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“We are a catalyst for the economy of this region”

Interview - September 12, 2013
The sugar industry has a major effect on life in Colombia. Studies have shown that for every job created in its sugar factories, or ingenios, another 10 jobs are created in the supply chain. Mauricio Iragorri, General Manager of Ingenio Mayagüez speaks to United World about the country’s thriving sugar sector and the company’s potential for foreign partnerships.
MAURICIO IRAGORRI, GENERAL MANAGER OF INGENIO MAYAGÜEZ
MAURICIO IRAGORRI | GENERAL MANAGER OF INGENIO MAYAGÜEZ
Last year Colombia overtook Mexico in foreign direct investment, ranking only behind Brazil and Chile. It has also overtaken Argentina and is now the third largest economy in Latin America. What is the reason for these special times that Colombia is currently experiencing and how has the Cauca Valley influenced these achievements?
 
I think a lot of things are happening. The first is that we feel we are in a safer country; you can sense the security we feel, it is perceptible, and it has made locals and foreigners invest in our country. In addition, petroleum and mining have created a boom that has spurred the country’s progress and growth. 

These are the most important issues that have drawn attention to Colombia, its growth potential and increased security. In the Cauca Valley specifically, what has also happened is that we had a problem of governance, both in the department and in the municipality, which, thank God, has recovered under Governor Ubeimar and Mayor Rodrigo Guerrero, and has made public and private enterprise develop together.
 
I am currently the President of the Intergremial and Business Committee of the Valley, and my management aims to unite the efforts of entrepreneurs in the region to promote projects in front of the national government in Bogotá. I think we have great potential; being so close to the Pacific is our strength and competitive advantage. I believe that to compete, our agricultural, mineral and petroleum potential is in the eastern plains of the country.
 
Today, products for export from the eastern plains have to be sent via Bogotá to reach the Pacific market at Buenaventura, which is not very logical. We are trying to push the national government to set the central mountain range as a boundary so that products from the eastern plains come through the mountains, arriving here at Valle del Cauca and the directly on to Buenaventura. That is one of the major plans that aim to achieve greater competitiveness for all those products.
 
Chile is traditionally the primary destination for Colombia’s sugar exports, which in 2011/2012 reached 215,000 metric tons (215 TMT). However, Colombia is expected to double its amount of duty-free product sales to the U.S. thanks to a free trade agreement (FTA). How important is the FTA with the U.S. for the Valley and its sugar sector?
 
It is very important because it opens the way for additional sugar exports, however it is not very representative within the context of our production. Colombia produces about one million tons of spare sugar per year. When you say [duty-free sales to the U.S.] doubled, yes, we can go from 25,000 to 65,000 tons but we actually export one million.
 
It is important to have greater access to a country like the U.S., but in not large amounts. In total, today Colombia can export 75,000 tons. We have realised that we must identify niche markets with regard to the sugar industry, because what we have traditionally done in the U.S. is to export sugar in bulk and we should aim for business where we can be more profitable.
 
It was also expected that by 2013, 80% of production would to comply with all of the standards set the United Nations Global Compact. What measures have the sugar mills had to implement to meet these standards?
 
We’ve had to work hard. We voluntarily joined the Global Compact, which aims for transparency, compliance with human rights, labor rights and responsible environmental management. As such we have internally restructured our procedures because in my opinion it is the only way to compete in the future. We must be sustainable over time and be sure that in 150 years’ time we will still be here.
 
Instruments such as the United Nations Global Compact and the “better sugar cane initiative” are certifications that demonstrate our commitment to sustainability. In terms of sustainability, we have been promoting different social actions in Mayagüez, we have developed a responsible approach to environmental management and maintained our profitability. At the core of our social responsibility is education. We created a school that has already been going for 54 years and seen 1,000 students graduate. We are not working on social responsibility just for the Global Compact; we were already doing it but we have restructured and formalized our procedures to meet its requirements. 
 
The Cauca Valley is one of the most efficient sugar producing regions in South America, producing about 120 metric tons per hectare. However, the impact of La Niña in 2009-2012 has been negative. How has the sector recovered from this climatic phenomenon and what is the state of the industry today?
 
The La Nina phenomenon hit us hard; when we harvest in winter conditions, the intensely compacted soils significantly affect production.
 
