Why is Peru a strong market for BASF?
We have been in Peru for 59 years and it is an economy with strong growth opportunities. We are involved in pigments, homecare, cosmetics, mining, water treatment, construction, automotive coatings, and agrochemicals. Yet our main business is agricultural and construction chemicals, which generates the bulk of our sales. We have two companies in Peru. One is BASF Peruana, which is a subsidiary of BASF Germany, while the other is BASF Construction Chemicals, which is a joint venture with local investors.
This year has seen a slowdown for the Peruvian economy. How has this affected your business in Peru, particularly the fall in commodity prices?
Mineral and commodity prices have been falling internationally, and internally, national elections and corruption issues have played a part in the slowdown. Yet we are highly optimistic about 2015. Sales are growing in our main businesses, and in 2016, especially in mining, but in the economy in general, there will likely be a rise in consumption. BASF expects to grow by about two percentage points above Peruvian GDP growth forecasts for next year, putting the figure at around 8%.
Agribusiness is a new sector in Peru, and the government plans to diversify into niche products like avocado, cacao, and coffee. What products do you supply to the agricultural sector, and what do you expect to see in terms of growth there in 2015 and the coming years?
We provide agrochemicals, including fungicides, herbicides, and insecticides, as well as biological products, but not fertilizers. Today, the agro-export business isn't more than 30% to 35% of the agrochemicals market, but is set to become the most important business within the next two or three years due to new irrigation plans in Arequipa, Lambayeque, and Jequetepeque. We work closely with traditional crops as well, as they account for a significant part of the economy and a large part of the work force. So the traditional sector is very important for us. We work to efficiently and effectively transmit innovations in the production of traditional crops, and we work closely with the government and agro-export companies to promote the traditional crops, which mainly are potato, quinoa, rice, and corn. What we can offer are the agrochemicals that can defend and protect these crops and keep yields high. For example, there's been a major blight in the coffee crop, and we are working with the Ministry of Agriculture to provide the fungicides to combat it.
How does Peru figure in BASF's regional Latin American strategy?
Peru is a healthy and growing economy in South America, and we have a lot of opportunities here. The social structure is changing in Peru. As the economy and society develop and as living standards rise, people spend more on detergents, for example, and we can provide the right chemicals to make detergents more efficient, clean, and green. There are in fact numerous opportunities in homecare. On the construction front, major infrastructure projects are ongoing for roads and transport, seaports and airports, logistics, energy, which also spell opportunities. In mining, Peru has the advantage of lower production costs, with a much lower break-even point. I think investments will resume next year, and once those projects are in full production within a few years, there will be much business there, too. So overall, Peru is an important market for us in the region.
What is your outlook for 2015 and what projects will you be undertaking next year?
This year we want to concentrate on our distribution channels, focus on developing new generation talent, and to work more closely with growers. We'll probably grow by around 10% in agrochemical products next year. We will also be launching three or four innovative products this year in the Peruvian market, most being fungicides and herbicides. In homecare, we're introducing new technology, which is an innovative new way to reduce energy costs, and will also innovate in the cosmetics segment. As a company we lead by example, encouraging countries and companies to reduce pollutants and contaminants, and to reduce energy and water use as far as possible. Let me also add that this year we celebrate BASF's 150th anniversary worldwide with the new slogan, “We create chemistry." So these are exciting times for BASF, and 2015 will be an important year in Peru and the world over for us.
© The Business Year - May 2015