President of ACEM ( Asesorias Consultivas Eugenio Maslowski & Assoc.)
For World Investment News Ltd, 6th September 2000.
Mr. Palma from the VenAmcham described your activity as an essential tool to enhance investment in Venezuela. Therefore, can you briefly give us a historical background of the company?
I used to work in the beginning of my career with multinationals companies especially American ones. I started with Dow Chemicals and then I worked with country it was an exciting time to be there. When Chernobyl occurred I decided to come back to Venezuela because the economy was facing a boom. I wanted to start my own business here at that time. When the Cisneros group for a brief period immediately after I went to work for Monsanto. One of the interesting things of Monsanto was to work in the former Soviet Union, today Russia with a lot of changes taking place inside that I came here president Lucinchi made some typical populist economical measures, in the last year of his government it was terrible to get a new business ventures started.
I had an offer to work for an executive position in Corimon, and that gave me a lot of exposure to the international business, concerning especially Venezuelan export products. Starting off from that concept I saw the changes in the global economy of the world. I realized that if I made a product in Curazao I could then bring it in Europe through the European community or I could create a platform on the Canary Islands exporting Venezuelan products to Africa. We began a project making passion fruit concentrate in Venezuela with the people that made apple concentrate in Europe. We were able to exchange technology in order to produce that kind of product instead of applying the typical method, using the technology developed in Italy or Switzerland and Germany. The global concept was common, this was in 1989 and it was still a premature market for this level of economy.
In 1988 I visited the World Economic Forum and I met someone very interesting that marked my life. His name was Peter Koestembaun; he is a business philosopher from the University of California. I invited him to Venezuela and he arrived the day there was the first riot against President Carlos Andres Perez in March of 1989. There was an internal revolution due to the new economical program. Since there was so much turmoil going on we had to stay in the hotel. We discussed about my future plans. He advised me to quit Corimon and start my own business. Fifteen days later I quit Corimon, and decided to start my own venture. I wanted to create an industry that concentrated on chlorine for swimming pool treatment. I was bringing technology from Barcelona, Spain. I also needed a commercial activity in order to make money. I started a joint venture with a company in Houston, specialized in equipment for the oil industry. When I was raising the money to build the company for the chlorine pastilles, the first cue against Carlos Andres Perez took place, so the investors pulled out. The industrial part of my project was over and I continued with the commercial group in the oil sector. I had a lot of projects for due to all the mega projects that were taking place in Venezuela; it was very exciting to be in the oil sector. There were investments made in the refinery of Cardon Those projects once again gave proof that the world was changing globally.
A project was conceptualized to be built in Venezuela by a company that was working in Milan, Italy, but the procurement would be done in Japan or in the United States, and everything would be ship to Venezuela to be built by an Italian or French company. We had to go back to the consulting concept of incorporating these worldwide economies and technologies and bring them together for the specific business opportunities taking place in Venezuela.
At that time Venezuela was concentrated on the oil, all the economy was based on it as well. Oil is a very small employer; it does not distribute the economy well. We began consulting, acting as global assistants and serving companies around the world who were interested in investing in Venezuela. We acted as consultants to Venezuelan companies who wanted to export some of their products abroad and did not know how. We began doing specific work for certain companies. I am working currently on a license for a company in Columbus Ohio; a large research development organization named Battelle Institute. They were the company that in 1938 developed the first Xerox machine; they also create the devise for the B2 Bombers, and the chocolate covers that were supplied to the American soldiers that went to the Gulf War, so they would not melt. They sell about nine hundred million dollars in research and development and they look for small companies that want to start licenses. I am always looking for something innovative to work with.
I am also working with a Venezuelan group who wants to export a product that was discovered here and has a patent in most countries of the world, it reduces emissions of combustion for cars that do not have catalizers; it reduces the consumption of the car by increasing its efficiency. In the case of cars that are still using leaded oil, it can reduce up to fifty percent of gasoline consumption.
Today what would be the extent of your business in financial terms, regarding your turnover, profits?
