Plaza Logistica raises the bar in Argentinean logistics market

Q: Plaza Logistica announced a new investment plan in August 2016. What are its key features?

A: We announced an investment plan for a total of 3300m pesos [$210.5m]. About 20% of those resources will be spent for the acquisition of four new properties, and the remaining 80% for the development of these properties. Right now, we have three active logistics parks, mostly offering storage space for logistics purposes, and we are planning to complete the investment in the four new ones by the end of 2018. All seven parks are located in the Buenos Aires metropolitan area.

Q: What are the drivers of growth that are backing up these investment plans?

A: Our demand does not originate in growing logistics flows, but in the improvement of existing flows. Today in Argentina there are many companies that carry out their logistics operations with obsolete technologies and processes. They have very fragmented logistics, which makes their processes very inefficient and risky, with low levels of safety. All this is taking a toll on their competitiveness.

This has been countered by the fact that many sectors have a strong monopolistic character, which to a certain extent allowed inefficient companies to stay afloat. However, those companies have to upgrade as the market develops, and this is where the demand for our multi-client logistics parks originates. We believe things will work out like that for another three to four years, until Argentina catches up with the rest of the world. Then our demand will also depend on growing logistics flows.

Q: Do you see Argentina’s overall logistics system, which has been an Achilles heel for many years, improving soon?

A: If we look at the broader picture, the problem can be traced back to the lack of companies investing in the sector. Plaza Logistica is an exception to that: we are investing, and if we weren’t our clients would have to set aside resources for their own logistics infrastructure. We need many more companies to come and invest, to stir up the sector. Within this context, the role of the public sector is very important to fix those structural issues that create barriers for potential newcomers.

Q: What are these barriers?

A: The main barrier is inflation and in recent years, the lack of foreign currency. Those factors made any kind of investment almost impossible. Today we are in much better shape in terms of inflation, and finally currency controls were lifted. Besides, credit access is improving. We received long-term credit from the Inter-American Development Bank and the US-based Overseas Private Investment Corporation, but we almost didn’t get any long-term funding in the local market. This is gradually improving.

Looking forward, the problem is that there is a lack of local mid-tier players able to grow because, as mentioned already, markets have become very monopolistic. They are left in the hands of a bunch of inefficient companies.

Q: From your business perspective, how are the reforms launched in December 2015 by new president Mauricio Macri working out?

A: Argentina is going through a tough transition: 2016 was a year of sharp recession and a number of clients belonging to sectors concerning consumer goods, textiles and some segments of pharmaceuticals were affected. Investment increased, but not enough to counter the fall in demand. However, most parts of Argentinean society understand that this transition was necessary to fix a number of pending issues that constrained the country’s economic potential. The government was very successful in conveying this message.

Q: How do you see things developing in 2017?

A: It’s like being in a burning building with four bombs to defuse – default, currency controls, inflation and fiscal deficit. The government defused the first two bombs, it’s on its way to defuse inflation, whereas there is work left to do with regard to fiscal deficit. Once they are all defused, we can fight the fire, which represents the terrible decay in education across the country, youth unemployment and impoverishment of many segments of Argentinean society. All these issues are feeding into the fire and weakening the building. This is why it’s important to look at Argentina in the long term. There is so much left to do to make it a more stable country.