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Interview

Juan Chediack – President, CAMARCO, Argentina

13.10.2016 / Energyboardroom

juan-chediak-portrait

The president of the Cámara Argentina de la Construcción (CAMARCO) elaborates on the future prospects for Argentina’s construction industry and the obstacles for the industry to navigate left from the former government.

Could you please outline your mandate as president of the Cámara Argentina de la Construcción?

The chamber has numerous activities, the main tasks being the promotion of our industry and fostering healthy and stable relationship with the respective stakeholders in the private and public market. One of our more recent projects is the ‘Pensamiento Estrategico’- a think tank tailored to finding solutions and innovative ideas surrounding the construction industry. One of the projects within the think tank was the evaluation of mandatory infrastructure developments that need to be satisfied within the next decade. For the latter we consulted 20 individual consultants, specialized in particular areas within the construction segment in order to get a thorough understanding of all needs within the complete spectrum of the construction business. We are also collaborating with the relevant universities in Argentina and are offering, for instance, a comprehensive library for up and coming engineers. Simply put: supporting the needs of our industry and our members is my mandate.

Simply put: supporting the needs of our industry and our members is my mandate

You’ve mentioned earlier the relevance of the think tank to Vaca Muerta. What can you tell us about the work and results of the think tank regarding the world’s second largest shale reservoir?

We comprehensively analyzed all the different developments needed and furthermore sorted these by priority on a value for cost basis. Additionally, we scrutinized what will be needed for the individual aspects from a construction point of view in order to establish a reliable and complete catalogue of requirements. Overall, we concluded that Argentina needs to invest 15 percent of GDP (USD 91 billion) into infrastructure construction works; via public and private funding alike! We estimate that split into 6.5 percent public and private individually (USD 39.5 billion each) and two percent (USD 12 billion) via public-private partnerships.

Where do you identify the strongest need for development?

We identified a total of 14 different areas of where infrastructure developments are most severely needed. From an economic perspective the most important one is the logistics segment including railroads, pipelines, ports and highways; from a social perspective its water distribution, sanitation systems, housing and water treatment in desperate need of development.

Especially the oil and gas industry is need of established infrastructure to access the remote locations of the basins. To what extend are your members prepared to support the government’s ambitions to develop this infrastructure?

We are absolutely confident that the local, Argentinian construction companies have full capacities and capabilities to carry out all of the work needed in the oil and gas segment! Scrutinizing Argentina’s infrastructure history it becomes obvious that the latter has always been the case, 99 percent of established infrastructures in Argentina was built by Argentinian companies; we have a high level of construction quality, highly educated engineers and high level of sophistication of equipment in the field, hence why we will not have any problems with any project to come. As aforementioned, we have fully analyzed the needs surrounding Vaca Muerta –while it was still in flames— to see if we can carry out the necessary work and –of course—the result is that we can.

What are the current hot topics of your members that keep you most busy?

Our government is in the process of launching a comprehensive and thorough infrastructure development plan which, I personally believe, will be focusing water treatment, water construction and portable water infrastructure as well as on railroads and educational infrastructure. We, as chamber anticipate these developments and seek to support our members as best as we can for upcoming tenders.

You said earlier a total of 15 percent of Argentina’s GDP will be needs as into infrastructure development. What is the role foreign investors are expected to play in these investments?

Foreign investments will play a significant role if Argentina is to develop! I expect and hope the aforementioned two percent of investments within the sphere of public-private-partnership will be coming through foreign investors. I mentioned earlier the Argentinian industry is capable of satisfying all infrastructure construction works, nonetheless, it can be beneficial to obtain international partners when constructing super structures –such as a particularly sizable damn— to utilize the possibilities of know-how and technology transfer.

To what extend to you think multinational companies entering Argentina pose a challenge to your members?

Anyone can do business in Argentina – I don’t see any challenge in multinationals constructing in Argentina. Frankly speaking, any multinational company coming to Argentina to undertake construction work is very well advised to partner with a local company in order to be successful – and these multinationals know that too. Our unions are unyielding and wouldn’t appreciate the balance of workforce shifting towards a higher share of foreigners. Furthermore, the geographic specifics in Argentina are unique in a global context- just consider the different weather conditions throughout our country and much more – local companies are aware of the specifics and needed by multinationals working here.

What is the synergy potential you identify in between the local and multinational construction companies?

I identify strong synergy potential for both sides of the equation! The local Argentinian construction companies will benefit as they can learn from international best-practices, general know-how transfer and gain experience in highly specialized supersize projects such as damns, hydroelectrical centers, pipeline, plats for shale gas and more; construction projects where high specialization is needed. In return the local Argentinian companies can support in multiple country specific issues, whether it be regulatory, local geographic knowledge or providing workforce thus substantially support the successful realization of the specific project.

There is currently a debate about the numbers of employees within the construction industry, which took a windfall in mid-2015. Could you please introduce us to that issue and the reasons that led to the large layoffs in the industry?

Historically the construction industry was a main employer in Argentina. In 1999 the construction industry employed approximately 80,000 employees –known via the construction union called ‘obero de la construccion de la republica argentina’— which grew rapidly counting 436,000 employees in 2007. Obviously during the financial crisis in 2008 that number shrank a little bit, nonetheless, the average number until mid-2015 remained steady at approximately 412,000 people employed in the construction industry. However, in between August and December 2015, approximately 30,000 people lost their job in the construction industry, additionally, another 25000 have been laid off in 2016 alone! The latter now is slowly growing again, however, a lot of people have lost their jobs in the construction industry in a very short time which rightfully raised serious concerns.

The reason for these rapid and unexpected layoff’s is two dimension: one side it was the disastrous economic situation mounting up towards the end of the political term of our former government, which maintained a fiscal deficit of seven percent of GDP and inflation of minimum over 20 percent yearly for the last decade consequently defaulting repeatedly thus not being able to pay their debt to contractors. Once the new government assumed position, they had the burden of dealing with the financial mismanagement of the previous government –which they did— resulting in re-considering public contracts hence why less construction was being carried out through public tenders. However, I am confident that by now we have reached the bottom of the pit, we already notice that business slowly, yet steadily, picks up again and I believe we will rise again to strength of our past!

Has this challenge been overcome completely?

As aforementioned, we are at the bottom of the pit and there is no other way but going up. What I can say is, that the growth will be sustainable—which is what matters! As industry, we do face some more challans, such as the rise in tariffs for instance, nonetheless we are very optimistic about our future. The government is the light at the end of the tunnel; a new hope!

To what extend will the energy industry be a lever to emerge out of the bottom of the valley and become strong again?

Argentina needs energy and to supply its own demand it needs add generation capacity of 1500 megawatts per year minimum—which needs to be constructed. What’s more, of the total 32,000 megawatts currently produced, the infrastructure for 7000 of those megawatts are in need of renewal! I foresee many tenders for power plants, hydroelectrical plants and various construction projects within the area of renewable energy!

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