Chile Roberto Angelini Rossi, CEO, Empresas Copec The Empresas Copec holding company is the corporation in Chile with the highest market capitalization and comprises a group of companies active in a wide range of productive segments. It is mainly active in the forestry industry through Arauco (Celulosa Arauco y Constitución), Chile s leading forestry industry conglomerate and one of the largest in the world. The company has the highest volume of production, sales, and forestry assets in South America and, in addition to Chile, also holds investments in Argentina, Brazil and Uruguay. Its second line of business is carried out through Compañía de Petróleos de Chile Copec, Chile s leading fuel and lubricants distributor with market shares in excess of 60% and 40%, respectively. Moreover, Copec has a substantial share of the liquid petroleum gas (LPG) market, through Abastible, and of the natural gas market through Metrogas. The group is also present in the fishing industry. Its subsidiary, Igemar, is an important global player, active in Chile s two main fishing areas, the northern and central-southern zones, with the largest fleet in the country. Additionally, Empresas Copec is present in the electric energy segment, through Empresa Eléctrica Guacolda, and in mining via Sociedad Minera Isla Riesco and Minera Can-Can. Roberto Angelini Rossi is the CEO of Empresas Copec S.A. and a member of the board of a number of other companies belonging to the Angelini group. A nephew of the founder of this group, Anacleto Angelini, he is an industrial civil engineering graduate of the Pontificia Universidad Católica de Chile and started his professional life with Lever Chile S.A. In 1976, he started working as an engineer in a fishing plant in Arica, in the north of Chile, where he began his professional career with the Group, holding several executive and director level positions before assuming his present role. 20 7 th South American CEO Survey
What do the economies of your key markets require to attain stability if, indeed, they have not already achieved this? Are there any particular indicators that would evidence, or that have already evidenced, that recovery has already commenced? First, I must point out that this crisis is not an unprecedented event; cycles have been a part of the economy s development for many years. Every now and again, for a host of reasons, a crisis occurs. Over the last forty years, we have experienced many of varying degrees and of global dimensions. As a general rule, crises have been overcome by anti-cyclical monetary and tax policies. With few exceptions, these are the policies that are now being put in place all over the world. In the case of companies, each one must take the decisions and apply the necessary adjustments to counter the negative impacts experienced during the crisis, be these due to a shrinking market or other reasons. Over the last few months of 2009, our markets seem to have bottomed out and we now note growing demand and a trend of price increases. How can the flows of capital and the capital markets change, and how would such changes affect your capital structure? As was the case in past crises, capital flows slow down and then gradually start to climb back up as markets recover, investment opportunities appear and risks diminish or stabilize. In the case of our companies, we have had no capital flow problems; on the whole, they have had easy access to financing in the capital markets. Our Group of companies works hard to ensure the development of our long-term investments and our debt strategies are prudent. They promote each company s expansion, avoid placing stability at risk, and enable us to adequately face the challenge of fluctuating markets. Thanks to this policy of financial caution, throughout the crisis we have found ourselves able to continue developing our businesses and investments and to have access to the necessary funds. During the economic crisis, consumption dropped in a number of key markets. What are your renewed consumption expectations? Is consumer behavior similar to that seen in past crises? As I said earlier, the world economy goes through a crisis every so often. This is not the first time the markets have shrunk and then recovered. This is a risk that we have incorporated into the strategic development of our investments and businesses. This crisis has impacted our companies, particularly those in the export sector which have recorded decreased sales. Naturally, this trend is reversing itself, as we see signs of recovery. What we cannot predict is how long it will take for sales to return to their pre-crisis levels. And here I must point out that we make our investments in a long-term context. Accordingly, more important than the crisis-provoked fluctuations, are the trends and growth of the markets over a period of several years. What matters is that, historically, the trend of the world economy is always to grow. The crisis will end and not only will business and sales activities recover, they will also continue to expand. PricewaterhouseCoopers 21
pwc.com/ceosurvey/southamerica Do you believe that world economies will implement important structural changes as they emerge from this recession? Crises always teach us lessons whereby we take steps to rectify the weaknesses of the economic system to avoid a repetition of the events that led to instability in the markets and the economy. This crisis is no different. In a global context, specific measures are being put in place without changing the market economy model. I find it hard to believe that after this crisis, structural changes will be introduced to the existing economic system. The structural changes already put in place by economies and the markets over the last few years have tended to involve new ventures and initiatives, innovation, scientific and technological investigation, the development of new technologies, interest in protecting our environment, advances in management, etc. That is what is at the root of the profound changes in our economies and markets. Some analysts believe that the economic crisis has eroded public trust in the private sector s motivation and has harmed the reputation of entire industries. Do you agree? Some confidence problems may have been caused by this crisis. Perhaps, in some cases, unsatisfactory evaluations of some of the financial sector s operating risks came to light and trust was eroded. Do you believe that your organization will emerge strengthened from this crisis? If your answer is yes, how will this be? All crises teach us many lessons and bolster our capacity to innovate and to improve our management; circumstances are faced which strengthen companies. What were the most important changes in your strategy, your management or organization model implemented in response to this economic crisis? Our Group s policy is aimed at staying in each of our lines of business for the long term. We invest and reinvest our resources to expand and diversify our operations. We have taken new directions in developing projects that have modified our country s economic map. Some examples are in the forestry industry, fisheries, and fuel distribution, among others. This long-term view has been the pivot for our constant innovation, the introduction of new technologies, to invest, evaluate, and, where necessary, to change our management models. This is how we add value to our companies and strengthen our market positions. A crisis merely modifies certain priorities of business management. In our production sectors and companies, we have had no problem with public trust. 22 7 th South American CEO Survey
