Alejandro Garcia, CEO IXE (Foto: IXE).
Interview by Helmuth Fuchs
Moneycab: Mr. Garcia, your grandfather built on the family’s agriculture business in Mexico, your father added the mining business and expanded it in Latin America. What are your plans, what do you want to contribute to the heritage of your family?
Alejandro Garcia: Over decades and 4 generations my family has built substantial assets in the agricultural sector in Latin America, primarily in Bolivia and Peru. The family had been the second largest producer of eggs & poultry and is now still among the top 5.
«My vision is to become one of the largest traders of agricultural commodities on a global scale.» Alejandro Garcia, CEO IXE
While my grandfather and father built the family business in Latin America my mission is to add scale and internationalise our business into Asia and Africa, deepen the value chain by adding to sourcing and production trading and financing. My vision is to become one of the largest traders of agricultural commodities on a global scale. While growing our business I am bearing the responsibility of preserving our heritage. Our fathers’ businesses and deals were based on a handshake. This spirit lives on in IXE. Our business relationships are built on trust and a word still counts.
For the internationalization in Asia and Africa, what is your strategy? Do you plan to acquire land or are you contracting farmers for the production?
Owning farming land on that scale in Asia or anywhere in the world would require heavy land acquisitions and intensive capital investments that would go beyond our means. Our strategy for Asia and Africa is based in the duplication of our business model that we have deployed in Latin America, which is rather is based on collaboration with all stakeholders on the basis of collaborative agreements. By duplicating what we know what to do best, our target is to become a market maker as well in these new markets. For instance, we are negotiating with potential partners in Uganda and The Philippines in the area of palmoil. Strategic alliances and collaborations will consolidate our market position in Asia and Africa over time.
Your family business is the second biggest producer of poultry in Mexico and the fifth biggest provider of potatoes to the USA. How much of this is produced on you own land, how much do you cover with collaborative agreements?
The IXE initiative is positioned in the market as a participant with operations in FMCG (Fast-Moving- Consumer-Goods) Food Commodities, focusing on products with a year-long cycle and consumption. Our family has owned +50,000 hectares of agricultural land and 60 000 cattle in Peru and Bolivia. To accomodate the gigantic demand only in the United States a player has to control millions of hectares of farmland. Inevitably we are depending on long-term contracts and collaborative agreements with landowners.
«The food giants are interested in mid- to long-term contracts ranging from 5 to 10 years resulting in hundreds of tons of agricultural products per year worth up to a billion US$.»
During the last decade we have witnessed an increased interest from both public and private sector investments into agriculture. Mainly on a race to secure long-term food resources. Therefore a great demand exist for insights on how to structure agricultural investments in framework agreements that do not require intensive capital expenditures for land acquisitions, that support the growers and provide local benefit. To secure supply hundreds of millions US$ investments are needed. With a wide range of collaborative agreements between investors, on the one hand, and growers and local communities, on the other, our agricultural arm “IXE AGRO“, have bridged the businesses with diverse types of growers schemes, management contracts, joint ventures, land leases and new supply chain relationships.
To be chosen as supplier for the big food chains you must be able to fulfil long lasting contracts with high quantitative and qualitative requirements. Can you give us an overview of such a contract?
Large food chains in the U.S. have strict requirements concerning quantity and quality of supplies. Receiving a supplier status therefore is a recognition of our high quality standards. The food giants are interested in mid- to long-term contracts ranging from 5 to 10 years resulting in hundreds of tons of agricultural products per year worth up to a billion US$. Of course also IXE is interested in long-term contracts as safeguarding of our high capital-intensive investments in land, production facilities and machinery.
You want to expand the business in the trading and financing area. What exactly are your plans?
We are creating a win-win-situation for qualified investors such as Family offices/ HWNI or Regulated Fund Managers who want to invest in the real economy, in trading of commodities – physical and tangible products. The IXE value proposition is to provide its customers with access to investment opportunities they wouldn’t have access to within their current investment models. We are offering alternative Investment vehicles that provide constant returns to investors. The investment in real economy makes the advantages obvious – investors are benefiting from constants returns generated from actual transactions with zero speculation and zero volatility. With investors’ money we are able to generate competitive collaborative frameworks where growers and other supply chain stakeholders can get and feel the direct economic benefits.
