Luis Pagani, CEO, Arcor : Interview

Luis Pagani, CEO, Arcor

Interview : Luis Pagani

In what ways could Argentina’s SMEs achieve higher levels of internationalisation and integration into global value chains?

LUIS PAGANI: Argentine SMEs have developed an interesting management and business model in a macroeconomic environment that is not always propitious, without the possibility of accessing financing and facing a tax burden that in recent years has risen by 10 percentage points of GDP. One of Argentina’s main challenges is putting an end to the cycle of macroeconomic instability, which has hindered international integration and continues to affect the continuity of a business model for SMEs. It is therefore necessary to continue on the road towards delineating the place and role that Argentina should occupy. The resulting definition will impact the internationalisation of SMEs and their integration with global markets. That said, large companies can also contribute to the development of SMEs by incorporating them systematically and organically into their supply chains. For several years, Arcor has advanced the implementation of a sustainable procurement strategy, whose objective is to contribute to traceability in the supply process and promote sustainable management based on three axes: awareness and training; incorporation of sustainability criteria with suppliers; and the implementation of projects.

To what extent will macroeconomic stabilisation bring confidence to the financial sector?

PAGANI: The current process of establishing macroeconomic order and recovering confidence in the value of the Argentine currency is gradual and will not happen overnight. As the process progresses, it is estimated that the level of financing in Argentine pesos will grow, which is precisely what SMEs need: financing at affordable and long-term rates to boost their investments. The fact that these companies have to resort to the reinvestment of profits for financing greatly limits their projection of growth. However, I am convinced that the main factors that distinguish the Argentine business people and producers are their capabilities, commitment and resilience. This involves our entrepreneurial talent and culture, as well as the values of our society.

How important are consumption and investment variables in Argentina’s current growth model?

PAGANI: The central pillar of development for this administration should be reaching greater levels of investment, both foreign and domestic. The percentage of investment over GDP today is low and it must increase to make growth viable and inclusive. If we analyse public spending over the past two years, we see a reduction in subsidies, which affects consumption, whereas investment in public works has increased considerably. It is important to focus on investments as they demand sustainability and projection over time, allowing entrepreneurs and business owners to evaluate with a long-term view instead of only focusing on daily operations. Argentina cannot neglect consumption either, as it is a fundamental component of our economy.

What measures could reduce structural inflation, and how might they affect competitiveness?

PAGANI: Argentina has great economic challenges to overcome, including the high logistics, port and fiscal costs. Properly addressing each of these issues will require fundamental reforms, as well as a general consensus among different actors of society. This will allow Argentina to become a key player in the region and to re-enter world markets.

We remain confident that the current measures promoted by the authorities such as tax reform, new public infrastructure works and the simplification of bureaucratic procedures – will lead to an overall improvement of Argentina’s competitiveness.

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The Report: Argentina 2018

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