Do you believe that your capacity to reply in the face of new opportunities is limited by difficulties in obtaining capital? What does the consequent adjustment consist of? We are constantly analyzing and evaluating business opportunities, regardless of whether these are new projects, acquisitions, or mergers. For example, in 2009, we made major investments in industrial and forestry purchases in Brazil and Uruguay, which will complement and expand our activities in Chile and Argentina. The success of these transactions was based on having the necessary resources. As I said earlier, our debt criteria include responsibility and prudence. This means that our companies financing and investment policies prioritize maintaining a robust financial position, a satisfactory level of indebtedness, and a comfortable interest expense cover. This has enabled us to tap financial markets whenever funds were required. Which of your organization s risk management flaws was most exposed by the economic crisis? Have you introduced modifications to improve this situation, or did you decide to completely switch your focus? The management and investments of our companies in the industrial sectors in which we are present have all taken into consideration the risks of these economic cycles. Several of our markets have fluctuated in cycles that do not necessarily coincide with periods of bonanza or of crisis in the world economy. The same long-term approach that we apply to managing our business also requires us to project ourselves several years ahead and to be extremely proactive in introducing organizational modifications or structural adjustments to our production and market positioning. The economic crisis has been stressful for most personnel and many have been obliged to achieve more with less. How did you deal with your employees morale and motivate them through this period? Since our businesses are conducted based on a long-term approach and operate in cyclical markets, we have always taken for granted that there will be good and bad times. Decisions are based on long-term trends and, consequently, our labor policies emphasize the continuity of our workers conditions, regardless of the cycles. Most analysts predict increased regulation. However, CEOs have repeatedly told us that excess regulation is one of the chief threats to growth. Will this new regulatory context lead to excess regulation? It is true that excess regulation discourages entrepreneurship and doing business; rather it damages the growth of the economy. What is most likely to occur as a consequence of this latest crisis is that new regulations will be introduced, probably in the financial sector, aimed at improving risk evaluation mechanisms. It is our policy to endeavor always to be as prepared as possible to face times of economic cutback or expansion. PricewaterhouseCoopers 23
pwc.com/ceosurvey/southamerica How can governments ensure that new rules do not become an excess of regulation? Excess economic regulation undermines company development and productive activity. As a rule, regulations are introduced by official bodies, usually the Government. However, we believe that they should work more closely with the private sector, because as businessmen we can perform a more important and active role as economic agents. We have a role beyond our own businesses we are lead actors in our countries development. We must channel our efforts through the organizations that represent our companies, for which it is crucial for us to collaborate in designing and applying public policies. It is absolutely vital that we work together with State institutions to promote such entrepreneurship and private initiatives, and to reinforce economic growth. The businessmen associations representing the many production sectors can make some very valuable contributions in this sense. What would be the most important step that governments could take to stabilize the financial sector and minimize the risk of another catastrophe? We do not have the recipe, as this is more a task for the financial sector specialists. However, in our country we are fortunate enough to have a good institutional and regulatory framework controlling our capital markets, one that was built on experience gained in previous crises. We do not see a need to create more tools, when we already have many rules in place for supervising and controlling the financial system. These regulations have enabled us to successfully come through other crisis periods and what is important is that they be applied appropriately and on a timely basis. 24 7 th South American CEO Survey
What would be the most important step that governments could take in relation to climate change? To promote and encourage the access to, and application of, environmentally friendly technologies. In our specific case, for many years now, our approach has been based on the sustainability of our businesses. Our production processes incorporate the most advanced technologies available in the world that do not generate negative environmental impacts. Moreover, our companies now issue Carbon Credits which are traded in global markets. This policy reflects our contribution to avoid climate change risks. Earthquake in Chile A month after the interview in relation to the global economic crisis, a severe earthquake and tsunami affected the center-south of Chile, causing hundreds of fatal victims and important damage to homes, infrastructure and industrial complexes. The specialist international consultants in natural disasters, Equecat, believe that losses could reach 30 billion dollars. A large part of the productive activities of the Empresas Copec holding company take place in the zones most affected by this phenomenon. At the close of this publication, we therefore spoke to Roberto Angelini about the consequences of the earthquake and tsunami on the Group s companies. We are very distressed. Our forestry and fishing industrial plants in the zone suffered substantial damages. They are all paralyzed today and we are evaluating their damages. But the most urgent priority in this first week has been to attend to our workers and their families; some of them are among the fatal victims and others have suffered great losses, including the destruction of their homes. The impact and damages of this earthquake have been considerable; we are working with our people and with the rest of the country to move ahead and overcome all the problems. As I told you in the interview, difficulties and crises, regardless of their causes, strengthen companies and their workers and bolster their capacity for greater innovation and better management at all levels. Therefore, despite the complicated moments we are experiencing, we are clear that with plenty of courage and effort, our industrial activities and the Chilean economy will recover and normalize within the not-too-distant future. PricewaterhouseCoopers 25