YPO’s CEO Insights chats with Alfonso Bustamante, YPO member and Country winner of the EY Entrepreneur Of The Year Award 2021, Peru.
The story of Alfonso Bustamante, CEO Corporación Financiera de Inversiones (CFI), is one of entrepreneurialism in sustainability development. It is also deeply intertwined with Peru’s history over the past three decades and its unique geography and climate. Under his leadership, the company’s two major branches, Huaura Power Group (HPG) and Agrícola Cerro Prieto (ACP), have withstood economic, ecological and ethical challenges to become regional and global industry leaders in their respective sectors.
Bustamante offers advice to other entrepreneurs on the leadership qualities that have enabled him to build businesses within the context of a changing global climate.
Entrepreneurial beginnings in a country in transition
“I always knew from the time I was a kid that I wanted to be my boss. I had high regard for my father, who was an entrepreneur,” says Bustamante. “While attending Peru’s Catholic University with a focus on the liberal arts, I grew impatient. I moved to the U.S., where I enjoyed learning entrepreneurial tools and a practical approach to business.
After graduating in 1989, he started a business with a small loan from his father to pay for installation expenses. He recalls, “At the time, Peru was a country under big economic and political stress, coming from 30 years of a socialist regime. It´s economy was composed of mainly state-owned companies and suffered from extreme hyperinflation and currency devaluation, as well as political conflict and terrorism.”
As the country was “lacking everything,” Bustamante saw the opportunity of an import-and-export business in the bottling industry, which needed to source more affordable caps. He started identifying more cost-efficient regional suppliers, and this led to importing other key supplies and equipment for the major industry players.
Meanwhile, as the national privatization process accelerated, the government invited new investors to fund infrastructure projects. “I come from the highlands in Peru. My family had been involved in the electric utilities business in the past and I wanted to participate in investing in utilities again,” says Bustamante. In 1996, after six years of building a successful bottling supply company, and with the support of a group of family and friends, he shifted his focus to restoring a utility company that the government had made available.
Pioneering clean energy
With over 50% of its territory covered by forest, Peru benefits from abundant natural resources. However, decades of resource-depleting growth had resulted in environmental degradation, including water and air pollution.
The new private holding company, CFI, was committed to sustainably tackling the electricity needs, identifying the potential in investing in clean energy and Peru’s natural resources. “CFI embarked on building a thermoelectric power plant, which recovered unwanted natural gas that was being burned offshore,” says Bustamante. He attributes his early interest in sustainable practices to his roots growing up in the highlands of Peru, where his family owned farmland.
“It was a risky project. But we recognized a huge opportunity in meeting the shortage of energy more economically and sustainably. Instead of paying market price for gas, we secured cheaper access while providing oil companies with a solution to an environmental problem,” he says. By 2000, four years later, the 160-megawatt gas fire power plant in northern Peru quickly became the most efficient in the country, achieving profitability and setting a new standard in Peru’s crumbling electricity infrastructure.
Expansion into sustainable agriculture
“In 2009, as the cash flow started coming in, we (CFI) used the resources to enter the sustainable agriculture business. Again, this was not only a challenge but also a calling. We saw an opportunity to transform the desert into sustainable farmland by using hydroelectricity techniques to build an irrigation system,” says Bustamante. “Peru geography offers a unique situation. Our coastline is a huge desert interrupted by narrow valleys.”
Bustamante initially wanted to grow Pima cotton, using state-of-the-art automated machines and innovative green irrigation methods, it proved unprofitable. They switched to produce. “But this involved a bigger and longer-term investment with greater risk. As we had the cash flow from power plants, we faced the challenge by switching crops,” explains Bustamante.
Today, where once was a desert, now stands a 4,600 hectares fruit farm producing avocados, blueberries, grapes and asparagus. Using gravitational energy and a state-of-the-art fresh produce packaging plant, the facility grows and export fruits and vegetables year-round to five continents, providing seasonal agricultural workers with secure employment.
“Out of the 15 largest supermarket chains worldwide, we supply 12 of them from four different facilities in Peru. As avocados, our flagship crop, could only be grown 12 weeks a year in Peru, we eventually bought land in Columbia, achieving all-year production,” says Bustamante. “Clean energy and healthy food remain the focus of CFI. Both sectors are more related than you think, with many synergies between them. Our framework is water and sustainable practices.”
A long journey full of obstacles
Developing profitable high-yield projects in energy and agriculture by leveraging Peru’s natural competitive advantage came with a unique set of challenges. CFI ended up selling the natural gas business and developing other energy projects involving wind farms, solar and run-of-the-river hydroelectricity.
“Between 2004-2006, we were almost bankrupt due to unforeseen challenges driven by Perú´s poor rule of law. It was the perfect storm.” Bustamante´s energy operating partner entered into a long legal dispute with the local Securities Exchange Commission, hurting the shareholder´s cashflow. As the energy company´s dividends were financing the produce venture, another perfect storm was brewing when Bustamante lost his irrigation land titles in a misplaced lawsuit. It took eight long years to gain back property rights.
— Alfonso Bustamante, CEO Corporación Financiera de Inversiones share
With CFI caught up in litigation battles across both businesses, Bustamante had to choose to sell one to save the other. “We went temporarily out of the electricity sector to put all resources into saving the agriculture company where we had to deal with new natural challenges like El Niño floods.” In 2016, a U.S. capital investment company that shares the group’s focus on sustainability, people and growth, entered the produce business taking it back on a trajectory of stability and growth.
Leadership qualities of a sustainability entrepreneur
As more entrepreneurs recognize the need to integrate environmental and social concerns into business decisions, Bustamante highlights some key principles and values that have helped him navigate through the difficult times:
Resilience and endurance: For Bustamante, an essential entrepreneurial requirement is having a long-term perspective and an ability to confront unexpected challenges. “Throughout the legal trial years, I had a profound belief that we could overcome and that we needed to stay alive until we were given back our property rights,” he says. “There will always be new challenges to face. You cannot go through an entrepreneurship path without the ability to endure and confront challenges.”
Passion and purpose: Bustamante places passion and purpose as additional key drivers for entrepreneurial success. “They are what makes you wake up in the morning and make life more interesting.” He adds, “I can only achieve what I did because I have a fantastic team that has absorbed my sustainability passion and purpose. Most of the initiatives nowadays come from my team.”
Respect and empathy: A key pillar of the growth has been respect — “our best crop” — to the environment, the 20,000 employees and the local communities where CFI continues to invest in education, health, hospital and school building. “People are key factors in our growth. We often operate outside cities, where we find people lacking in education and health. With one out of two kids suffering from anemia, this is not just a problem for communities, but our workforce.”
Summing up his definition of impact from a long and winding entrepreneurial journey, Bustamante says, “To create the impact you have to have a profitable company. Any business leader has the responsibly to build a strong company first and then that company is obligated to share value,” he says. “You can’t be an island of success in a sea of poverty. To be successful, everyone in your community has to be successful. In the long term, it is the only way.”
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EY is YPO’s strategic learning advisor.
