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Global logistics provider highlights Uruguay’s regional advantages

Interview - June 9, 2015

United World talks to Karl Huts, Managing Director of Katoen Natie Terminal TCP about the importance of Uruguay in the global logistics industry and the key role of the company in the development of the Port of Montevideo


Before we get into Katoen Natie, I would like to know your opinion, first as an expatriate who has been here in Uruguay for 4 years, and second as the head of one of the most important multinationals in the world, in terms of logistics. How would you assess the current situation in Uruguay? And, what potential does Uruguay have to become what it wants to be, a logistics hub for the entire region?

Let’s start with my opinion as an expatriate, which is the easiest. To live here is nice and easy. The country is very nice and peaceful; you shouldn’t come here with the idea of a cosmopolitan adventure because there is none. It’s quiet and safe, you have country life, outdoors life, old style way of life. Uruguayans are mostly descendants of Spanish immigrants, therefore they are all about family and Sunday activities involving barbecues, which is a lot of fun. They also have the advantage of having the most cosmopolitan city on the other side of the river, therefore you can get there easily. You have the best of two worlds, tranquillity and quality of life. Also, it’s a small country, where almost everything is concentrated in the city of Montevideo, which is not very large, so everything is close by.

As a company, and here I may directly answer your question about Uruguay’s potential to meet their goal, they have almost everything. The country aspires to be a logistics hub for the region of Argentina, Paraguay, Bolivia and part of Brazil, and Uruguay has won almost 100% of the match. It has the geographical location, which in the area of logistics is key, we are at the mouth of Rio de la Plata, which gives us access by sea to Bolivia, to parts of Brazil where the Amazon basin doesn’t reach. Along the way, you cover all the territory of Uruguay, a lot of Argentina and Paraguay, so it’s important. It also has a land and road infrastructure. They have to work a little more on the recovery of its rail network but it will cost them a lot. I am quite pessimistic about that, though it would solve many problems. So, location comes on first level. On second level, which is very important for us, come the people. You have very good people, with good training, with willingness to work and good work ethics, and that also has to do with the descendants of Spanish immigrants, who somehow also brought this along with them. So, in terms of human resources, at least for us, it’s easy to find the similarities. We think the same, not always, of course there are cultural differences, but broadly speaking, if I talk to my colleagues who are working in Mexico or the United States, we find it easier to work with Uruguayans than other people. As a Belgian-Flemish company, the cultural click has been a plus.

On a third level, which is absolutely essential, is the legal framework. The legal system in Uruguay, the democratic system here is very stable. It doesn’t tend to vary, there isn’t a lot of improvisation or change of direction. First, it is a framework which in itself is very attractive especially around the area of logistics, because they have three areas that are undoubtedly better positioned than other countries in the region. They have a free port, which allows them to fulfil the role of hub in the transit of maritime cargo. They have a free zone system, which allows them to fulfil their role as a distribution center for all kinds of goods, which for me, is the best in the world for its efficiency. The legal framework is unique, and they have had a business class that has managed to make the most of this legal framework. Other free zones always have a weakness, either they are too upturned towards logistics, or too upturned towards services; here they have a good mix of both. For example, few people know this, but half of the call centers of the American airports are organized here in Uruguay, also many banks, many trading companies, a lot of research, design and development of things is done here in Uruguay. So there’s a superb free zone system. Then, for all that is local logistics, also their legal systems, their customs codes, they are very well organized. Along with these three factors, we must also add another element which is the absence of bribery, the absence of corruption. That means you can trust the system. I’m not saying that the system is always the most efficient for that, but we know that at least the system is the system, and there aren’t two parallel systems. As a company, Uruguay gives us a very attractive investment climate, especially if you compare it with the neighboring countries.

My next question is about the synergy that a multinational company like yours has with the Uruguayan government. What have you seen in Uruguay apart from the competitive advantages that they have, logistically speaking?