I try to work and benefit of international finance. I can promote projects that reach sales levels of four to six million dollars, usually my benefit will be of a quarter to half a million dollars. Using different companies it works well.
Usually the large foreign companies relay on well-known law firms or consulting firms, like Arthur Anderson. We try to get our sources from venture capitalists or investors. We can go for a specific contract in the venture that the client is interested in and bring the network of people that we need for that specific task. The idea is not to have a permanent red tape organization that instead of trying to create business is just trying to survive.
You are today the exclusive representative of the American company "Surface & Production Systems", SPS-Expro and Fisher Rosemount. What services do you currently provide?
In the case of Fisher Rosemount, through their puffer sweiven rep in Houston I work with them in mega-projects as international consulting. Basically we develop together the strategies in order to win a project that can be conceptualized by a company. During the last several years Venezuela has been working on a few projects with strategic alliances for the oil sector, Petrozuata, Sincor, Cerro Negro, And Hamaca. Four heavy oil ventures that are developed on the eastern side of Venezuela, Petrozuata is a PDVSA and Conoco J-V, Sincor is a joint venture among PDVSA-Total & Statoil, Cerro negro is PDVSA-Exxon Mobil-VEBA Oil and in the case of Hamaca you have PDVSA, Texaco, Phillips. When you follow these concepts they are sometimes very conflictive. Some projects are developed in France but the people from Norway want to influence and the ones from PDVDSA want to maximize the Venezuela content. When you go to the top representative in France, he wants to sell a French product; you have to convince him that it is global company. We have to integrate all those concepts.
Maybe we are selling as a global company. Maybe we are selling in France to be shipped from Marshalltown, Iowa, to be serviced by a company in Maracaibo. We have to integrate for the customer to feel that even if he is buying it in Japan, France or California he will have the same kind of supports when he comes to Venezuela. At the end of the day the companies that will operate this business will be here for the next thirty-five years, to make all those groups work together sometimes it takes the effort of certain coordination. This is what I do in the case of Fisher-Rosemount in all the commercial negotiations. I travel a lot for these negotiations.
In the case of SPS-Expro we have been working in Latin America, in countries as Mexico, Ecuador and Venezuela where some of the oil developments are. SPS was created as a subsidiary of SOFREGAS; the idea was to create a new niche in the area of oil production facilities. SPS is specializing in optimizing the kind of investment that has to be done in order to allow a shipment of oil to have the service wherever it may go. They once simulated through a model, seven hundred wells in a project in Zuata, they were able to reduce the investment by 50% also they did a similar proposal with the use of multiphase pumps to another venture that reduced the costs from US $ 150 mil to some US $ 70 mil.
Consulting services to multinational companies in the engineering & construction or High tech sectors seems to represent the bulk of your activity. Do you have a significant number of customers with a different profile?
SPS has worked for PDVSA, LASMO, ARCO, and BP. We work at the level of all the large multinational companies. There is a profile we usually work with when it comes to worldwide players that use our services. The interesting issue is to find a disruptive technology that puts you in projects in new niches.
You are currently working on an international project in Ecuador, called TEPRE. Which proportion of your business is done outside Venezuela and which markets do you target?
I spend about seventy five percent of my time out of Venezuela. You have to move with the economy and the economy especially in the oil business is made up of cycles. 1999 and 2000 were slow in investment in oil facilities and production there were more developing offshore than onshore. I would move where the business is. That is not a problem nowadays; you can be anywhere within the next fifteen hours and if you use efficiently the technology you are everywhere because business is virtual.
Right now I am focusing on Latin America, because I have a better understanding of this culture. I think there is a need to have international ventures that will bring technology, capital, etc. When I went to give a speech to a group of MBA students here in Caracas, I asked them what a global economy was. They started to explain it was about the government abolishing trade barriers in the world, etc. I told them that the first thing is getting to know and understand with whom are you working for. You must learn to approach every one individually. Global business means getting to know everyone individually, think global and act parochial.
In order to facilitate the establishing of foreign companies into the country, you have developed a network of alliances with consulting houses such as Deloitte&Touche. How are you related today with those partners and do you intend to expand your network towards new consultants?
