WISE INVESTMENT

Peru 2015 | ECONOMY | INTERVIEW

TBY talks to Andrés von Wedemeyer, CEO of Cervesur Corporation, on investing in Peru, volatility in mineral prices, and the future role of agriculture.

Andrés von Wedemeyer
BIOGRAPHY
Andrés von Wedemeyer obtained his Master's in Business Administration at the University of Hamburg, Germany, and also completed a Program for Management Development at Harvard University. He is the Executive Chairman and CEO of Corporación Cervesur S.A.A. He is President of Euromotors SA, Altos Andes SA, Euro Camiones SA, Euroinmuebles SA and Renting SAC; as well as President of several companies that make up the Cervesur Corporation. He previously served as Chairman of the Board of Profuturo; President of the Association of AFPs; CONFIEP Director, President of the Chamber of Commerce and Industria de Arequipa, member of the Board of TECSUP, Director and General Manager of the company Cervecera del Sur del Perú, among others.

What has motivated Cervesur as it has invested and grown in Peru?

After long doing business in Peru, we had to develop the skill of growing several businesses, while addressing a variety of risks. When risks are presented that are unrelated to your business, it is a sign you should be more diversified, which is one of the characteristics of Cervesur as a holding company. We have invested and diversified in cotton textiles—the entire production of the garment—which is seldom seen in the world today. This gives us strength to cope with the variations in the market. We are in several businesses that are dedicated to services. We invest in the main importer of machinery in Peru and in the main steel plant. Our policy is to try to be present in the businesses and the activities where Peru has a comparable advantage, to ultimately develop into a competitive advantage.

Have you been concerned about the fall in mineral prices and its effect on the Peruvian economy?

In the last decade, China has become a country that demands goods and services in foreign markets. Now, after decades, China's growth is slowing, bringing prices comparatively lower than what they were 1½ years ago. That diminishes the possibilities of growth in Peru and there is also the challenge of producing out of the advantage of having this base of growth in mineral exports. So we should excel in other products that we can produce, not only for the national market, but specifically for exports. Peru is a country that has a small national market and to attain considerable growth, it needs to export. That is what we should do in the coming years, although it will not bring us to the growth rate we achieved in the last ten years. Now, we will focus on developing the market for goods where we can be competitive.

What role you do see for agriculture as a larger part of the Peruvian economy in the future?

With the necessary framework, it should be one of the legs on which Peru's growth can be developed. Economies grow steadily if they have different bases of growth. The base of growth for Peru has been mineral goods and raw material, and based on that, there are some developing industries. 17% of Peru's GDP is dependent on industry and it should be 25%, but there is no industry today without technology. Investment in technology is necessary to drive any industrial venture.

What is your assessment of the textile industry, now that international companies have moved away from Peru and are now sourcing in Central America and Asia?

We have to differentiate the textile businesses across the entire textile business. One segment is weaving, which is something that has to do with high standards of production technology. Production of cloth, on the other hand, is the other end of the business. More sophisticated production processes with higher value are things in which Peru has skill. Our raw material is also better than other alternatives. Peru has a relatively high gross export value of cloth, whereby we produce expensive garments. We cannot compete with China on high volume, low-priced goods.

What potential do you see for the Pacific Alliance to play a transformative role in the Peruvian economy?

That is beginning to be seen as an alternative, specifically to arrangements like Mercosur, or any other alliances in the region. One of the advantages of this alliance is that the partners have a clear idea of a free market economy. The markets, ventures, and companies that develop in each country can compete for better conditions in a free economy setting.