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Colombia 2016 | AGRICULTURE | INTERVIEW

TBY talks to Gustavo Edmundo Vergara, General Manager of Gelco, on the challenges facing the gelatin industry and the growth of Barranquilla.

Gustavo Edmundo Vergara
BIOGRAPHY
Gustavo Edmundo Vergara studied chemical engineering at the National University, and has work expeirence in breweries, tanneries, and chemical companies across Colombia. He is also a former member of the Colombo-American Chamber of Commerce for Barranquilla.

How was 2015 for Gelco?

Overall, 2015 was a complex year. The entire country faced difficulties when it came to securing raw materials; however, that drove us to become more efficient and creative, looking into alternative sources in US and Asian countries. We also had an increase in our costs due to the fact that we depend on the US dollar, against which our currency depreciated. When our plants are working at full capacity, we export 57% of our production. The gelatin industry is a sector that always tends to export more than it sells locally and this is because most countries, with the exception of the US, do not produce these products.

What factors are behind the lack of raw materials for manufacturing jelly products in Colombia?

One of the main reasons for the lack of raw materials in the country is the lack of export restrictions for raw material producers. They choose to export rather than sell to the local market. It is not a problem of capacity to serve the local market, but of willingness to serve this. Every month between 100,000 and 150,000 skin units are exported. If you multiply every unit by 18kg, which is the average weight that we can use, then you can understand how many kilograms of this raw material we use. Both our industry and the leather sector cannot compete with foreign players because we pay in Colombian pesos, and abroad they pay in USD. In 2015, we stopped production for an equivalent of two months, which drives up costs even further. Another factor is the free trade agreements Colombia signed with countries like Mexico. From that we see how other countries in the region have taxes for leather exporters, creating a level playing field for the local and foreign markets. However, Colombia is the only country in Latin America with no exports restrictions at all. We created a lobbying group to represent our interests to the government and protect our industry. We try to document the situation and provide facts and statistics from our sectors. Unfortunately, the government sees us as an industry aiming to live off subsidies, with no commitment to work. There is a lack of real interest from the government to address the situation, and it has become increasingly difficult to do business in this industry.

In 2008, you acquired a production plant from Kraft in Brazil. What drove that decision?

The plant is the largest cowhide plant in the world. From the beginning of our operation, we had Brazilian managers in the factory; therefore, we understand the particularities of the Brazilian market and the local needs. One of the main challenges with that plant came from the staffing point of view, in terms of costs. This move was thought to expand the export side of our business and we transformed the factory from a local producer to a global player, raising the standard levels. Today, it is a mature company, regardless of the current economic situation of the country. Over the past 15 years, we have seen an increasing level of specialization and technicality in the industry alongside the traditional artisan section of the industry. This has allowed for greater flexibility in the market as a whole.

How would you rate Barranquilla's economic development?

Barranquilla's growth has been a surprise for both locals and foreigners. In the last decade, we have seen a boom in housing and infrastructure that has changed the face of the city. We have also seen a boom in population in the city with many people venturing here from other regions. We have an economy that is focused on exports, which means that the economy is dynamic. We have also seen an increase in cost of living and services such as hospitality and restaurants. This has been accompanied by an increase in the purchasing power of people in the city.