Argentina , Mexico , Chile and Brazil

'We’re used to navigating this type of environment'

Bnamericas Published: Wednesday, October 28, 2020
'We’re used to navigating this type of environment'

Last week, Mexican raw materials group Pochteca sealed the acquisition of Melbourne-based Ixom's Latin America business division, with which it plans to expand its operations to Chile, Argentina, Brazil, Colombia and Peru in the industrial, mining, agriculture, water and construction sectors.

BNamericas spoke with Armando Santacruz, chairman and CEO of Pochteca, about the decision to expand in the midst of a pandemic and the business opportunities that the acquisition opens up.

BNamericas: Why was it decided to make an acquisition like this in the middle of the pandemic?

Santacruz: We had already started talking with Ixom before the pandemic broke out, and we liked the company, as it had very strong synergies with us for various reasons. The portfolio is very complementary, since we’re not in construction apart from paints and coatings, and Ixom has a large presence in sealants and silicones in the markets where it operates.

Our figures at the end of the second quarter, despite a brutal foreign exchange loss, are good. We had significant growth in operating income and Ebitda. The truth is that we wouldn’t have had this without diversifying. Brazil has performed well this year, so we believe that we must continue this trend of diversifying, not only in segments and industries, but also geographies.

The only thing that COVID-19 has proven is that diversification makes you more resilient.

BNamericas: How can your experience in Mexico be applied to Southern Cone countries?

Santacruz: We have many things that can be taken advantage of. One is the technical know-how and the portfolio to sell to market segments that Ixom doesn’t serve in those countries, such as the food chemical industry, which has weathered the COVID-19 crisis very well, or water treatment chemicals.

There are a number of things where very interesting opportunities open up, even for staff training. For example, after the acquisition of Coremal we’ve sent people from Brazil to Mexico and vice-versa.

I believe that we also have the unique advantage of being a public company, with public governance, and our main shareholders and founders are the directors of the business. That allows you to have the agility for decision-making. That has been attractive to Ixom, where there’s a lot of enthusiasm to enter a group with a vision for business growth.

BNamericas: Do you think Ixom's experience in water treatment and sanitation will lead the Pochteca group to evaluate new investments in this sector in Mexico and Central America?

Santacruz: Without a doubt, and also in the southern region, because Ixom's portfolio is closely linked to this sector. In Mexico, the mining industry requires a lot of water treatment, and Ixom is a leader in mining and we’re going to take advantage of that to penetrate that industry.

On the construction side it’s also very interesting, since we in Mexico don’t participate at all in the market for polyurethane, silicones, extensible polystyrene and others. It’s very interesting for us to reach the second largest economy in Latin America with this portfolio.

BNamericas: What business opportunities do you see in Argentina, Chile, Peru and Colombia, especially now with the political situation in these countries?

Santacruz: Mexico is not exactly Switzerland. Today we have a government that is overturning all the consensus of the last 30 years, reversing the energy reform, changing the rules of the game.

The manager of Ixom in Argentina asked me how I saw the situation in his country, and I replied that we’re used to this. We’ve lived in Mexico with massive devaluations, capital flight, exchange controls, regulations that come and go. So we’re used to navigating this type of environment.

In fact, I’d dare to say that, with the exception of Argentina, the rest of the countries where Ixom participates have more clarity and more economic certainty than Mexico has today.

In that sense Chile, even with the vote on Sunday, Peru, Colombia and Brazil have a clearer business policy than Mexico has today, so we’re very calm. Argentina is a more difficult environment to navigate, particularly in light of all the exchange regulations that make the movement of currencies and products very difficult.

BNamericas: Was there interest in closing the Ixom acquisition before the plebiscite in Chile?

Santacruz: I think that after COVID-19, any other uncertainty is small. Frankly, if we’re not scared by COVID we’re not scared by the plebiscite.

I’m very confident that the outcome in Chile will be more for the better than for the worse. Chile has been an example of stability, the rule of law and economic growth, but it had unequal opportunities. In that sense it’s highly probable that there’ll be an improvement. I don’t think they’re going to throw away what has been achieved so far, but to build on what has already been done.

In Mexico, gross fixed investment has collapsed due to mistrust generated by the government, and GDP has been negative.

However, we see opportunities in areas such as mining, since it’s possible to have an adverse domestic economic scenario and still have growth in exports. In that sense, mining gives us a lot of confidence.

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