Business & Investment sat down with Sylvia Escovar, President of Terpel, one of Colombia’s leading companies in the energy sector.
We are facing a complex moment due to the difficult global situation. Some studies are mentioning a huge drop in the FDI, although according to President Santos this is just a cloudy moment. A few weeks ago, Bloomberg named the Colombian economy as one of the 15 most miserable in the world, while The Daily Telegraph has mentioned that it is one of the strongest in the region. Apparently it all depends on the eye of the beholder. How do you assess the Colombian economy, both for 2015 and for the future?
It would be foolish not to acknowledge that this is a difficult time globally speaking, a moment that demands from us to rethink our economies. This is not just a problem for Colombia; nobody expected such a pronounced drop in the oil prices as the one we witnessed this last year. Still, it is true that for Colombia it was especially significant because we were developing a great dependence on the petroleum sector, and because of the effect that the drop in the oil prices had on the exchange rate, after many years of revaluation. That is why, during the first few months of the drop in the oil prices, the currency exchange rate (the representative market rate – TRM) changed almost in the exact opposite direction than the crude oil price, but in these last few months the revaluation has continued even though the oil prices had no significant variation. All these changes in variables that are so determining in both the macro and micro economic outcome are setting a new outlook for the different sectors in the country. Even though the petroleum industry, and of course all its related industries, are suffering a considerable damage, the sectors that were affected by the revaluation are now facing great opportunities because of their new international competitiveness. At the same time, the local industries have great possibilities in a domestic market that is reducing the consumption of imported goods because of their increased prices. The most significant variable now is the time it will take us to adapt to the new conditions. This is indeed a difficult moment, but it is also necessary for the country to have better incentives for investment in better education, in centers for innovation, in achieving exponential productivity growth as a result of improved technologies. I think Colombia is facing a positive scenario in the medium and long term, better than what we have already experienced.
Considering the situation on a global scale, what is your opinion on the United States-Iran nuclear deal? How do you think it will affect the sector?
The crude oil price, like any other good in the economy, is determined by the crossing point between supply and demand. This means that, as long as the supply is higher than the demand, the price will not recover. The nuclear deal is actually increasing the crude oil supply in a context where the demand is not. This confirms the idea that we are heading towards a short term future with low oil prices, and that we must learn to accept it. That is why we must prepare for working in a scenario for which we were not prepared, but that will most likely happen.
Colombia is expected to enter the OECD for 2016-2017. How do you think this will affect the private sector?
I think that is going to be good news. To enter the OECD is to belong to a group of countries known for their high standards regarding their public policies for development. Its focus on economic growth, environmental issues, and the strengthening of education, will definitely have a positive impact on the design of policies at a national level. Beyond the macroeconomic variables, which may fluctuate even regardless of any political decisions, in the long term a country is defined by the institutional framework, which will determine its efficiency, how prepared are its people, how sustainable in the use of its natural resources. That is, how competitive the country is and will be, in a very demanding global context. Being a member of the OECD will force the Colombian institutions to be constantly up to date, and thus allow the country to have a higher potential for growth, a higher income rate, and especially more wellbeing for the population.
The year 2015 could be a milestone if the peace treaty is signed, after more than five decades of armed conflict. We know that you are a true advocate of this. Jorge Londoño told us “the private sector must be a bastion for peace”, while Chancellor María Holguín said “the United States have been very supportive in this as well as in the planning of the post-conflict”. What is the responsibility of the private sector in both achieving peace and in the post-conflict process? What is the role of the United States?
