Roberto Moreno Mejía, President of construction firm Amarilo, discusses Colombia’s housing and construction sectors, the potential impact the Green City project could have if replicated in other countries, and also the company’s quality focus in its massive homebuilding projects under way.
How do you see the Colombian leadership in the coming years?
Well, I think that Colombia has to continue being a leader. On the one hand, based on its geographical location and the size of its economy, we have presence in both the Atlantic and Pacific Coast at the same time, next to Panama.
On the other hand, I think we need to strengthen our regional leadership, especially showing the positive growth the country achieved after the Great Depression of the ‘30s and on, until the late ‘90s when we had negative growth, caused by drug trafficking, insecurity and their consequences.
But we overcame that situation and, once again, we presented positive growth until 2008 and 2009, even while much of the world was affected. We have been a very conservative economy.
The internal conflict has definitely affected us but I think it has also brought us benefits. A study made by McKinsey two years ago shows that 68% of global economic growth over the next 10 years will take place in cities.
In Latin America there are 196 cities, 26 of them are located in Colombia, with over 200,000 inhabitants. Colombia is a country of cities, and that gives us a big advantage. Why is that? Because during the internal conflict people migrated to the cities, and that became an advantage for us because the middle class that is arising has a strong impact on the economy.
For us, the obvious path to take is to seek peace, not at any price, but I think genuine peace comes from generating prosperity for all Colombians.
That is why there is a lot being talked about from the post-conflict point of view, especially on how to avoid internal conflict while giving people opportunities.
I think that’s the great challenge of this government, social investment and infrastructure. It’s like the human body, what happens to us if our veins become clogged? And our veins in the city are the roads, rivers and railways.
I think this infrastructure investment will give us great results, making us more competitive. Because, for example, if I produce in Bogota and have to export abroad, the transport to the coast is more expensive than the cost of carrier between the coast and Japan or Europe.
We have to work on that. But, as an advantage, we have the Atlantic Coast, where we have Barranquilla and its strong workforce, and there we have Tecnoglass, which has a factory in Barranquilla and is exporting.
We always look up to cities like Barranquilla, with good administrations, such as the one they had for the last two periods and that will probably continue. And, of course, having a long-term policy in these kinds of cities really helps.
I think the same should happen in the national government. Fortunately we had Uribe and Santos after him, both with similar policies, who were long-term oriented and with the same guidelines.
Obviously, there are differences about the problem of the guerrillas and the question of peace, but I think that’s where they have to sit down and evaluate how to accomplish it, because everyone is seeking to reach the same goal but taking different paths.
Uribe gave us back the country that we had lost. We started to believe in Colombia once again, and that’s very important. And now Santos is leading us to a perspective beyond the fight with those people, thinking about social investment. I think both perspectives are highly complementary.
Speaking of infrastructure, which obviously is a historical problem the country faces and that the government now seems determined to change, Vice President Vargas Lleras is really down to business and under the title of “execution” took the management of this portfolio along with housing. In that sense, what challenges does the matter of infrastructure suppose for the government and what responsibility does the private sector have on this issue?
Well, I think we cannot have better leadership than the Vice President. I think he is an excellent executor. As Minister of Housing, he was the author of the One Hundred Thousand Houses Program [Programa de las Cien Mil Viviendas] which was impeccably executed and showed that the public sector can work with the private sector efficiently, transparently and fast.
We got the private sector to take risks, build and they did not get paid until the homes were finished.
Vargas Lleras is a person full of energy, who handles the political level very well. He is an excellent politician, he has been in Congress. He is surrounded by a very good team.
If you go to the Ministry, you might think that you are in the private sector, because you will see it is efficient, clear and transparent.
I think the challenge for him, at the present time, is first how he will finance this, and then how to attract large companies, because there are very good Colombian companies that can make alliances with foreign ones, and have had much experience in infrastructure.
We could take as an example the infrastructure developed in Spain, comparing the infrastructure they had 25 or 30 years ago and the one they have now.
So, I go back to the example of the veins of the body, if one gets a good infrastructure (now we have the best team we could ask for), I think everything will be fine. So I give all my backing and support to the Vice President because I’m sure he will succeed.
Precisely, in the construction sector, the Minister used an image that resembled the one you’ve used. He said that the Construction Ministry is investing money for the economic “blood flow.”
Sure, also the multiplier has to be very big because per every house built, 2.5 jobs are created. With the value chain something similar happens. If we look at the industry – and the Finance Minister himself has said the same – between 20% and 25% is related to construction, then construction jobs begin to move all industrial activity as well.
Therefore, all these measures taken, such as rate subsidy, the program My House Now [Mi Casa Ya], the One Hundred Thousand Free Houses [Programa de las Cien Mil Viviendas Gratis] program, the program of the VIPA, all of these are anti-cyclical, because they are moving a sector of the economy that is a high employment generator.
