineering company CH2M, Manuel Aguirre discusses his dual role both with the company and as President of the American Chamber of Commerce in Argentina to discuss the key sectors for mutual growth.

 

The Argentina Business & Investment Forum has recently come to a close, and you have stated that the following three months will be critical for Argentina to attract foreign investment. What is your perspective on the short-term outlook?

The Forum was quite positive, not only for foreign investors but for local ones. Seeing the largest Argentine companies speak so well about the country also boosted local investors' confidence, who echoed the phrase, “It is time we launched our investments.” At CH2M, we work from real estate to industrial projects, both private and public businesses, and we are seeing more movement. Old projects are resurfacing; investors think that now is the time to invest and do the projects that we have been thinking of for the last few years.

Secondly, I would highlight the confidence climate. We are going from being a red-tape to a red-carpet kind of country. Earlier it was impossible to do business in Argentina, but now we are seeing total openness from the national, provincial and municipal governments in terms of attracting investment.

If you want to have a meeting with any governor or mayor, they will promptly receive you. That does not mean all your problems will be solved, but at least you can interact with the authorities, work with them in the aim of solving any problems. This is quite a change, particularly if you have lived in this country for the past 12 years. It used to be impossible to schedule a meeting with an authority. Even officials within the government would not meet with each other. Each ministry worked as a silo, there was no interaction between them.

 

Regarding increasing Argentine investors' confidence, it sometimes seems it would be more difficult to do so than in the case of foreign investors. The potential of this economy is undeniable, but foreign investors have always adopted a 'wait and see' attitude because of the lack of predictability of the rule of law and the red tape. Argentine investors, since they have had to deal with this from the start, would be even more difficult to convince.

Agribusiness is a good example. Looking at the investors in this sector, we see they have not waited. They have already started new investments, they have bought new equipment and there are many companies from the interior that are investing plenty. We do a lot of business with the agro sector: we have built three or four major plants north of Rosario. There is Cargill, Molinos, Vicentin—two major local companies—and Renova, which is a joint venture between Vicentin and Glenko. These companies have not waited. The government lowered the export taxes of grains and the companies reacted accordingly.

The same is occurring in the real estate business. Many projects used to be on hold and they are being resumed. These investors are seizing the first-mover advantage. Of course, when we talk about mining or non-conventional oil and gas, the timeline is different, meaning it will take longer to see the investment. But medium-sized business is showing a reaction.

 

Your company has been in Buenos Aires for the last 30 years. One of the advantages that you mentioned have been the excellence and exceptionality of Argentine engineers, due to the great education system that produces high-quality professionals. However, in the last 10 to 15 years, we have seen competition from other economies that have developed their quality professionals, such as Chile, Peru, and Colombia.

The engineering business is interesting to analyze, because it is different from a typical price-based commodity business. In the first place, you need the talent, the capabilities and the capacity. Companies have understood, throughout the years, that when you buy engineers you need focus on acquiring quality, because it means a good price by the end of the investment. Normally, in the engineering business we do not compete by price alone. We are not a call center; companies in this sector sell only what they know what to do well.

When we compare with other countries of Latin America, many students come to Argentina not only to obtain their undergraduate degrees but their Masters' as well. The quality of the education is still quite high in this country. Argentina will always produce good quality professionals.

The problem lies in the capacity, as we do not produce a large amount of professionals such as Western Europe, India or China. We have around 500 professionals at our office here—we export about 20% of them and the rest works at the local market. In the years that Argentina was not doing so well, we would export more. But we cannot compete on capacity with the major engineering centers. Our company has a major engineering center in Krakow, in Poland, which we are developing. What is recognized in our local team is that we are quite specialized in some businesses, in case someone wants to pay a premium price for developing them. This is a market we will maintain.

 

You mentioned attracting talent but also keeping the talent here. You want to develop the entrepreneurial skills within your own company, and not lose them to the competition. How do you plan on doing this?

Our largest competitor at the moment is the government, as there are many really good engineers who have gone from working with us to working in the public sector.

Attracting talent is a hard task, particularly when it comes to young people. At our offices you will notice here that there are very young people and other very senior ones – with not a lot in between. Those who have been with us 10, 15, or 20 years do not show signs of leaving. We have a challenge with the people who have been in the company for less than 5 years, and we have to work hard on retaining them and on offering them a good career path.

We try to challenge these professionals with projects. We always try to raise the bar and to put them in a really challenging position in the projects they are working, so they can learn from them. We do training on the job, and at the same time we provide a coach that can guide them. It is very difficult to put someone in a very stretch position and then make them responsible for the failure, should it occur. So what we do is we have quite a strong mentoring program, where each one of these young engineers receives mentoring from some of the oldest engineers. But at the same time, we let them participate and voice their opinions—we have open meetings in which they can say what they think about the company or what we could do to do better.

 

You also give them global access, is that correct?

We know that young engineers like to travel; they like to improve their language skills, to get to know another culture. So we are always trying to implement worldwide rotation, but there is always the risk of them staying at the places that they go. This is a risk we need to take, however. The rotation normally lasts six months, which is plenty of time to learn, but also the right amount of time to want to come back. When they stay for more than a year, they are not as likely to want to come back.

 

The quality of Argentine professionals is on par with the rest of the world, a result of the Argentine education system, which Argentines are proud to mention. However, within the country there is constant criticism of this same system.

One of my children is currently studying environmental engineering, and we have discussed this issue many times. He is studying at the Catholic University, in Puerto Madero, and when he complains about something I tell him that he will test how good the university was when he is working. It is very hard to evaluate a university while you are studying.

