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Argentine business mogul returns to spotlight

Interview - April 20, 2017

Previously a congressman, business leader, and one of Argentina’s preeminent public figures, Francisco de Narváez retired from the national spotlight in 2015.  In 2017, he returns to the scene reactivating his business expansion with global investors. He brings to Argentina the first-ever investment in the country by the firm L Catterton, which gave its vote of confidence in Mr. de Narváez’s clothing brand Rapsodia.  With the injection of L Catterton’s capital, de Narváez’s objective has been made clear: make the brand global.  He sits down with Nicolas Carver of The Worldfolio to discuss his business’s global jump, at a time when the Argentine economy at-large seeks to do the same thing.


Argentina has undergone many large reforms: the lifting of the exchange rate clampdown, the reduction of export taxes, and the agreement with the holdouts. All these measures put Argentina under the spotlight in the international scenario. What is your view on these changes?

In order to analyze Argentina properly, you need to consider the long term. Argentina has fluctuated in the last 70 years and, contrary to other developing economies, it used to have a very prosperous economy. Between the end of the 19th century and the beginning of the 20st, it used to be the 7th economy in the world.

Argentines used to be very well-educated, because this was once a rich country. In other words, there is still a slight memory of the times when we were one of the most advanced economies in the world. However, nowadays there is one third of the population under the line of poverty, public education and healthcare are not what they used to be and Argentina is no longer a developed economy.

If you do not analyze the whole story of the country, then it is impossible to understand the current situation. What one must ask today is 'Is this a structural change? Or are we in the face of the upward part of the cycle?' This is what international investors are asking.

The truth is that it is hard to answer. The current government has been in power for a little over a year. Even though they made the right decisions at the time, we still have a long way to go before we can say this government is the one that turned the country around and achieved stable long-term growth.


Juan Procaccini, President of the Agency for International Trade & Investment, mentioned the cyclical ups and downs of the economy as a reason for foreign investors not to be in the country ('fool me once...'). Are the many reforms that have taken place enough to awaken the interest of foreign investors?

It is crucial to analyze not only the economic scenario but also the political one. Are politics backing up and supporting the structural change that Argentina needs? My answer would be 'no'. There are many different points of view as of what is the direction the country should take. We have not been able to settle the debate and to reach an agreement on the central issues that would make a reform last for the next 20 years. The question as to whether we are in the face of a structural change or simply a reaction to the previous government has not been answered yet.


The Macri Administration has made it very clear that the private sector should lead the way when it comes to growth. As a member of the private sector, what is it its role when it comes to developing the country in a sustainable way?

As an investor, I look at the government and ask myself if we are going to achieve fiscal balance. If the government spends more than it collects, the country will be heading towards a crisis. Is the government cutting expenses—which is hard, as no one wants to do so? Does the government have support to do it? This is still unclear.

Every crisis in Argentina in the last 70 years has stemmed from a fiscal deficit. When a government finances its expenses on a deficit structure on a permanent basis, it does not end well. This government still needs to prove that they will fight—emphasis on the word 'fight'—to cut the current deficit.


What is the private sector's role to develop this country?

The answer is clear: stop asking the government to make exceptions and start working. That means getting up early and going to bed late in order to get your business going. Is the private sector going to do it? Or are we demanding exceptions for a certain company or a certain industry? That is not the way it works.

Foreign investors do not have the same experience as Argentine ones. I live here, as does my family, we suffer when the country is doing badly and we enjoy it when the country does well. A multinational company will see Argentina as just another subsidiary, while the headquarters are elsewhere.

Our job as private sector is to create employment, to produce better products and to be more competitive. We need to work with the government but not demand protection from it.


L Catterton has decided to work with you and invested in Rapsodia, a clothing brand that belongs to Grupo de Narváez. What made them have the necessary confidence in order to make such an investment?

We do not see L Catterton as a traditional investment fund, because they do not just go for the profit. They focus on retail and on luxury goods, which is what we focus on with Rapsodia. There is a matching knowledge on the business, and we agree on the philosophy of how these businesses should be run: the client is always right, you are a service company and your product needs to reach the market with all the excellence that it needs to. We are not looking at the numbers in terms of return but at the investment in terms of growth.

Growth also means the development of our people, which is something that L Catterton picked Rapsodia for. I believe that, from the very beginning, we have hired talent. They are looking at this talent, which is well-known internationally and can be exported abroad.

Of course, we have to adapt this talent to Mexico, the US, Europe and such.