All these anti-cyclical programs are impacting well on the economy, how directly do these affect the country’s competitiveness? How is the Ministry of Construction promoting the growth of competitiveness in the country?
Going back to the One Hundred Thousand Houses [Programa de las Cien Mil Viviendas], I would like to comment on how it was structured: the private companies that offer the best products and biggest housing areas were the ones who got the program. So, either we become efficient or we don’t win. Competitiveness is very important.
I say that the priority interest in housing, which is the least expensive, is very important because in these kinds of projects every penny counts, given that for constructors it is only profitable when the operation takes a series of houses, like volume construction.
Bolivar Construction Company [Constructora Bolivar] has been a leader in priority interest housing, in the VIPA housing program and the Hundred Thousand Houses, demonstrating it through industrialization and focusing on one sector.
We are more diversified in other strata, but if we look, any company that has entered the VIPA housing program, will find that there are many of us: Prodesa, Bolivar, and several companies that have made a high volume of housing just because we think of this business as building up a city.
It is not just about building houses; these have to be accompanied by the proper services, such as the school –because families need to send their children to school – and health centers, libraries, kindergartens, malls, etcetera.
That is the model, and every day we have been improving and learning from this vision.
I’ve been invited three times to the Kennedy School of Harvard University to present the model of Green City as a management alternative to urban design graduate students, and the title of my presentation was “Learning from experience”, because all the time we are learning.
Last time, the teacher said I should entitle it “Learning by doing”. They were all impressed the first time I went and presented the project; there was good feedback from postgraduate students. I remember that in the audience there were the Director of Planning of Santiago de Chile and the mayor of Costa Rica, challenging and interesting people to present our ideas to.
We were just starting. In the third year, we were able to show all the problems we had and how we were solving them, concluding the following: when you accurately design a good urban plan, a good city is generated, with all appointed facilities, and that is fine, but without social support to these families all of these advances are useless, and I think that’s the biggest challenge in sustainability.
We just made an agreement with the IFC endorsing the Green City project. IFC is providing its resources and so do we, to track sustainability, and if this model works it surely could be replicated elsewhere.
Sincerely, I wish a lot of cities would copy this model, because we are not the owners of Green City, many people are: those who live there, the builders who have joined us, we all built Green City, and today we join the Green City Group, created so the inhabitants could appropriate the development of this project.
Each family contributes with the equivalent of two dollars a month for management of public space purposes, therefore Green City is now spotless, there is no litter, no graffiti or any disturb at all.
Why? Because if I’m paying two dollars a month and see a child breaking something, it will surely bother me; that park that is being vandalized is my own park.
I do not just expect the state to give me this or that, but we do it all together, with our resources.
Then, I see we are learning new things from this kind of situations. I’m not saying that there are no challenges. Indeed, there are, as issues related to education, given the required number of schools, or transport, employment, security, I mean, everything that happens in Colombia also happens at the micro level in a city, and that is part of major projects.
Therefore, I think there’s a challenge and through the Ministry and leadership of macro-projects such as the Hundred Thousand Houses [Cien Mil Viviendas], we are thinking this in a different way.
In Colombia we must think big. Certainly from the economic opening during the Gaviria administration we were able to truly compete, along with Uribe that made us dream again, all that has prompted many entrepreneurs to think big, in that context was conceived Green City.
Thinking a project of 49,500 houses 10 years ago was really utopic. People from many countries, Brazil, Chile and Mexico, have come to experience our model. I hope they will replicate and improve it, and even tell us what we can do better.
Green City is taken as a model for housing construction and...
Yes, as a management model. I would call it a management model, a community model, city and sustainability. This is how I see it. It is a more compact city.
Because everyone wants their own home, but if we make houses for all, considering that Bogota has a deficit of 270,000 homes, we should urbanize the whole Sabana.
Decent housing should not only be purchased but rented too, and we must see the family as a seed first starting to rent, then showing its ability to save, then they can take a loan and finally buy a house.
But the important thing is that they gradually got to live in a different environment.
For example, a child who lives in a Green City, who was born in Green City, I can guarantee he will have a different life from one born in a squat, because when that happens, the child is condemned to poverty.
What would be the dreams of a child who goes all muddy to school and then goes home? But if he comes out and has a nice setting, a park to play in, has the school across the street, has the library or even go to the movies.
What does this mean? The child has changed. He lives in a different environment. To me that’s Green City. That is peace: to give people opportunities, because that’s where peace is built. Let people have real opportunities.
Within these opportunities, considering that Amarilo has diversified its activities, what potential niche markets do you see for the future besides the traditional construction sector? Which ones do you prioritize?
