Carlos Mundín – President, BTU, Argentina
The president of BTU, one of Argentina’s leading construction companies, talks about the future of energy in Argentina and how his company has excellent in difficult times. Additionally, he elaborates the advantages that Argentina offers to foreign investors.
BTU was co-founded by you in 1982 with a strong focus on the energy sector. Why did you choose this sector?
The energy sector today is challenging but growing. We know that growth will be exponential in our country, since Argentina is a very privileged in natural resources
We chose this sector because we felt that it was not only a very important sector, it was additionally underdeveloped. The energy sector today is challenging but growing. We know that growth will be exponential in our country, since Argentina is a very privileged in natural resources. We are able to develop technology to exploit wind energy in the south, solar energy in the north and extract gas from the Vaca Muerta reservoir. Additionally, Argentina has already transportation infrastructure established to successfully exploit Vaca Muerta. When we begin to extract the gas from this region, we will be able to sell it to the domestic market, neighboring countries and export to more distant markets alike. Our company has developed this infrastructure over the last twenty years. We have built 1,500 km of gas pipelines and have installed compressor system with a total 150,000 horse power.
Nonetheless, Argentina needs strong investments to develop its energy potential and many people seem to be losing hope. How do you stay calm in this situation?
I think investing into Argentina will be a successful endeavor; however you need to be patient. The infrastructure is developed according to a plan which reaches 35 to 40 years into the future. Therefore, you cannot expect that the investment will come from one day to another. What is certain, however, is that Argentina has all the tools to make this investment come soon. The government has already developed a public-private partnership with legal certainty which allows secure placements of capital.
We are working directly with the investors to identify their needs and to assure that these investments stay in Argentina for life. This is the plan for the next five to ten years. Moreover, if we consider the current situation in Argentina and the world, very few countries offer investors the success that Argentina will have.
When an investor has to weigh in a country like an option to invest, he studies its past and its future. Argentina has had very mixed results. What business philosophy have you followed as an expert in your area?
I think it’s important to keep in mind both the present and the future, taking into account the lessons of the past. Argentina has gone through difficult times, good times and everything in between. This has given us vast experience, preparing the Argentinian businessmen to understand how the market functions. Despite the ups and downs, we still believe in Argentina. A foreign investor has to learn from the Argentineans how to be succesful in this market.
In the case of our company, we have been operating sucessfully for 35 years and now we have become a second-generation company. Our children have joined the company, once they have finished their education. They are our improved version, since they start from a better place. Our company, like most companies in the sector, is constantly renewing and acquiring new technology.
BTU has a policy of reinvesting part of its profits; as of now, we reinvest 75 percent of it. This is not just money that we reinvest, but also education, training and human resources. The investments we make into the area of human resources allow us to grow rapidly. We are a company of a thousand employees, although this amount could easily be twice as much, which facilitates growth, allowing us to respond quickly to market needs.
Seven years ago, we expanded our portfolio from energy infrastructure to include railroads and civil structures as well. This area is also closely linked to the energy sector because rail transports represent very significant energy savings.
How have you handled the economic ups and downs that Argentina has lived through?
What we have done is to look for projects that work against the current. Now that the energy sector is somewhat arrested, we are working in the railway sector.
We also developed projects with internal funds that have been highly successful. A few years ago, we invested own funds to convert liquefied gas —which was highly subsidized— to be converted into natural gas and generate electricity. Once the project was developed, it was sold to the government to provide cities with electricity from natural gas, which previously generated electricity with methane gas.
In addition, we leave room for smaller companies to develop their own projects because we believe that the market only functions when everyone is active and working.
What is the current balance of the energy and railroad sector within the operations of BTU?
Now our activity is divided 50 percent each. Our two biggest responsibilities are to be successful in both areas, because the consequences of not being successful would be devastating. Our only result can be to do well, or to do well. We set up branches close to the projects that are in remote areas, to control and supervise them accordingly. We are constantly changing, facing new challenges and learning, this is one of the reasons that attracts employees to our company. We are a young company with an average age of our workforce being 40 years.
When we have talked to other companies in the sector they have told us that, given the need to hire large amounts of staff for certain projects, they have encountered social problems such as substance abuse, absence from work and other irregularities. How does BTU navigate through these challenges?
We do not suffer this problem because we keep a close relationship between management and the employees. Keeping one thousand employees helps us minimize these problems. We have a legal responsibility on our projects; therefore we are very selective with our human resources. In 35 years we have never had such problems and this is the reflection of my colleagues’ good work, which make such efforts to properly screen employees.