That is what we are experiencing today; those fields are barely just in their recovery phase. We can only keep working and be patient. An alternative would be to plant more cane but here in the Cauca Valley, our flat land is already heavily covered by sugar cane and we really have no space left to grow more. So what we have done is to develop farming, incorporate technology, renovate the plantations that were affected and suspend our milling for long periods of time, to allow the cane to thrive and reach the age necessary for an adequate harvest; only in this way can we succeed.

This is a cyclical issue and in this business we must be prepared to deal with both years of heavy rain and years of drought. 
 
Looking at the sugar cane supply chain, in addition to producers there are the cane cutters, carriers, financial services industry... this all has an effect on local businesses in the valley. How is the sugar industry evolving with regard to the generation of wealth and employment in the valley and in Colombia, from the small business to great sugar factories like yours? 
 
What we have is a cluster, from the small growers to larger producers, including confectionary producers and paper industries such as Carvajal Pulpa y Papel, which uses residual sugar cane pulp – a by-product we produce – and transforms it into paper.
 
A recent study Fedesarrollo, the Foundation for Higher Education and Development in Colombia, shows that for every job we generate in the sugar factory, we will generate 10 additional jobs in the value chain. We are a catalyst for the economy of this region. What we are trying to ensure is that both the small farmers as well as those further down the supply chain can maintain their productive businesses and enable the Cauca Valley to be a competitive region.
 
We know that in 1937 Nicanor Pérez Hurtado founded what is now one of the most productive sugar mills in Colombia. How has Mayagüez kept this spirit of leadership alive in the sugar industry throughout its history?
 
The cane business is an interesting subject. I started working in Mayagüez in 1988; I've been working there 25 years and am part of the fourth generation of the company’s founding family. For us and especially for me it is very important to ensure that ethical values are maintained over time. If a company can have a clear vision and continue to exercise such values that are a legacy of its founders, then it can get ahead. As the leader of a family business such as Mayagüez, I have managed to grow the business at the same level, or at a greater level than how we have increased our shareholders.
 
That is our goal in Mayaguez, to continue growing at a higher rate and that is why we are investigating alternatives and new business outside the Cauca Valley and beyond Colombia to achieve growth.
 
For many years the valley has historically been a hotspot for drug trafficking and other reasons, but talking to the Mayor of Cali he has spoken of how the Cauca Valley is working to improve safety. Naturally we have seen how the Uribe and Santos administrations have significantly reduced danger, but I would like to talk to you about how people are ensuring the safety of their workers in the fields and how they fight against violence.
 
We believe that the issue of security should be in the hands of the State. In the specific case of Mayagüez, we have a security department that monitors the lands and ensures the safety of our teams. It is a job that should be done by the State, and that in my opinion the former president Uribe and now with President Santos is being done well; we feel safe working in the geographical area where we are located.
 
We have lived through difficult times, of terrorism and of rising kidnapping rates. This is an area with access to the Pacific, an important corridor for the movement of goods which has also been used for illicit sectors. Florida and Pradera also have to deal with this situation, but we feel secure about where we are working.
 
We talked briefly about the corridor to Buenaventura and Colombia has always had the Pacific right on its doorstep but without giving it the importance it deserves for export potential using the port of Buenaventura. According to our sources you already have your sights on Asian markets, and we would like to know how Mayagüez is taking advantage of this port on the Pacific.
 
You are absolutely right, the Cauca Valley and the country have been a bit indifferent to the Pacific region, to say nothing of Buenaventura. We cannot manage the evolution of companies in extremely difficult social environments, and somehow that is what is happening in Buenaventura: we want to have a profitable and thriving port, however the gaps in development around this city and the Pacific are quite large.
 
It is important to have state policy that improves conditions in the region; with the Pacific Alliance this is the most important port in Colombia . To make the country competitive, infrastructure needs to be improved. The dual carriageway leading to Buenaventura has been under construction for 15 years. This is a structural problem in Colombia. We have to manage the permits for communities to plot out this road, and what has actually happened is that new communities began springing up that were not there at the start of the road’s construction. This has also been a setback that has caused delay to the works. 
 
In order to generate development in the Pacific need to improve in terms of infrastructure. What we are doing really, in the case of Mayagüez currently, is to keep up with the efforts and continuity being made in other countries on the Pacific such as Mexico, Chile and Peru.
 
In your own words, Mayagüez is energy in evolution; it is an agribusiness leader in the clean production of sugar processing, biofuels and bioenergy. Could you talk about its diversification strategy and how its know-how of reforestation of rubber and oil palm are key?
 