I am sure that L Catterton saw not an Argentine-fashion and lifestyle company, but the talent that the company has to create new products, to create a fantasy, to keep up dream. We have opened 90 stores all over Latin America with the same spirit every single day.


As a company in the creative industries, like fashion, human talent is critical. What elements of Rapsodia make the brand enticing for a global partner like L Catterton?

Argentines are well-known for being very individualistic, but Rapsodia was able to build a team. Of course, that team has two leaders—Sol Acuña and Josefina Helguera— who came up with new ideas every day in order to remain ahead. A team means the people who replace merchandise in the store, the cashier, the designers; we all work together as a team. This puts Rapsodia in a different league than other companies that may have a strong creative mind but without a strong team behind. When we sit at the table to discuss the next steps, everyone has an opinion to share: logistics, financial, production, you name it. At the end of the day, we make decisions as a team. A team player is much more relevant than a big check.


With the diversity of global, do you think there is a better possibility now for brands that come from emerging markets?

Without a doubt. I also think e-commerce has changed the game. The speed at which it is growing is vertiginous. The barriers which we used to think were impossible to overcome have now fallen. Anyone can use their phone from any part of the world and see what Rapsodia is making, as we do with other foreign brands. E-commerce has overcome all the barriers and enabled a company like Rapsodia to conquer the world. It is a tool that was not available ten years ago, and it is now in the market.


Rapsodia going global is a huge jump from where the company is at the moment. How are you going to carry this out with L Catterton?

We always make our decision based on the clients, and not on the company. You first have to find out whether there is a market for what you do, before you think of the logistics, for example. If the answer to the question 'is there a client for my product?' is positive, then you start wondering how you do it.

We believe there is a woman out there that wants to experience wearing Rapsodia clothes; she wants to dress in the types of clothes Rapsodia is offering. She also wants to decorate her house in a style matching her clothes, for which we have the Rapsodia Home division. We asked ourselves whether the Rapsodia lifestyle was in a position to approach the world, and since the answer was yes, we asked ourselves if we were willing to do it. Now that we have said yes to that as well, the challenge is to do it. Once you have made the decision, though, half of your problems are solved.


Now that Argentina is opening up, there are new many opportunities for finance and insurance companies. How will El Cronista newspaper adapt to cover all these changes in Argentina?

The purpose of El Cronista is to be a journalist-run newspaper. It is not under the influence of me or anyone else. We let El Cronista do what it is supposed to do: journalism. This works, because it generates trust. I have learnt that trust is like a match; you can only use it once.

We sell around 10,000-12,000 copies a day. This is probably the second newspaper after people have read La Nación or Clarin, but our aim is to influence the 2,000-3,000 decision-makers that read our newspaper, by giving them true information. By doing this, El Cronista will have fulfilled its goal. We provide trustworthy information; we double-check our sources, we investigate, we do not engage in any unclear situation. We write what we believe; and trust is what El Cronista is all about. It is not about numbers or copies sold, but about providing sound information to people who make important decisions—financial, economic and political ones—every day.


You have made clear that you are done with politics and that you will focus on your business. What do you think your contribution will be in terms of moving the country forward?

I started working when I was 16. I did not go to college; my education consisted on running the family businesses. I learnt by doing. I like making things happen, which I think is what characterizes an entrepreneur.

In the year 2000, there was a tremendous crisis in the country, and I realized that I wanted to do more than just watch it go by comfortably from my TV, so I jumped into politics. I was in politics for 12 years, and I have done my duty. I have learnt plenty: I lived politics, I ran for elections; I lost them and won them.

I am willing to help this government in any way I can from my role as a businessman, because I understand politics and it sometimes seems that the public sector and the private sector are speaking two different languages. As someone who has been on both sides, I can be a bridge between both sectors. Sometimes mistakes happen because of misunderstandings.

At least, there should be an agreement regarding the basics: people want good education for their children, to have a decent salary that enables them to save up for their holidays, to enjoy a roast on a Sunday. People need to believe that if they work hard, they can progress. When I say progress, I do not mean being a millionaire from one day to the other, but to be able to little by little improve your life. For this, all the sectors should be working with each other, as opposed to against each other. The government has to focus on this.

The Rapsodia story is worth telling, because the L Catterton investment is not going towards the financial sector but towards the real one: it will create jobs for the country, talent and career paths. It is about bringing Argentina and its fashion and design to the world. It shows that it is good for other investors to be here; there are many opportunities in the country. We do not want bottom-feeders; we want strong investors, both local and foreign. But we have to believe in our country ourselves first.


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