As I said initially, we are prioritizing cities within the city, in various regions. We are on the Atlantic Coast, in Cartagena, Barranquilla and Soledad, which are the three largest cities on the coast, with three important macro-projects.
In Cartagena we are talking about 7,000 homes, in Soledad 15,000 and 19,000 in Barranquilla. Cartagena Parque Heredia and Hacienda San Antonio are projects a 100% ran by Amarilo. For some projects, we are inviting other developers as in the case of Green City, currently with the Argos Group in Barranquilla and their development company Situm, we just have set up 200 acres to build Alameda del Rio, a project that will include 19,000 homes, facing Miramar.
It is a project that will be launched later this year. We are calling for other developers; we are in the process, and in Villavicencio, we also have Hacienda Rosablanca, a project for 8,000 homes.
We have projects here west of the Sabana in Madrid, Facatativá, Chia, Cajica, Guasca and Soacha where we will build a new era of Green City, we are working to structure a second stage.
We are in Valledupar and we are evaluating Ibague. In Panama we have six projects, we are currently structuring one of 20000 housing for the middle class. That has been our focus and will continue in that range which consists of cities within the city.
Additionally, we have been building business centers and small malls. For these projects, we made an alliance with Spectrum – a firm part of the Pantaleon de Guatemala Group –, and formed Cimento, a 50-50% company to develop shopping malls under the sole ownership model, as exist in many parts of the world.
Our first project is the Fontanar Mall in Chía, which will open in October and will feature brands such as Falabella, Ripley, Cinepolis, Zara and others.
We are diversified in different ranges of the real estate sector. This year we should sell over 7,000 houses for 1.2 billion pesos. Last year our sales were a little below that figure.
A company like yours is focused on quality. So, what does excellence mean to Amarilo?
In my opinion, quality is not only about the product but quality throughout. Quality customer service, internal and external quality that leads to the quality of a final product.
We have two construction managers because of the size of our business. If I ask for the budget to be prioritized, then the other two functions, which are the program and quality, couldn’t be accomplished.
The right order is, first quality, and finally, after the program, the budget. If we respect that order quality will be fulfilled and, truth be told, quality is extremely important for us.
We give houses to families with zero observations, no details in the record. Even when they start using the apartment, and you can find something that was not tried, we try to attend that as fast as possible.
Because here in Bogota, because of temperature changes, cracks are more likely, so we return the next year to fix anything that could arise from that kind of failures. People do not know why some things fissure, and it is because in the morning temperature could be at zero degrees and about noon be at 18 degrees, then that variation in a very short time produces these effects.
Materials expand and retract, and that generates the cracks, and furthermore, as we use a construction system with masonry or concrete, well, that is affected by temperature. So once a year we do a service on fissures.
That is the reason why nearly 30% of our clients seek to buy from us again, and that means they are pleased with our work quality. In two sales, one is from someone with a recommendation or directly someone who had bought us before.
I believe that those are the assets of this company, people, quality and service.
Turning now to the international context, you mentioned above and in the interview with the Minister that the major U.S. funds are investing more than 400 million here. What synergies and investment opportunities do you think are generated for international capital?
Well, the best and strongest. We have been working with a Canadian fund for five years. That is PCP Montreal, which is investing with us and is a pension fund for Canadian public employees based in Montreal.
They already have made investments in our housing development projects and also commercial ones.
To build up these big cities much capital is needed. If you buy a plot of two or three hundred acres and work on “debits”, you’ll find yourself in the same situation that happened to some in Spain, where the bank has the problem and not the developer, meaning that ultimately the problem is on the State and transferring duties to third parties.
Therefore, when you buy this land and do it without debt, while designing a good development project, that will stand the time and the cycles of the sector, and this alliance with this fund has enabled us to make these large projects, and the funds needed to invest in the rent.
Because pension funds and other entities that want to invest in long-term renting turns them into very important and vital players for the business dynamics.
This is how several funds have arrived. The experience we have had has been very important for us, for growth, given the trust we have achieved with them has been great, and also for the corporate governance.
Because when you have a pension fund and better when it comes to a Canadian Government fund, our partner is the government of Canada. So that makes us work in a more efficient way.
Now talking about Miami, which is already known as the 33rd department of Colombia, what kind of opportunities do you think the Colombia-Miami axis offers?
I think Miami has become the capital of Latin America. There you can find not only Colombians, but also Brazilians, Peruvians, Mexicans, Argentineans. It primarily started as a vacation spot.
Several multinationals have their headquarters for Latin America in Miami, and it definitely has become a cosmopolitan city. All you want to find is in Miami, and that is why it was affected by the crisis of 2008 and 2009, due to real estate problems, that were quickly absorbed not only by the Latin American sector but European and Russian. Many Russians have invested in Miami.