We have been for almost 15 years in the harbor, in the country in a free zone.Because we are also partners in the most important free zone in the country, we’ve been here for a little over 20 years. Gradually we are becoming more “Uruguayan” and it’s not like we arrived yesterday. It was key when we decided to come and settle in Uruguay 20 years ago. I take a step back, the reason we are here is because of the ports. All other businesses like the free zone were a result of our presence here through the ports. Because the bids failed, the free zone passed before the port, so, the port process had so many delays that in the meantime we had already settled in the country. About 20 years ago, Uruguay was a black hole in logistics in the region. A dirty harbor where you knew when the boat went in but not when it left, if it ever did.  There was a great visionary generation of politicians who wondered how they could turn the table and relaunch Uruguay as a logistics country. Because the legal framework at that time did not exist, but they had the location and the people, then that people began to develop the legal framework that we have today, a port’s law, a free zone law. All of that process, we have to locate it in the early ‘80s, the preparatory work was in the ‘70s, we are talking about the end of a dictatorship, just after the dictatorship. So, this new generation of politicians began to work on this in the ‘80s and ‘90s, they made a lot of preparatory work, and the government’s vision was: “We are a small country, we have to maximize what we have, but we have been a country with a vocation so far, mainly agricultural, so how are we going to attract people to know about us? We will build concepts, concessions, let’s start licensing,” which at the moment in Latin America was a dirty word, “Let’s create a legal framework, and let’s bring people who can serve as the armed wing of the state.” So they did, and about the ports they said “We are going to clean up the harbor, take the necessary steps to achieve organization, and, in all the areas that are important for Uruguay, we’ll bring an expert from outside, or inside, if we have the knowledge inside we will not close the door on our own, but it was almost always outsiders. We’ll bring experts with the know-how, we are going to make concessions, and we will give them important areas to do their job around the country.” The areas identified were: passengers, connecting with Argentina, and fishing. Much of the fishing is done in the Falklands, Antarctica, as Uruguay has a base there.

There is also bulk, everything regarding production, grain, corn, soybeans and containers. And they said “In each of these areas, we will create a terminal dedicated to this, with the full support of the state, but with a company expert in the field which will operate the terminal.” We agreed with them, it’s very rare to find a country supporting so strongly, putting the cards on the table to get involved, to help make it a success. So we were convinced by the collaboration, the outline presented to us by the government. That is, we wanted the expert, working in partnership with us, because TCP is a partnership between state and Katoen Natie, where the private is commanding the ship, doing the work for us, but the entire government apparatus has its back. This was key for us to get involved and believe in Uruguay. Because the country has the advantages that I mentioned, but it is a small country, it must always act with one voice. There’s not much room for error. Argentina, with one foot can kill Uruguay, so can Brazil. So the key for us has been the vision of Uruguay, that is the direction we want to go. All the ducks were lined up and then, to implement this strategy, we sought a private partnership with the state, that was a trigger.

What responsibility does Katoen Natie have to develop the port of Montevideo together with the ANP? What are the synergies between ANP, INALE, the private sector and you? Are you working together to develop the port?

Yes and no. What we just discussed has been the vision for many years, many decades. Today they are analysing how to adapt the system to today’s world, whether to adapt or to remain as it is. In Uruguay, the system is based on specialized terminals, and we believe that it must remain this way because it proved to be a success. Today, if the port of Montevideo is on the map of international shipowners for regional transfers, it’s because of the success of the policy applied in the recent years and certainly for the success of Katoen Natie’s Terminal “Cuenca del Plata.” We hope that the authorities won’t change the course that they took. From the begining, TCP’s goal is clear,our responsibility was to develop and position Uruguay as a regional Hub. Commercially we have done so, we have behaved as a state sales team in that regard, and at an investment level too. The investment we have made to this day is roughly U$S 200 million, which is a lot, especially for a country like Uruguay. From now on, we are at a turning point where the state has to make a decision.

Who decides this, the ANP with the Ministry?

It is at a political level.