My second girl is an architect; she studied at the UBA and is now working in Australia. She says she is very happy with where she studied, and how she learnt how to be open-minded and flexible. She says she does not see this in Australia.

You are right when it comes to taking care of the local universities and their quality. But on the other hand, I think we still have an outstanding education. Many professors here teach at the university with people who were my professors at the time. It is good that they not only teach but also work, because it enables them to keep up with the changes. I am not saying we have the best system, but as far as the engineering education system goes, the three universities are quite good.

 

Argentina has many promising opportunities, yet it also competes with other emerging markets. If you were an investor, why would you choose Argentina over a competing market?

It is very important for people to understand there is some consensus that will not change even if the government does. The Private-Public Partnership Law, for example, which will be voted in Congress, is an example of guaranteeing such predictability. In the case of Chile, this type of law was unanimously approved, and it is very important that something similar happens in Argentina and the law is voted by all the Peronists. If not, if Macri leaves office after his first mandate, there is the risk that the law will not outlive him. We need people to believe this law will last 30 years, not four. People need to see that there is some consensus that does not depend on the ruling party or who is in the government at the moment.

We need consensus regarding the variables that will make this country grow: bidding inflation, getting people out of poverty, for example. It does not matter whether you are a Peronist, a Radical, a Propuesta Republicana supporter; a basis consensus needs to take place. People have started to understand this—there have been plenty of changes in recent months and people are thinking about the future more than they used to.

 

Argentina has undertaken many early reforms in the administration and enacted a campaign to convince its own citizens and the international investment and political community that its rule of law is consolidated and permanent. What is your evaluation of this?

The answer depends on the point of view, and mine is quite positive. If I take what happened in the last 10 months and infer what will occur in the next three years and two months, many changes will be implemented. Of course, there are optimists, pessimists and people who think Macri should go faster.

Argentines have a short memory. In the case of the battle against inflation, for example, some people are still arguing whether it is slowing down again or not, but you cannot argue with statistics. You can say that the tariff increments were not well handled, politically speaking, which the government admitted and reversed. But there are still many issues that have been tackled appropriately. I am quite optimistic.

 

What do the major changes in Argentina mean for your company?

CH2M is very well known in the world as a big program management company. We have evolved from being a pure consulting engineering company to doing more project and program management. Program management is a capability that not many companies have, and we have been ranked the number one program management firm for the last five years in the US rankings.

Just to mention some big projects, we have done the program management for the Panama Canal, the London Olympics 2012, many water and sewage projects, big environmental projects such as Rocky Flats in Colorado. All these were program managed by CH2M.

Every big project demands someone from the top level, and the government has started to understand this. Projects such as the Aguas Negras Tunnel in San Juan, which crosses the Andes, will have a tender for project management. This project is in a province that does not have much population, so they need any big company that can program manage this project, as it is a complicated one.

The tendency in Latin American governments is to do things by themselves. That is not what is happening in the US, where everything is going through third parties. In any big US city there are companies that take care of the sewage or the waters systems—even billing and collecting the money. The outsourcing has not taken place in this part of the world yet. It is an evolving situation that will eventually happen, although it will take some time. CH2M is focused on these types of projects. In the meantime, we do plenty consulting engineering, but our aim is to do program managing for the government.

 

Buenos Aires 2028 is a possible Olympic bid. Would you want to be a partner in that project?

Sure! Let me tell you about Rio 2016, where we had an involvement but much smaller than the one in London in 2012. We developed a portal in which we controlled all the different projects—we had a control panel. We had around 60 or 70 people working on this, but other than that the government did it by themselves. Rio 2016 was an entity the government created to do the whole program management, and we were a part of the team, working in this particular sector.

The case of the Panama Canal was different. The ACP (the Autoridad del Canal de Panamá) decided to have CH2M and build their team at the same time. We were a mirror team; we trained them to do the project and they then continued by themselves.

The truly 100% project management we conducted was London 2012. Our intention is to show the Argentine government how we can help them to better manage the projects regarding quality cost and schedule, and for them to understand that they can focus on other priorities while letting us manage the projects.

Of course, this is something you are trying to sell to someone who was hired to do precisely that, so it is not as easy. But CH2M expects that during the second half of the Macri Administration, this change in the mindset will take place, and they will speed up the infrastructure projects through third parties. I think they are now doing what they need to do, which is to understand the legacy the previous company has left, to hire good professionals and to create their own teams. But sometime along the road they will need to speed up the projects.

 

You are the first and only Latin American on the board.

Yes, I have learned plenty from the company’s US culture. What is remarkable about the US culture and discipline is that, by combining it with the flexibility of the Latin American culture, of which Argentina has quite a lot, there is plenty of potential. You see some cities in the US that have such a mix, like Los Angeles and Miami. I have always said that trying to mix cultures is the best. We have learned much from working in a US company; we would not be the same company we are today had we continued being an Argentine firm.

 

What does Argentina bring to a US company?

Creativity in dealing with problems and bureaucracy, understanding that there is not only one way to tackle issues, our open-mindedness and flexibility. Argentines now how to deal with crisis; we are resilient. We have been through many crises over the years, so we know how to deal with them. We are also more open to different solutions. When we send people to the US, one of the first comments about Argentines and Latin American is not only how hard working we are, but also how flexible, which is our main asset.

However, Argentines' flaw is that we try to implement different solutions every time, instead of understanding some simple issues can be solved promptly with a systematic way of working, which is what US companies have and that we should imitate.

 

Interview by Nicolas Carver, follow him on Twitter at @WorldTempo



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