Marcelo Carro – Commercial Manager, Rovella Carranza, Argentina
The Commercial Manager of Rovella Carranza, one of Argentina’s leading construction companies, elaborates on the company’s strategy of moving into the energy infrastructure segment and explains the role strategic partnerships play for Rovella Carranza.
Since 2003 the ministry of public works in Argentina has awarded a total of 60,000 projects. Rovella Carranza has taken rank number nine in total projects awarded. What was the winning formula to this success?
The reason we grew national was our assets and the reason we grew successfully was our partnerships
We have our roots in the province of San Luis, which has a unique development because it emphasized infrastructure development much more than its provincial counterparts. As we started out small, we kept on participating in these government tenders and by each contract won we grew our expertise. Likewise, we reinvested a significant amount into enhancing our technological capacities and our human resources. Eventually, the infrastructure projects grew in size and we were left feeling comfortable about being able to carry them out to full satisfaction—and so we did. In 2008, however, San Louis’ pace of development slowed down significantly and —having the workforce, equipment and expertise— we decided to expand our scope of business nationwide. We had the competitive advantage that we already had all the equipment and workforce to expand our operations nationwide without the need of initial investment as other companies would have faced it. Furthermore, we went into strategic partnerships across the country, establishing profitable arrangements which allowed us to complement capacities wherever needed—today, 60 percent of our revenue is generated through these partnerships. In a nutshell: the reason we grew national was our assets and the reason we grew successfully was our partnerships!
What were some of the key projects carried out?
One of the most recent key projects was our participation in constructing a gas pipeline; although our participation was small it heralds a bright future in the energy infrastructure segment, as it was our first large project in this area. Another example of how we moved into different segments within the construction business is that we recently also conducted our first extra high voltage electricity project. These are key projects not because of the monetary reward, but because we were able to successfully enhance our capabilities and skills in order to seize these opportunities. It is our clear goal to leave the segment of pure infrastructure projects, such as highways, and go beyond that! When partaking in a tender for a highway, we face very stiff competition and the premiums are generally lower, however, in energy infrastructure projects fewer competitors exist and the premiums are more attractive.
What is the split of private projects and public projects you carry out and to what extent is the tender system in Argentina a challenge to you?
90 percent of the work we carry out is public projects. Private tenders and public tenders are different; whereas private tenders tend to be more subjective, public tenders are usually decided solely on a price basis. In private tenders, you not only tailor your price offering but also your offering in terms of technological aspects. In public tenders, you need to meet certain requirements and once these are met it’s the price that decides. The tender system in public procurement is not a challenge as such—the challenge lies within carring out these projects. Fulfilling technical requirements is not the problem; the real challenge, lies on non-construction aspects, i.e inflation, financial costs, unions, etc.
What is your competitive advantage in these tenders?
We are very skinny in terms of organization; our lean management structure allows us to react swiftly, be dynamic and flexible. This also reduces our overhead significantly and allows us to offer quality work for a lower price. Now, taking the next step is crucial. We want to be among the companies recognized as ‘the big’ players, the companies already belonging to this group, however, try hard to keep us away.Consider this: if we are not to go all the way, why have we come so far?
What do you offer to partners from abroad?
We have the full package: we have the know-how, we have the muscle, we have the market understanding in terms of unions, relationship with authorities and we have the domestic recognition as company of highest quality! The only task we need to fulfill successfully is to seduce the potential partner companies to make the move into Argentina, and we offer them all of the above in a genuine partnership on eye level. It is of utmost importance to us to treat our business partner just as we treat ourselves. Moreover, we can proudly pronounce that as company we have a 100 percent completion rate of all projects ever engaged in—we despise not finishing a contract!
One of the key understanding we gathered in Argentina, is the message that foreign companies have to partner with Argentinian companies if they want to succeed in this market. How would you assess the market specifics in this context?
Yes, a lot of companies coming to Argentina do not need an Argentinian partner in terms of capacity and expertise; however, these companies often fail because they underestimate the market specifics. We have realized the challenge of the Argentinian market to foreign companies and are utilizing it to our benefit as we partner up! Hence, 60 percent of our revenue is generated from partnerships.
You said earlier, that your ambition is to grow the scope of your projects into energy infrastructure. Currently, the government is trying to attract investors into the country’s energy development including oil and has, power generation, electrical distribution and more. What is the potential of these developments for Rovella Carranza?
A lot of companies coming to Argentina do not need an Argentinian partner in terms of capacity and expertise; however, these companies often fail because they underestimate the market specifics.
We have already made the first steps into this segment and have been successful. We are not yet ready to tackle complex projects such as refineries for instance, but are already capable of carrying out downstream projects, especially when infrastructure related. Frankly speaking, however, until these investments manifest into tangible projects it will take some time and I am confident that by then we will be ready to participate in these projects. Obviously, it is a high stake game, but the rewards are higher too and we need and want to be there. The developments of the past have showed us, that we need to diversify into new segments. For instance, the government decides to build bridges, roads, dams etc. then we will be able to build bridges, roads and dams, but if government investment into infrastructure halts, we are essentially out of business. This makes it absolutely mandatory to move forward and grow into new segments. We realize that for this development we need more highly skilled staff, new technologies and solutions and new partnerships. And this is exactly the path we are currently taking in anticipation of future developments in Argentina, thus, I can confidently say that in the future we will be very well positioned to take on these upcoming projects.
Next month, Argentina will see its first ever international investor forum. What message would you like to send to these investors?
Be patient. Be flexible. Be prepared to make sacrificies, but always look at the long run. This sounds harsh, but, Argentina is often mistaken as a country where developments occur overnight, but this is not the case. As a matter of fact, one needs to be able to continuously commit, then potential will manifest.
What are your goals and ambitions for Rovella Carranza?
We are currently on a quality crusade, not a quantity crusade. As aforementioned, we realize that we need to enhance our skills and capabilities to fully take on the potential created within the oil and gas and energy industry in the future of Argentina. We are currently working enhancing our knowledge base through smaller projects in this area; although we are only participating in a small percentage in these projects, it allows us to learn and grow our reputation in this area nonetheless. In the meantime, we are working on getting more certifications allowing us to successfully launch into new segments And we want better! Our current philosophy is simple: “Do not want more! Want better, then more will come!”