We have to move ahead beyond the valley; we want to develop agro-industrial businesses both in Colombia and abroad in the sugar business.
 
It is also in that order, because the business that we know is sugar and are ready to explore opportunities that stretch from Mexico to Brazil, and if there is an opportunity of business in the U.S. we would certainly like to look into it. So we are contemplating our growth. We talk about ‘energy in evolution’ because Mayagüez is more than sugar. We were no longer just a sugar producer when we got involved in energy. We diversified our business and regarding biofuels we now produce 80 million liters of ethanol a year. We also sell 150 million megawatts of electricity to the national grid.
 
Over the past 12 years we have invested over 400 billion pesos in our company. We wanted to make ourselves known in Colombia and abroad. So in 2012 we launched a major corporate media campaign. Our company has a sensitive and human vocation, so our brand is reflected by a smile that is in the umlaut of Mayagüez, which goes on expanding to represent the dynamic growth our company has and the result of a job well done.
 
In Colombia you spoke of the eastern plains, mentioning that you cannot ignore that the plains and the Orinoco are the food basket of Colombia. What opportunities does Mayagüez have for expansion in Colombia and what potential is there to do it hand-in-hand with U.S. investors?
 
You mentioned several issues. The first thing is I think the ‘agricultural pantry’ of Colombia makes it the only region of the country where today you can develop large projects because land is available in huge expanses. First, the State – through legislative bodies – has to define the rules of the game for private businesses to invest in or acquire large tracts of land in the plains in order to move forward.
 
For U.S. investors, the truth is that we are open to finding new possibilities. In fact, on occasion we have reviewed this issue and there were several opportunities. In the company we have an investment manager who sounds out and evaluates businesses with U.S. investors in the eastern plains.
 
Effectively with the approach that Ingenio Mayagüez is taking and with this investment management you created in 2012, the company is becoming an agro-industrial group of the highest order. What effect has the creation of the investment management team had on the group and how has it added value?
 
At first these undertakings do not produce quick results. It's a matter of carrying out a detailed analysis of the alternatives available so that the company can determine the direction of what it wants to adopt. The evaluation phase is very important because it allows processes to be precise .
 
From real-type investments to financial investments?
 
The truth is that we are focused on agro-industrial business, which is where our expertise lies and so this is where we want to grow.
 
Internationally, you mentioned you want to produce in three countries in the region: Mexico, Brazil and Peru. Could you talk about your expansion strategy and what plans you have in Latin American countries and also in the U.S.? 
 
Opportunities in the sugar-producing world are limited – it’s not just a case of arriving in a country and choosing the best factories.
 
Yes I have previously mentioned those three countries and we are looking into them, however we are also willing to consider other options that we think are interesting such as ethanol production in the U.S. With the new standard for biofuel production in the U.S., those who will have all the possibilities for growth are the "advance value fields" which are all those which are not made from corn – and yes ethanol is produced from sugarcane, so we therefore believe that there is potential for growth there.
 
You graduated from Georgia Tech and began your career here in Mayagüez in 1988. What is your management style and how has it been influenced by the U.S. university?
 
I think Georgia Tech University, where I studied engineering, provides you with a very wide, open outlook and a solid foundation in engineering. I started working in Mayagüez in 1988 as a staff engineer and rose through the ranks within the company to reach the position of general manager in 2001.
 
The leadership style that I promote is open and one of delegation. I have a good team. I like to have hardworking people and I like to delegate because I think it's important to allow people to shape their management while growing professionally; I provide guidelines as a leader. As general manager it makes me proud to know that even in my absence we have a team that is capable, competent, principled, which works and develops the company’s operations so that it stays on the right path to sustainability.
 
 It turns out that the great singer-songwriter Piper Pimienta said that “Cali is Cali and the rest [of Colombia] is just hills”. From your point of view, how right was Piper Pimienta and what makes Cali so special?
 
I think it was quite right; with respect to all the other areas of Colombia this is a magical area, where we have a great climate, great quality of life, people with great passion for what they do. Cali is one of the major economic and industrial centers of the country and the main urban, economic, industrial and agricultural center in southwestern Colombia.
 
I’m sure what make the Cauca Valley so great are its people – energetic and friendly people. What we must do in Cali and the Cauca Valley is to exploit these positive aspects we have to continue taking our department forward.

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