When the investors come here they want to see some solid structure backing up. The solid structure is good and bad, because it is inflexible. If you have this outsourcing approach you cannot have the organization that the customers really wants. The first thing that happens when you come to Venezuela is that the investor will try to get a working visa and a labor permit and wants to see how his organization will work. What are the general business conditions he will have to fulfill in order to have serious companies? He can go to one of these large known lawyer firms that have international branches or he can come depending on the size of the venture that he wants to create to small companies that have alliances. We will provide the low services, the economical services and the financial ones. At the beginning he will not have to invest a very large amount of money to have his operation started, if he then decides that he wants to stay in Venezuela and expand then we can adapt him either. To have his organization developed or we can find the local organization that will support him.
Your business obviously contributes to the economic development of Venezuela. What are your relations with the Venezuelan government and how would you evaluate the investment climate in Venezuela today and in a few years to come?
During the last eighteen to twenty months the Venezuelan government has gone through a very painful process but at the same it was necessary. The Venezuelan companies were working superficially; the kind of organization that exists is very difficult to get through. There was a lot of political interest that was not coming together. I think that even today the investment climate is not appropriate for an investor that is coming with a short-term view. The political changes have been occurring, what will happen right now either the President goes along with the world tendency, which is global and opens the economy to fresh capital and technology. If he goes with a nationalize approach this will scare the investors, in that case the investor will choose alternatives like Mexico. The president there is opened to new ideas. I think that the approach of the Venezuelan government will be an open economy. He has invited international investors; some people coming in are really looking in to long-term investments. La Electricidad de Caracas is proof that there are companies looking for the next fifteen to twenty years of investment. Same can be said about oil companies, telecommunications companies. People will continue to use energy, and the people will continue making investments that are larger. The companies that can make these kinds of investments are multinationals, and they are coming for long term. Petrolera Ameriven is investing 2.4 billion dollars in a project that will last thirty-five years. Phillips, Texaco, and PDVSA would be crazy to invest in a project that is thirty-five years long if they do not see a future in it.
The government has consolidated in these last eighteen months their political situation. Now we have a government that was democratically elected by fifty nine percent of the people and the president has the power for the next six years. He has almost absolute power to make this a great country and he can also destroy it. It is his responsibility, it is in his hands and he fought for it. He wanted to be president now he has all the political tools and now he has to develop the economical tools so the investors will come. Those investors that understand the large terms investments in the business relationships here and they are not going away. The people that are really creating this kind of insecurity are investing in speculative capital. No one is going to invest like this. We have to give the government the time to come with the economical guideline. The constitution is one of the best as a concept in the world, it is very flexible. If the laws that will accompany that constitution are not as flexible, the economy will be restricted too. We are in a waiting period so the government can implement this economy.
On a personal level, you are Chairman of the Engineering and Construction Committee of VenAmcham. Can you tell us what motivates you to take over this responsibility?
In VenAmcham every one is always rotating. We always try to keep new blood coming to the business and demonstrating what needs to be done. Some of the directors, including me, have the opportunities to chair committees in order to stimulate the participation of the Venezuelan business community. I have stayed member of that group to promote the exchange between the United States and the Venezuelans.
I used to be a member of the board of directores of the Venezuelan petroleum chamber. Right now I am working on the creation of a VenAmcham in Houston. I think it is important that we open the window to the outside. We are creating that concept. It is very important to be always innovative and the global approach is the one I am focused on.
My personal challenge for the future is continuing finding the niches that are coming in the new economy. I believe that e-commerce is an excellent opportunity at the moment. I am working on a special presentation for some devices for e-commerce and banking with the technology developed by Battelle, two weeks ago I was in BATTELLE, in Ohio, we discussed a business idea and they introduced it through their law department as a patent. I think is something with a lot of future. Every day we find disruptive technology that make great changes in people’s lives. It is a global village.
NOTE: World Investment News Ltd cannot be held responsible for the content of unedited transcriptions.
VENEZUELA
