Uruguay is a square very important for the multinational PepsiCorepeats Diego Hekimian, senior manager of Public Affairs for the Southern Cone. He says it in several possible ways, but he also illustrates it. Of the 200 countries in which the company operates, Uruguay is “one of the few places” in which PepsiCo is represented by the three business units: food, beverages and concentrates. In fact, the country has one of the company’s main concentrate plants in the world, that do not reach tenand recently established itself as the main export plant for all of Latin America.
PepsiCo established itself in the Cologne free zone in 1991 under a 20-year framework agreement. In 2018 and 2019, the company began working to renew the regime for another 20 years and managed to sign an extension until 2041.
However, from the end of 2021 until the first days of June, the multinational navigated in “uncertainty” due to the “dilation” of the bilateral negotiation between Uruguay and Brazil so that the company could export its products from the Colonia free zone under preferential conditions.
The matter was a matter of first order for the company insofar as it recently had closed its plant in Manos and now they had the need supply Brazil from Colonia. For PepsiCo, it was imperative that the governments agree and establish “clear rules” for commercialization between free zones, something that ended up being signed in a meeting between foreign ministers at the last Summit of the Americas in Los Angeles.
About how PepsiCo experienced this negotiating process and its advocacy to protect its interests, Hekimian spoke with The Observer.
How did PepsiCo experience Brazil’s decision to block exports under preferential conditions from the Colonia free zone?
Of course, PepsiCo was one of the most interested parties. What the Brazilian market represents is more than 10% of what the Colonia concentrates plant produces. So, there was a genuine interest. I think it was a negotiation that may have been delayed, but both parties, in the most intimate forum, knew that they were going to agree. I don’t think this has ever been in danger. Yes, the times could be in danger. It is often said that the times of companies are not the times of people. We can also say that the times of the States are not the times of the companies.
How did they experience that dilation then?
It generated uncertainty, yes, but based on the fact that a commercial action between countries exceeded all our uncertainty. We knew that in the long term it was going to be signed. When it was signed, it obviously brought relief to businesses and we are also working so that this relief arrives. That involved visits at the highest level with previously established relationships. There was also mirror work with Brazil: we met with Casa Civil, with Itamaraty, with the people from the Ministry of Economy, there were even confidential negotiations between some PepsiCo officials and government representatives.
I understand that there was a call from Roberto Azevedo (former director general of the WTO and current executive vice president and director of Corporate Affairs of PepsiCo) to president Lacalle Pou.
There was a contact yes.
What did they pick up in those contacts with the two countries?
Like any negotiation, it had its ups and downs. We tried to convey that the important thing for PepsiCo was that the States reach a trade agreement, because it went far beyond what we were particularly interested in. In fact, the agreement is much broader. It is clear that this is not a deal tailored to PepsiCo. With the Uruguayan government, the treatment was always excellent. At all times we thanked the ministers with whom we were in contact for their time and speed. The dialogue was permanent. At some moments the agreement seemed closer and at other times we had the feeling that we were in the same place.
What harm did the extension of the agreement bring to the company?
What it brought is an affectation of real income. We had to take into account that some tax benefit ceased to be available for a few months. But they are the rules of the game.
How much did that mean?
We don’t have the final number. The reality is that until this is finally published and the entry into force is taken into account, there may be a greater or lesser number.
What is clear is that it was an issue that mobilized them and led them to act.
Yes. But it’s the way we work at PepsiCo Cono Sur. It has mobilized us from the labeling law to the pandemic. With this case we did not do anything out of the ordinary. Where there is something that can affect the profitability of the company, and we understand that we can have an impact, we do the impossible to try to get the answer from who our interlocutor is. What was attractive about this case was that there were two governments. The issue of labeling has an analogy. Today you have Argentina with a labeling system, Uruguay with another and Brazil with another. All three countries are part of Mercosur. And Paraguay saying: help me come to an agreement because I don’t know which one to use. It’s crazy. For a production line that’s terrible.
Why concentrate PepsiCo’s business for Latin America from Uruguay?
Uruguay has been for many years a country that has given us peace of mind when it comes to evaluating investments, obviously there is legal certainty that we ponder. We have great talent. And they have also given us sufficient guarantees so that the rules of the game are always the same, beyond changes in political color. We feel very comfortable in Uruguay. It allows us to be innovative. The investment process that began last year with the visit of our president of Latin America, Paula Santilli, far from concluding, will surely have new stages of growth. For us Uruguay was, is and will be a land of opportunities, of investments.
