BETTER THY NEIGHBOR

Colombia 2017 | ECONOMY | INTERVIEW

TBY talks to Carlos Ignacio Gallego Palacio, CEO of Grupo Nutresa, on Colombia's demographic dividend, the economic promise of peace, and how to become more competitive.

Carlos Ignacio Gallego Palacio
BIOGRAPHY
Carlos Ignacio Gallego Palacio has over 20 years of experience within Grupo Nutresa. His previous roles include president of Servicios Nutresa, director general of Fundacion Nutresa, and president of the chocolate business of Chocolates Grupo Nutresa. He received his bachelor's in civil engineering and a master’s in administration from Universidad EAFIT.

What were the main drivers behind your success in 2016?

2016 was a good year for Grupo Nutresa. It was based mainly on good sales in Colombia, which is our biggest market and accounts for 60% of sales. Colombia is growing because of our strong marketing and channel development strategy and strong distribution network here. We have an omnichannel approach to the country. At Grupo Nutresa, we try to build knowledge about consumers, clients, and shoppers in order to create incremental value offers so we can maximize our capabilities. We know the consumer here well and are trying to go further than the competition to differentiate ourselves in the channel in which we are involved. Grupo Nutresa has more than 16 brands worth over USD50 million per year. We also seek to combine the trends we have in Colombia with geographical expansion. We already have 9.2% sales in Central America, 8.2% in the US, and 8.2% in Chile.

How will the peace deal affect Grupo Nutresa and Colombia's economy?

This would give Colombia a better environment for attracting more foreign investment and reducing the costs of operating in Colombia. Above all, I trust peace would help us live together without the current fear and damage that is happening. As a company, we have been operating in this hostile environment for many years; therefore, we know how to work and manage a company in a turbulent environment. As part of the private sector, we are ready to create more opportunities and work on inclusive, productive programs with farmers, local communities, and other players.

How will the peace deal affect Grupo Nutresa and Colombia's economy?

There will be a positive impact. A country is never viewed the same when at war as it is in peace. Some investors have never been to Colombia because of the violence. We have foreign investors; however, only some of the otherwise available investors are coming here. The country needs structural tax reform to make Colombia more competitive for private companies operating here. We also need a wider tax base to capture those people who are not currently paying taxes. As things stand, a few people and corporations are paying most of the taxes and at a high rate. We need a system closer to that of Peru or Chile in which more companies and inviduals pay at more evenly distributed rates.

How would you compare Colombia with its neighbors in its ease of doing business and ability to attract investment?

We need to ease the international trade tariff situation, as we still have a high level of protection in place. We believe more open markets are important for the country. Countries such as Peru and Chile already have lower corporate taxes; therefore, the conditions affecting commodities in each country are different. Colombia's economy has been affected by low oil prices over the last couple of years. Whereas Chile has suffered from copper prices, and Peru depends upon gold and a mixture of other commodities, their situations are still different. Colombia has all the conditions to bring in good tax reforms and execute the reforms we need in international trade, in addition to implementing strong competition laws. In a peaceful environment, all this would mean the country has great potential to grow because of its large population.

What is your outlook for 2017?

The problem is that low oil prices over the last two years and dry conditions created by the El Niño weather pattern have led to high inflation rates in Colombia. Now that the weather pattern has changed and the economy has adapted to the lower oil prices, we expect that inflation will finish at 5-6% in YE2016. Inflation in YE2017 will be around 4%. This would put the country back on a better path. The exchange rate will also be more stable.