Banks and specialized companies gave commodity trading a bad name because they are seen as one of the causes for anomalous jumps in food prices. How will you prevent your company from falling into the same category?
Our core competence lies in participation in tangible activities such the trade of physical commodities – real values. In principle this business hasn’t change over the years and maintained its solid reputation. IXE only makes real economy investments. We do not invest in high risk and non-transparent derivatives. In line with our philosophy we are interested in investors who understand the nature of our business, a model where speculation and bubbles are excluded.
How would a financial deal from your company be structured, who benefits in which way?
IXE deals are based on transparency, predictability and clearly defined and harmonised expectations among all participating parties. Within the scope of long-term partnership with growers on a collaborative agreement we even offer pre-financing of the grower’s production with a guarantee off-take agreement over produced volumes. On the other end we coordinate with the buyers concerning sales price, timing of delivery etc. Through this direct-at-site handling we can guarantee investors reasonable returns at no risk. IXE is earning through margins out of price negotiations.
«We are not anonymous traders, we know our counterparts in person. The fulfilment of contracts and deals create bonds and mutual trust over time.»
Banks don’t seem to be eager to expand into the trade financing area. What are the reasons for that and do you see an opportunity to build your own bank for that purpose?
Our experience shows that there are numerous reasons why banks withdraw from physical commodity trading. It has become fashionable to work in the high margin but also high-risk derivate market which investor Warren Buffet rightly called Financial Weapons of Mass Destruction. On the other hand we are observing a lack of knowledge of the business. It takes years of experience and hard work to understand the business and its principles. In fact we tinker with the idea of taking matter into our own hands and eventually acquire a bank that would serve as platform for processing all of our business activities. Our business may not seem sexy but it provides steady and attractive returns. We are not anonymous traders, we know our counterparts in person. The fulfilment of contracts and deals create bonds and mutual trust over time.
To channel your family’s business you established your company IXE 2006 in Switzerland. What were the reasons to choose Switzerland?
Next to its world class reputation as a financial centre Switzerland provides a series of unmatched advantages. One main driver for the decision to relocate our family step by step to Switzerland was the security aspect. Switzerland also provides political stability and an effective business environment and the country is conveniently located in Europa and between the Americas and Asia. As a family we share traditional values such as trustworthiness and a conservative attitude. The word, IXE, is of Nahuatl origin and means “One who gives the face and keeps word“ therefore someone that is trustworthy in all they say and do.
IXE, although representing a substantial value in the agriculture business, does not yet disclose any business figures. Will you change that and how much transparency will you establish for IXE?
As we are consolidating family assets and deploying the family’s fortune into IXE assets are valued under consideration of both South American and Swiss accounting principles. In the course of expansion and internationalisation of our business we are hiring key people both from the trading and finance side that will further enhance the governance and compliance part. Already today we are able to provide investors with full transparency about their investments and our processes. After this transition process we shall also be able to publish business figures and ratios on our operational performance.
You are put in charge of the family business at a quite young age. How were you prepared for this and how would you like to hand over the business to your successor when his time comes?
According to our family tradition business leadership and responsibilities are handed over to the first son. The business my father was intrusted to his safekeeping by my grandfather was consequently handed over to me within a long year succession plan. My father also put his trust in me and gave me a free hand in my first trading deals at the age of 17, since then I have been actively in the business. During my university studies, it was mandatory for me to overlook the business and its growth, there in the field I developed my knowledge and passion. My son who represents the next generation is designated to continue our successful family tradition and be the first to run the business out of Switzerland from the very first day of his tenure.
At the end of the interview you are granted two wishes. What are they?
I hope that mankind will eventually find the recipe to erase world hunger completely. Today we do have the knowledge and means to feed the growing world population. My second wish is very personal: I cross fingers for the Mexican team in the World Cup qualification. I don’t want to imagine the games in my continent of origin without participation of my home country.