BOUNCE ON OIL

Colombia 2013 | AGRICULTURE | INTERVIEW

TBY talks to Rubén Darío Lizarralde Montoya, General Manager at Indupalma, on the palm oil market and the efforts needed to encourage rubber plantations.

Rubén Darío Lizarralde Montoya
BIOGRAPHY
Rubén Darío Lizarralde Montoya went to Javeriana University and studied to become a lawyer, specializing in Labor Law. He later went to Miami University to do his Master’s in Management. He started his professional career in 1977 at the Colmena Housing and Savings Corporation as the Bogotá Manager and Nationwide Administrator. He then had various positions in the public and private sector including Vice-Minister of Economic Development, General Treasurer of Bogotá, Administrative Vice-President of Compañía Colombiana Automotriz, Partner at Lizarralde Vasquez & Associates, before finally becoming the General Manager of Indupalma.

What have been Indupalma's greatest achievements in the last few years?

Indupalma was traditionally a producer of palm oil, as well as some other related products. Throughout the years, it has grown and positioned itself as a national leading company in terms of R&D with over 2,000 workers. Some 20 years ago, our R&D department developed a palm seed that resists the worst diseases. Today, we commercialize this product and sell it in Ecuador, Peru, and Colombia. A decade ago, the company looked into different possibilities to diversify its business activity. When we acquired the company it was close to bankruptcy. We pulled through the crisis and faced a dilemma: either to go back to the primary stages of the industry or explore the biochemistry area of the business. At that point, we started to closely work with farmers, making them owners of the business and carrying out a kind of agriculture reform in the private industry. We also sold the business model to investors. As the result of the positive evolution shown during this period, Indupalma went from being an oil producer to a company generating business and investment opportunities, and we explored several other business areas such as pension funds through investment activities. Today, the farmers under our business model generate an average of $14,000 a month, and they pay back their investment loans from the land they acquire in only 10 years. The average pension fund currently gives farmers around $6,000 a month. Therefore, the margin is significant, and we encouraged a shift in the perception of the palm tree business, which went from a mere agricultural activity to an investment opportunity.

The Inter-American Development Bank (IADB) has also praised your model as a clear example to follow for other companies. What does that recognition mean for you?

We are pleased with that recognition. We knocked on the IADB's doors in order to finance the project. It offered us the possibility to provide 80% of the funds, and we would need to assume the remaining 20%. However, we declined the offer, based on the fact that when developing such projects with farmers that before did not have a penny, if we own 20% of the company, they would always be wary of our intentions. In addition, they would always rely on the resources of a larger company like Indupalma to overcome any economic setback. The value and warranty of the project resides in other elements, as we provide technical and business support to farmers to run agribusiness enterprises on their own, and we buy their final production in accordance to international prices. After that setback, we temporally shelved the project, and later on we were able to implement them thanks to the acquisition of land by Indupalma. The exercise has been extremely successful, because everyone has been able to pay back their loans within 10 years instead of the 14 first planned.

What are your main investment lines for 2013?

In Magdalena Medio, we developed a new extracting plant and a company named Oro Rojo, which started operating in late December 2012. This is a palm fruit processing plant that produces raw oil. Following this example, we are about to open another processing plant to produce biodiesel, and we foresee the construction of two other processing plants to supply oils for the food industry, as well as sulfated methyl ester, a key raw material to produce biodegradable detergent. One of these production facilities will be operating soon, and the other one will be opened in two year's time. These facilities are essential for the development of the cluster Indupalma aims at developing; Oro Rojo is based in a free trade zone, and we want to attract more investment to develop palm tree production activities that will supply our processing plants in the area, which has traditionally based its agriculture activity on livestock.

“Today, the farmers under our business model generate an average of $14,000 a month."

We also plan to develop a large project of 20,000 hectares of palm trees in the Meta region. In total, 10,000 trees will be under Indupalma's control, and the remaining 10,000 will be owned and operated by third parties. We expect to see major developments in the rubber segment of our activities in the near future, as we will plant 35,000 hectares.