The peace process affects us all; it is a process in which the business community has a great opportunity to be important agents for change. I definitely believe in the great possibilities that will open for us, as a society that has achieved peace, and as I said before, I think we are all involved in it, there will come a time when we will have to make our contribution and make the best of the possibilities offered by this process. I am convinced that, regardless of what happens in La Havana, the country has already moved towards the post-conflict, and that there are projects and initiatives in many regions of the country that must be supported and multiplied, in order to achieve sustainability and visibility. Today, despite some skirmishes and harassment towards the civil society, which unfortunately still exist, we are living in a very different country than 10 or 15 years ago. Now the population doesn't live in constant fear anymore, you can safely travel on our roads, where young tourists from all over the world can enjoy the nature and the warmth of our people, where you can do business and the FDI has been growing non-stop. Obviously there is still a long way to go, but we all make our contribution according to our possibilities, that way will lead us to the goal we are all looking forward to: a new Colombia in peace. Terpel was one of the first companies that took a chance and made a difference, by entering the program for the reinsertion of veterans, creating jobs for those who want to leave the conflict in peacefully and willingly. About the contribution made by the United States, I think that their role will change drastically. Their most important contributions would be, in the short term, to support projects related to the post-conflict process, and in the medium term, to become a true ally in the educational and technological transformation of the country.
Colombia is currently experiencing a revolution in infrastructure, with the most ambitious projects in its entire history that will surely change the economy and the banking sector of the country. What is your opinion on this megaproject?
I believe that is the true revolution that will happen in Colombia. This is the process that, after so many years, will boost the commercial and competitive aspects of our economy dramatically. This infrastructure program is unheard of: ambitious in terms of coverage and technology, and completely innovative in terms of financing, which is exactly what allows it to be viable. The benefits derived from this project will be countless and in several sectors, such as tourism, trade, or industry, not to mention education, health, and many other areas in which the connectivity always plays a key role.
On April this year, you were a speaker at the CEO Summit of the Americas in Panama. What priorities were defined concerning the role of the private sector in the face of the socioeconomic development in the Americas?
My subject at the Summit was the responsibility that us, entrepreneurs, have in creating contexts for ethical behavior that could reduce the transaction costs for the business environment in our region. Personally, I think this is one of the most important goals in the road to development in Latin America. We also insisted on the importance of understanding the environment as our partner for growth, with both productivity and sustainability. The subject of education was also essential to our discussion, understanding that without quality education there is no chance of achieving the levels of social and economic development coming from disruptive processes, among others, from companies, universities, and other areas of the private sector. Finally – though I might be leaving something out – we analyzed the importance of supporting the infrastructure programs aimed at reducing the logistics costs for the industry, and allow the companies to enter the international market in a more competitive way.
Regarding the environmental issues, President Obama said a few weeks ago “No challenge poses a greater threat to future generations than climate change”. We know that Terpel is a company that exceeds the legally established standards. What kind of policies for environmental responsibilities are being carried out by the company?
Terpel is, first and foremost, what we call internally a “Country Ally.” Our responsibility towards Colombia is the framework according to which we develop each and every one of our activities, in all of our business segments. That is why we indeed exceed several of the required environmental standards as a way of reducing any possible risk our operations might pose. Compliance with these standards is particularly demanding for us, since we are a company with presence throughout the entire country, which is actually one of our differentiating attributes: it is born in the rural areas, all the way through the most isolated regions, and into 100% of presence in the cities of the country. Throughout the complex Colombian geography, in provision plants and service stations for vehicles, maritime and aviation, we have implemented strict programs for prevention and attenuation of risks for people and the environment. The monitoring of indicators and constant training of our staff are an essential part of these programs. Our safety and CSA rates are the highest in the sector. Additionally, we also work in other activities related to the environmental issues: we measure our carbon footprint and partially mitigate it through initiatives such as having a forest near one of our plants in Barranquilla, planting trees in volunteer programs, creating environmental awareness on the use of renewable resources inside our offices, among others. Also, and directly related to our business, we are the leaders in the use of Natural Gas, a more environmentally-friendly fuel, and we were the first developers of lubricants from organic compounds.
With more than 47 years of history, Terpel is in charge of a vast network of service stations located in Colombia, Ecuador, Panama, Peru, Mexico, and the Dominican Republic. Why did you decide to go international? What other countries are you aiming at?
