“With the economic shift, we went from playing defense to playing offense,” says the president of San Miguel.
Martín Otero Monsegur, president of the Argentine citrus company, talks about the strategic shift the company has taken to focus on lemon-derived products and assesses the economic situation from a business perspective; he welcomes the floating dollar and calls for reforms to boost competitiveness
Since April 29, Martín Otero Monsegur has been the president of San Miguel, the Argentine citrus company controlled by the Miguens Bemberg and Otero Monsegur families, and the world's leading lemon processor. Following the pandemic, the company—which operates in Uruguay and South Africa in addition to Tucumán, its local production base—underwent a strategic transformation: it abandoned fresh fruit sales, which had previously been its main source of income, and redirected all efforts toward the higher-value industrial lemon business (concentrated lemon juice, essential oils, and dehydrated peel), which has lower volatility and better long-term growth prospects.
In an interview with LA NACION at the company's offices in Munro, Otero Monsegur discussed San Miguel’s situation following the business model shift and shared his views on the economic landscape from a business standpoint.
Why did you decide to make a strategic shift in your operations?
We can divide San Miguel's past ten years into two phases. In the first phase, which ended around the pandemic, the company had two business lines: fresh fruit sales for consumption and a small industrial lemon processing business. The processing business is highly value-added and requires extensive knowledge, experience, and significant commercial development, as it depends on long-term relationships with strategic clients. When the pandemic hit, we decided to focus exclusively on the value-added business and shut down all assets related to fresh fruit sales, including those in Peru, Uruguay, and South Africa.
We made a significant investment and built two industrial plants over the past 24 months, one in Uruguay and the other in South Africa, to supply long-term contracts we signed with global triple-A companies. These contracts guarantee volume and pricing, which is unusual for an Argentine exporting company. Today, San Miguel has a major operation in Argentina, in Tucumán, with one plant, and industrial presence in Uruguay and South Africa. This year, we’ll process a total of 400,000 tons of fruit and have the capacity to add another 150,000 tons once the trees mature in Uruguay and South Africa.
Was the decision to exit fresh fruit sales due to Argentina’s instability and export disincentives, or were there other reasons?
The reward for making the transition was enormous in two ways: first, the profitability of the value-added business, and second, the reduction in volatility. Fresh fruit is a business with highly variable daily pricing. With value-added products, prices are set through long-term contracts with clients. Today, we already know the price we’ll be selling at in five years. This has allowed us to focus on being more productive and efficient. Five years ago, in Tucumán, we produced about 35 tons per hectare. Today, we produce 60 tons per hectare. We doubled our field productivity by focusing on it. All this was possible thanks to commercial development work with those major clients.
How was the internal transition managed?
It was a process we managed with great maturity. The decision didn’t take us a minute to make, because it made all the sense in the world. When those large clients—over 100 of them—opened their doors to us, that fully convinced us it was the right path. Naturally, there’s uncertainty during the transition, when one business is shut down and another is activated, and that new business takes time to mature. You have to get through the valley, like planting a tree that takes seven years to reach full production.
To cross that valley, the shareholders made a significant capital increase last year of over US$40 million, and at the same time, the capital markets supported us greatly, recognizing the value the company is creating. We’ve already crossed the river: last year, San Miguel had an EBITDA of nearly US$10 million, and we’re on track to reach US$50 million, according to our projections. We believe so much in this project that, at the last shareholder meeting, we voted in favor of another capital contribution to continue strengthening the company’s structure.
What’s your view on the economic situation?
I think the changes the government has introduced for the business world have been very positive. Reducing inflation, stabilizing the currency, and beginning to incorporate tax cuts into the agenda are all very encouraging. You go from playing defense to playing offense. And in fact, we’re starting to see this in M&A deals led by Argentine companies.
The economic policy poses a challenge for businesspeople, what some call a "cheap dollar." A cheap dollar is tough for exporters, but I’m not convinced it’s a bad thing. The most important part is communicating a consistent economic and monetary policy to the business world and sticking with it over time, because that gives us predictability. And with predictability, we have an obligation to turn around and start doing the homework we’ve neglected for a long time. Now we must fully focus on competitiveness—just like we did in Tucumán, going from 35 to 60 tons per hectare.
The dollar has been floating for nearly a month, between 1100 and 1200 pesos. Is that a good level?
The fact that the dollar is floating—a way of saying there’s no more capital controls—is possibly one of the best pieces of news we’ll get in 2025. Especially because for the world, the idea that there are no capital controls puts Argentina back on the map. What do I think about the 1200 pesos? I don’t know; maybe in three months we’ll be looking at a completely different picture. As long as the market is the one setting the exchange rate, that’s the best possible outcome.
You mentioned competitiveness. Are business leaders now expecting structural reforms, starting with tax reform?
I recently read a statement by Minister [Luis] Caputo saying something like two-thirds of competitiveness improvements fall on the state, through tax and labor reforms, and one-third on the private sector. At San Miguel, we have a very concrete benchmark: our three operations. In Argentina, excluding corporate income tax, between gross income tax, the check tax, municipal fees, withholdings, and more, the state takes between 5% and 10% of our revenue. None of that exists in Uruguay or South Africa. When we compare the cost of an employee in our Argentine plant with Uruguay and South Africa, the Argentine worker costs about 40% more than the Uruguayan one, who in turn costs a bit more than the South African. When you add labor taxes and contributions, the Argentine worker ends up costing twice as much as the Uruguayan—almost three times as much as one in Uruguay or South Africa. We have a phenomenal group of highly productive employees in Tucumán, and that productivity offsets a good part of the higher cost. But a three-to-one difference is just too much.
A significant portion of the products we export are shipped in steel drums. We have to import the steel because it’s cheaper than Argentine steel. But that imported steel ends up costing us 35% more than it would in Uruguay, once you factor in taxes and fees. So, there are a number of issues—labor reform, tax reform, deregulation—that would greatly help not just San Miguel but the entire Argentine lemon industry cluster grow and thrive. What affects San Miguel affects all competitors. Consider that the lemon cluster in Tucumán employs over 50,000 people in the province—it’s the largest employer after the government.
Do you expect tax reform agreements with the provinces to reduce gross income taxes?
I want to point to concrete examples. Not long ago, the government eliminated all export duties for industrial products and temporarily reduced export duties for corn and soy. We used to pay 5% on industrial products—now we pay nothing. With lemons, we’ve seen duties swing from 0 to 15%, then to 10, then 8, down to 5, and back to 8. Today, we pay no duties on lemon-derived products. Now we’re greeted by [Donald] Trump, who is imposing tariffs on our exports to the U.S., and Europe is also applying tariffs on some products. But that’s part of this government's agenda: ensuring the foreign ministry supports companies and acts as a commercial manager to resolve these tariff issues.
