Melquiades Pulido / President of DuPont for the Andean Region

“We will survive”

A corporation of global dimensions should plan strategically and even further, long term. This goal cannot be overlooked by any manager, even though the situation is difficult. To achieve this, he must use this adaptability to a volatile environment, taking into account that the country has lived through similar moments of economic contraction and a shortage of foreign currency.

Hugo Prieto

Melquiades Pulido, President of DuPont for the Andean Region, believes that the performance of the Venezuelan economy for the second semester of 2010 will not be as “catastrophic” and bases his opinion of the stability of oil prices, which could rise. Also, he notes the conjunction of two factors. One is stationary, such as the payment of profits and the other is exceptional, marked by the upcoming parliament elections on September 26. “We expect public expenditure to increase”, says Pulido.

The situation forces us “to sacrifice some profits, to work in innovation: what can I do to become necessary in the future? I have to start investing today”. Corporations have to bet on change and on the new demands of society.

Business Venezuela (BV): In this scenario of currency exchange uncertainty and economic recession, how can corporations plan their budget for the second 2010 semester?

Melquiades Pulido (MP): One issue to be considered is that your strategic plans must be retaken and reviewed for short-term planning. Otherwise, you get lost in an uncertainty environment. If you don’t know where you’re going strategically, your actions lose sense unless they truly have a purpose. Maybe because of the company I work for, which is 200 years old and has been in Venezuela for 60, we plan strategically. But that doesn’t guarantee anything, maybe because you don’t do any good but at least it gives sense to the actions you take. The first thing I would say is: what will I do today to influence and shape the future? Nowadays, I believe that Venezuelan managers and businesspeople have developed the capacity of adapting to the demands of the environment. We faced the 1983, the 1989, the 2003 crisis; we know how to handle a few things. Intuitively, we know there are certain pre-election and post-election scenarios. I would divide the second semester of 2010 into two quarters. Even though the first has an inflation environment and a possible GDP contraction, it will not be as low as in early 2010, because intuitively, the government (all governments have done this) will increase public spending and after an electoral event, we have become used to (in this case in the last quarter of the year) some possible adjustments that are somehow solved through the payment of profits, which generally increases demand. 

BV: Your vision is not so catastrophic.

MP: No. The truth is that it is not. First, we want to have a future and we will have a presence, if we are allowed, in a country where we are betting for change. Why do we make this bet? Because we have seen Colombia, Peru, Brazil. We have been in countries where we plan strategically and we are currently harvesting those fruits. I don’t believe Venezuela is an exception. That we are going through a difficult situation? Without a doubt. But we will survive. Venezuelan managers can handle difficult situations.

BV: Which crucial areas should be protected in that planning?

MP: At this moment, the human resources area (personnel) becomes a priority, among other things, because your operators, your employees, will give you support to overcome any situation, to produce more, to reduce costs, for everything, obviously. Our team is very mature, well experienced and well trained. We have young people who are also making long term plans and that helps. The cost area is important. And once again, maintaining firmness and flexibility with respect to change.

BV: In an inflationary process, sales become volatile and a hard to handle variable, what is your perception?

MP: We have the advantage of working in many industrial sectors, some go up while others go down. Nevertheless, I think these are times to sacrifice some profits, to work in innovation: what can I do to make myself necessary in the future? I have to start investing today. A Venezuelan farmer, for example, would not plant corn that yields 6 or 7 tons per hectare. What are we doing now so that in five years we have a seed that doubles corn production? We have to start doing that today. How will we handle this situation? There will be businesses that grow and this currency restriction situation will induce our national producers, many of which are our clients, to operate and there will be a balance, the result of which could be an inflation environment, that we can see around 32% or 33% and a GDP reduction that can be possibly placed around –3% for the second semester. We have already suffered –17% falls of the GDP and inflation of 100%.

BV: One thing is interesting, because –3 is half of the first semester. Do you believe that the GDP fall is giving way beyond the elections or circumstantial approximations that could make?

MP: Yes, at least in the short term. An electoral process is coming up and we are expecting, at least those of us who have been in this for years, a moderate increase of public spending. The –5.8 fall of the first semester is truly important. I do believe it will stabilize a little, because we are talking about –3, after a –5 point fall. Yes, we are possibly reaching stabilization levels. Oil production has to be maintained more or less the same and the tendency of oil prices should go up a little. Asia is a black hole that swallows everything and has a very important demand. Last year was a year of adjustments for the natural markets of Latin America (Europe and the United States) and the region passed the test. I think countries did their financial homework: tax discipline, savings and adjustments. We can see demand in the growing regions: Peru, Brazil, Chile and even Colombia, which lost tree important export markets in 2009. There is a demand environment; I would see stable, upward oil prices.

BV: You said that this is time to invest. Invest in what? How to invest?

MP: We, as a corporation, have mega tendencies and we keep our eyes on the ball, as the say in baseball, we try not to miss the direction of world tendencies. An example is the car paint markets. We know that the world is moving towards water-based paint. If that is the case, we will not stop investing in Venezuela. Investing early, as soon as next year, in those technologies. We know that it may not be a profitable project for the first two years, anyway we know that there will be limitations with respect to the solvents, emissions and eventually, the future will force those companies to develop that technology. Society generally, let’s say, imposes the search for those technologies. If you look to the future, you obviously have to adapt to it.

BV: What do you think will happen in three years, a horizon that is almost inconceivable in Venezuela?

MP: We make 100-year planning; but we have 50, 10, 3 and 1 year planning. You cannot loose sight of any of them; otherwise, short-term planning doesn’t to make sense. Again, having a plan is no guarantee of success, but I insist, it gives sense to what you are doing today. Otherwise, why would I invest today? Why do I have to sacrifice profit? To stay in a difficult market, if I’m not thinking long term? Then, it looses sense.

BV: How do see the currency exchange situation for corporations? What do you believe is the principal problem?