Due to Argentina’s strong union system, many foreign companies are not attracted to open subsidiaries here. How does BTU acquire technology, when local or Latin American companies largely govern the Argentine market?
We stay up to date thanks to our young staff. Before, young people used to care about learning without giving much input. Now, this has changed; young people learn while they teach us how to use new technology. Also, they are constantly requesting to go abroad to be trained in the use of new equipment. Globalization also has accelerated this process. In the past, we have acquired technology to install pipelines in the United States and Europe that were not yet in the market, but thanks to training and practice we have been able to use it properly. Acquiring technology is an important investment that gives us peace of mind, efficiency and the ability to trace a stronger future.
Acquiring technology is an important investment that gives us peace of mind, efficiency and the ability to trace a stronger future
What approach do you take to invest in new technology? Do you expect large companies such as YPF or PANAM to request it, or do you invest on what you think will be the future need of the market?
Our activity in the railroad industry is the perfect example of how we make decisions. When we saw the success that transgenic soybeans was having in northern Argentina, we quickly determined that there was going to be a need to connect this area. The plantations were in a very remote and underdeveloped area and the crops needed to be transported to the big cities and to the ports.
Therefore, we began to invest in the railway sector to distribute these crops in a very ealy stage. Although there is always room for error, we must make these decisions swiftly and early, since the machinery that we need to buy can take up to a year to be delivered.
What changes have you noticed in the energy sector in the last year since the change of administration?
I have seen an effort to stimulate the renewable energy sector by giving fair rates and predictability. In my opinion, we are on the right path in expanding the energy sector in Argentina. We have natural resources, now we need to develop them.
Our company sees great potential in Argentina hence why we are investing in the pipeline in the north. In the past, we have built gas pipelines anticipating the growth for the next 20 years and within five years we had already fallen short. Therefore, we are confident in the success that the northern pipelines will have in the near future.
The opportunities to develop the energy sector in Argentina are inexhaustible. Five years from now, people are going to have a better understanding of the energy future in Argentina.
The northern pipeline is a fairly large infrastructure. Have you encountered any obstacles or problems in the structure?
The structure is about 3,000 km long. We have had minor issues, as it is part of the job, but no significant obstacle. By June 2017, we expect it to be finished and transporting natural gas.
In the last two years the oil industry has suffered many cuts due to the fall in oil prices. This has forced the companies involved in the sector to ask for cut reductions to continue operating. How you have dealt with this situation?
That was one of the reasons why we decided to venture into the railway sector: to have other projects. Although, we have not lacked energy sector projects during this time, our prices had to be adjusted. We have maintained our human resources and equipment fully active.
In Argentina there are very capable construction companies such as Techint. How does BTU coexist and win bids?
Techint is an example to follow as a company, but there is room for BTU. To win tenders, it is key to be prepared and equipped for the projects. Besides, it is important to have a company that makes the whole process and does not depend on subcontracts. We provide the staff and equipment needed for projects, which allow us to give fair prices.
What type of new projects would BTU like to participate in in the near future?
We now have new projects for electrification of trains, signaling and construction of railway branch lines. These projects are developed with domestic financing to create services in the energy area.
We are trying to develop a project to generate electricity in the future, but taking into account our limitations, we plan to create a partnership with another company to complement the knowledge.
What is your view on the subject of Vaca Muerta?
For me, Vaca Muerta has great importance both strategically and politically. If it were up to me, I would invest and develop it at this time, despite the drop in oil prices. The reason is that due to that fall, the machinery needed to develop Vaca Muerta can be found at a better price right now because of the low demand.
Argentina has the human capital and the ability to finance this project now. I think that now is the optimal time to invest, so that when the price rises it can distribute the gas both domestically and abroad and get a higher profit.
What is your message for entrepreneur readers after your experience? Would you recommend Argentina as the place to start their projects?
I would strongly recommend visiting and discovering Argentina. Our people are very entrepreneurial. We give great importance to technical levels, proof of this is the fact that our president is an engineer. This is helping to give a more technical and technological twist to the economy of Argentina.
Companies that come here, stay in Argentina
I invite prospective investor to get to know the Argentinian companies, the country and the opportunities we offer. I also highly recommend partnering with local businesses to make the transition easier. Companies that come here, stay in Argentina.
What is your advice for Argentinian entrepreneurs?
We must dare to start! The base is studying to possess the necessary knowledge and be aware that nothing comes immediately. We need to be persistent. Young Argentines have great potential.