So, I see there are still opportunities in Miami, and most of those who pushed Miami were the Cubans. Cubans who emigrated to Miami, all highly educated people, enterprising. Colombians also came, like Brazilians, but mostly it was the Cuban colony that made out of Miami what it is today.
Miami International Airport (MIA) represents a large part of its economy, so does the port. The cruises, which generate a lot of income, but the highest income is generated by the MIA, and obviously construction, Second Home [Segunda Vivienda] for Latin Americans, Canadians and Northerns.
Also a younger generation of Colombians who went to study abroad and are needed to return to our country, have prepared there. In 1998 1,300,000 Colombians emigrated, and they were not workers but trained people, professionals. We lost a significant amount of people who have then returned. A few went to Spain and other to New York. People who have longed to come and take their retirement in Colombia, after living there.
I think that the Second Home [Segunda Vivienda], the way that Panama has been managing it, has been dealt with, and Miami has done the same as well. Well, what we are trying to do here is that a second home has benefits for those who want to return to live in Colombia.
So the Housing Act can be very interesting for the coffee zone, coastal areas and geographic areas for recreation, even the plains in Villavicencio and its surroundings. A second housing policy could be very positive.
The My Own Home [Casa Propia] program that you have driven could be considered to be in line with that kind of policy.
Sure, that program is promoted among several constructors, such as Marval, Pedro Gomez, Colpatría and Amarilo, we were the ones who had the initiative to sell our projects to Colombians residing abroad. I find it very important because if you’re a senior and want to take your retirement in Colombia, this option could be interesting.
The ambassador Villegas told us that nearly 10% of the Colombians living in the United States are coming back.
I studied and lived in the U.S. for 19 years. Twenty-three years ago I returned and I founded this company with other partners. The Fontanar dream is like entering West One.
If we did the West One for the upper classes, why not doing it for the lower and there comes Green City. So, it is possible to build up these communities.
We were in Mexico with Minister Henao, when he was President Uribe’s Vice Minister. He was the one who took our Green City project.
Well, with Henao and a group of Camacol we visited the large urban projects in Mexico, as we went to learn what they were doing, and then we realized what mistakes they had made, because you go there to learn from both sides, what has been done right and wrong so you don’t make the same mistakes.
Building houses in the middle of a pasture, two hours from Mexico City, so people will take up to three hours by car to go to sleep and two hours to go to work, without any infrastructure, is why it failed. There are almost two million vacant homes in Mexico, because people decided to live with the mother or uncle or whoever, in the same house, as long as they don’t have to spend two or three hours in a car.
So, generating cities within cities is what we have to look for, and address the issue of urban renewal. I think that in large parts of the cities of Latin America urban renewal could be implemented, but that takes a lot of political will, because as a private player, it is very difficult to buy house by house.
But when there is a state policy, trying to work with people, relocating it, urban renewal can be done, while considering the two fundamental aspects to be developed, expansion and renovation. You cannot say “no expansion”. Well, look at what is happening in Bogotá.
People are going to live to municipalities because there is no place in Bogotá. So now we have the biggest challenge, which involves knowing what we should do with the entire region, how to communicate it, how it will entwine, how municipalities are going to interact. That was how the Probogotá region was born.
As a final question, I would like to know about one of the keys that your father considered necessary for success, after the study and work in this sector.
Well, two things. First, one leads by giving the example, that’s the most important thing. If I want everyone to be here at seven in the morning, I have to arrive before that time.
One must be honest if you want the rest of the team to be so. We must lead by example. One has to give those messages permanently.
We must lead by example, with hard work and teamwork and also know how to be conciliatory.
I learned a lot from my father, and one thing he taught me is to not tolerate mediocrity. We were seven brothers, and none of us could afford to be mediocre. My father was a doctor, surgeon, dean of the faculty, and director of a hospital in Florida.
The example he gave us was to work hard and not tolerate mediocrity. Whatever you do, you have to be the best at it. If you want to be a fireman, you have to be the best firefighter. If you want to be a policeman, you have to be the best cop.
It didn’t matter what we wanted to do, we had to be the best and I tried to be the best. That’s what I tried to do with the company. If you observe each area, you will note that the success criterion is to get to be surrounded by people who are better than the self in every activity.
And “yes, sir” is never the right answer. Surrounding yourself with people with that kind of attitude is accepting a formula for disaster.
It is all about setting up with skilled, strong people, so when you meet the business manager, she imposes her position and in turn she has to reconcile with the other people too.
With the construction manager it is the same and so it is with the finance sector. That results in a more horizontal organization of collaborative work.
Pretty different from the ancient pyramid where there is God and the rest. Because if you have that formula, you’re dead.