We decided to internationalize in 2006. Terpel is a company that all along its history has been able to add differentiating value for its customers, who are the ones that granted us the leadership we enjoy today in Colombia. And even though the possibilities for growth were and still are very promising, the opportunity to bring this added value to potential markets in our neighboring countries was a challenge we were willing to accept. At first we looked at countries that were culturally closer to us, like Ecuador and Panama. We were indeed very well received in the fuel and lubricant business, and today it is a real honor and a pleasure to be able to provide our services for the people of these two countries. That gave us the confidence to consider moving yet further in that direction towards other countries: that is how we moved into Peru and Mexico with the business of natural gas, where we see a great potential, and then with our aviation business into the Dominican Republic, where we made our latest international incursion so far. That way we have been writing our history in the Latin American market. We don't have any other expansion plans at the moment.
Terpel received the annual renewal of the “Reconocimiento Emisores IR” (Investor Relations) for its commitment towards best practices in investor relationships and its high standards of information disclosure. Also, it won the Andesco award for best corporate governance environment in terms of ethics and transparency, and its second bonds issuance received AAA qualification from Fitch Ratings Colombia S.A. What does all this say about the trust that your organization’s management inspires?
This makes us very proud, but also generates a great responsibility: it makes us aware that we can't fail our country, our customers, our shareholders. All this recognition has a great effect in our company, because we are aware that we are here to make a difference, to set higher standards for ethics, quality, and productivity. Terpel is a company that is at the service of all Colombians, and it is very fulfilling to confirm that, seen from outside, it is indeed the perception on what we do. We work every day to make that trust even greater.
The company sold $12.7 billion in 2014, in fuels alone, that is 5.4% more than 2013. You said that Terpel “doesn't just sell gasoline anymore”, but now it sells an experience for people. What kind of experiences do you sell and how have you diversified?
Even though we have a 48 year experience in the country, these last four years we have really emphasized our service aspect. We initiated this phase with the conviction that our mission is to create memorable experiences for our customers. This might sound like just an empty catchphrase, but it's not. To create a memorable experience means that every time we, at Terpel, are in front of a customer, we also have the responsibility to make that customer remember that encounter with us in a positive way, after they have left the point of sale. After the most important thing, which is the training and motivation of the person behind the counter, we started to make important changes in our service stations: we put a strong emphasis on the cleanliness and order, we placed plants beside the gasoline pumps, we designed and built new and more modern, simple, and technological canopies; we designed gardens inside the stations, remodeled the toilets, introduced convenient stores with traditional food... basically, we created spaces that would give you a memorable experience! But we didn't stop there. We kept on innovating: we took the car-wash to the next level, adding the possibility of listening to music while you wash your car in record time; we created a special lubricant so that the motorcyclist don't end up smelling of smoke, we even designed a station especially for them. These are all memorable experiences, this is betting for the service, the sales come after that.
You have a long professional history in different sectors and institutions. What added value do you bring to Terpel?
Regardless of my position, I will always be a public servant, and that means to be at the service of the people. I feel privileged of being able, currently in the private sector, to continue to be a public servant and to have shareholders and a company supporting me in that dream of service. The goal of being the number one in the heart of the people of Colombia is not easy to achieve, it is the most difficult but at the same time the most differentiating. Having been in so many different positions and looking from so many perspectives it maybe allows me to understand my environment more easily, to be more resilient, and to have the benefit of a more long-term sight.
How would you describe the role of women in management positions here in Colombia?
Colombia is one of the countries with more women in high positions. However, there are significant differences between the public and the private sector. Maybe as an effect of the quotas for women, there are more women in high positions in the government than in a company, where we are very few. I definitely don't think that a man or a woman are per se better or worse at a management position, I think there are complementary abilities. I think that the opportunities for women should increase in the country, in order to make the best of those abilities that today are not that visible.