Doesn’t the administration have anything to do with this?

The administration depends on their political hierarchy, which is the Executive Branch through the Ministry of Transport, who determines the policy of ports. All positions on the boards of the National Ports Administration are political appointments and change with each government. So it’s very important to have the existence of state policies and medium and long term strategic plans as they have developed, until they overcome the changes in political leadership and can give certainties of the course they’ll take. This has made a great differencein Uruguay.It’s not like in Belgium, Spain or Mexico, where the direction of the ports is independent of political leadership. So, in Uruguay, planning and state policy are very important.

Going into Katoen Natie, what competitive advantages does a multinational company as big as yours have within the framework of Uruguay? What are the strategies for the coming years?

First of all, we have imported a know-how that didn’t exist in the country. The infrastructure we have built didn’t exist either. It is something historically recurring. If you look across the history of the port of Montevideo, the architects of the docks are always Belgian or French, for some reason history repeats itself. Now we are importing the know-how to make a last generation dock and a container yard, that’s performed at the infrastructure level, and then at an operation level. The work scheme we have in the port of Montevideo, in the specialized terminal, is a unique scheme in Latin America. Implemented by us with the methodology of European work, and also with European technology. In all ports of the world, we can have two systems, one system tends to optimize the use of space, but it is slow, it doesn’t give much flexibility for operation, it works with trucks. The other system that works with mobile cranes, on wheels, is much leaner, faster, but it doesn’t optimize the use of space, it is difficult to organize, because you have to have a well thought-out computer system, you have to import the cranes and the technology. We import that technology, that know-how to Latin America.  To this day, our terminal is recognized by customers, by shippings that make all the coast of Latin America. Therefore, this is the most efficient, most flexible, most productive terminal of the coast. For us, this is an added value for the country. It is very difficult to measure, to quantify, but it was absolutely necessary to attract the charge needed to convert Uruguay in a Hub. A Hub for us is defined as a Gateway, an entry and exit of goods from your own country, but also as a center for regional freight consolidation. Hubs can only be created in very productive ports, because you need fluidity of operation and you can’t allow the load to stay too long because it is already underway. We have imported that productivity into the country, have been able to attract transhipment from Paraguay, Argentina and southern Brazil into the port of Montevideo.

The slogan of the group is: “Our people make the difference.” Was the issue of human capital a challenge here in Uruguay during these years?

Yes and no. As I said in the previous question, for us the cultural click with people has been immediate, too easy. We can say that we are operating with people, and people, we think, allow us to differentiate from other countries, or from the competition. In regard to other countries, when you are a small country, if you are a hub, you live off your neighbors’ load. There’s a reason this load isn’t handled in Argentina, there’s a reason why it comes to Uruguay. This reason often has to do with the human factor, the legal framework, or the problems that other ports are facing. So the understanding that we had with our people, the social peace that existed, the work ethics, for us was a fact that we could use to distinguish ourselves.

What efforts do you see being made from Uruguay to promote the country and its international investment opportunities? Do you think you could do more?

Look, I know the president, especially this president, is making many efforts to organize economic missions, which is already a great support, because an economic mission in presence of the president is something that opens doors and will generate benefits. I don’t know, it is very difficult. I think that what worked in the past, using private companies as the image of the country, entrusting them with the marketing, has worked. The best proof is the port. I think they would have to trust a bit more private investors again to say “Look, we’re going to support you. You do it, because the state here is small, very small.” They can’t do everything, they are trying hard but it’s difficult because the budget isn’t large, how do you compete selling your meat against Argentina? Uruguay’s meat is much better that Argentina’s, but who would order, in Spain, aUruguayan steak if they can have an Argentinian steak? They have the products and the quality; they have to find the way to create volume, to open markets. In terms of attracting investment, we firmly believe that Uruguay, through their experience of partnership with Katoen Natie, can show the world an ambitious and successful public-private partnership. It is, undoubtedly, the best way to introduce Uruguay to investors worldwide.