Business & Investment sat down with Julio Gerlein Echeverría, President of Valorcon, one of Colombia’s leading companies in the civil construction sector.
According to the IMF, Colombia was the third fastest growing Latin American economy in 2014, and according to Mr. Uribe from Banco de la República (Central Bank of Colombia) it will be the fastest growing economy this year. Some studies are predicting a huge drop in FDI in the country due to the difficult international context, although President Santos has stated that this is just a cloudy moment. How do you assess the Colombian economy for 2015?
The drop in the oil prices has really affected our economy, even though Colombia was never an oil producing country as it is just a country that has oil. This situation will be overcome, the country will surely move forward.
As a consequence of this, the economy has started to defend itself and develop different opportunities for exports, plus the devaluation of the currency places the country in a better position for that.
The defense mechanism established by former president Carlos Lleras Restrepo, known as “crawling peg,” is mitigating the effects of the drop in the oil prices.
The benefit is going mostly to the minor exports, we have to make extra efforts for them to increase their limits.
Last year the World Bank named Colombia as the most attractive economy for doing business in Latin America. What competitive advantages is the country offering to attract investment?
Fundamentally, our safety. Our rules of the game guarantee the respect for foreign investment, unlike some neighboring countries where the difficulties for investors are an everyday thing. Issues regarding labor and taxes, the law and the behavior of the government regarding the foreign companies' private property, it is all stable and all investors know that before they even set foot in the country.
We offer them clear and solid conditions. Everyone who comes to Colombia knows exactly what to expect.
By 2016, Colombia is expected to enter the OECD, the “club of best practices”. How will this affect the private sector?
It will definitely invigorate our private sector. The fact that Colombia can enter an international organization like the OECD means a great deal for the development of the country.
The year 2015 could also be an important milestone if the peace treaty is signed, putting an end to 50 years of armed conflict. What responsibility will have the private sector in general, and companies like Valorcon in particular, in the post-conflict process?
Peace is already achieved, what is now being negotiated is the protocol that establishes the conditions for the post-conflict. There are still some skirmishes and disagreements, but that is happening because some people are not aware of what is going on in La Havana.
The will of both the government and the guerrillas for achieving the peace is secured, and that is the most significant fact here.
This is a key moment for Colombia, as we are witnessing the most ambitious infrastructure program in the history of the country, something that could have an effect on economy. Vice President Vargas Lleras told us that these plans are also countercyclical and will help Colombia mitigate the effects of the global crisis. How do you think they will affect the economy and the companies that are involved in these megaprojects?
All the roads that are being built will put us in the same league as countries like Chile, which has one of the best developed road systems in the whole region. This will make our production more competitive for the international markets.
A very special project is the dredging of the Magdalena River, which is almost 1,500 kilometers long. Improving its navigability will drastically reduce the costs for the transportation of the production from several parts of the country to the port of Barranquilla, and it will position us as the second most important city in the country.
Besides, the Free Trade Agreements have meant a great benefit for us, the city has experienced a significant growth lately, there has been an increase in real estate development, revaluation of land prices, and industries settling here as well.
When the contract for the Magdalena river works was signed, President Santos mentioned that that project “is maybe the most ambitious ever carried out on our Caribbean seaboard”.
Indeed, the Magdalena project involves an investment as significant as the construction of the Panama Canal. The total project, together with the 4G project, is the equivalent of five times the cost of the Canal. The Magdalena project represents 0,25% of the total Colombian GDP.
Minister of Transport Abello Vives told us that Colombia is “a country of regions” and that her wish is “to leave a country that is competitive, in motion, in constant progress, and always closer to its regions”. As a person from Barranquilla, what impact do you think a more connected and competitive country would have?
We are definitely a country of regions, something that we inherited from Spain. Our regions are very much separated one from another. For instance, here we are radically different from the people of the inland regions, because we don't really have much contact with them.
The regions only get together when the National Soccer Team plays at an international tournament or during the presidential election. If we had a better transportation system our identification would be better and we would be more united as a nation.
The last separatist movement was lead by the father of the current Barranquilla mayor, Vicente Noguera Carbonell, in the 70s. He wanted the Caribbean region to be a separate country. This movement didn't really work, we are still a country of regions, and thankfully more and more integrated as time goes by.
Valorcon is a leading company in the civil construction sector, with a broad experience and recognition in the design and execution of engineering and construction projects. During its five decades of experience it has focused on the creation of development. What milestones in the history of the company would you highlight regarding the socioeconomic development of Colombia?
We have carried out projects of vital importance throughout the national territory. Our most important and most satisfying project was the construction of the Metropolitan Stadium of Barranquilla, with a capacity for 60,000 spectators.
We have also built electrical plants and important road developments. For example, we have the concession for the Santa Marta road, one of the most important in Colombia.
The aviation sector is trying to gain competitiveness as a driver for the progress of the economy, in tourism, business, and investment. According to IATA, Colombia grew 2.3% above the global average of 5.7% in passenger traffic during 2014. You will be in charge of renovating the Cortissoz Airport in order to make it a world-class airport once again, turning Barranquilla into an aviation hub, and thus counterbalancing the centralism of Bogota, which sometimes can be detrimental to the users. We know that Minister Abello is particularly enthusiastic about this project, especially considering challenges like recreational and business tourism, and the organization of the Central American and Caribbean Games in 2018. What kind of improvements will you carry out?
By contract we have already established certain modifications both on air and land. The landing strip, which is three kilometers long, the taxiways, the platforms, and the stopway, will all be paved with new asphalt; we will change the lighting, expand the terminal with a better access to the counters, improve the comfort standards, and change the severe aspect that the building has today, because it was originally built 35 years ago.
Besides, we will build a new cargo terminal to encourage air freight exports and a medium size terminal for private aircraft traffic, we will expand the parking and access areas, and we will put a special emphasis on the commercial aspect inside the premises.
We are now at the pre-design phase, and we've hired a world leading company for it. We are expecting to have the complete designs before the end of 2015, and then we will go into the government approval stage, and finally start the construction process in January or February next year.
What passenger traffic figures are you considering?
The current passenger traffic of the airport is 2.4 million annually. We've had the concession only a few months and the traffic has already increased 14%. With all the planned improvements, we expect an increase of probably 50%.
The strengthening of the commercial area will definitely have a great impact, considering the Barranquilla mindset. For us it's very common that, when a family member leaves on a trip, there are at least five relatives that go with them to the airport to bid them farewell.
So we're not only aiming at the passengers themselves, but also to the people who go with them, so they can also get a cup of coffee or do some shopping.
Vice President Vargas Lleras told us about his social housing projects with great enthusiasm, and we know that you are also a part of them, for instance with your project of building 7,500 homes by the end of 2015. What does a project like this mean to you personally?
This is, without question, the most important social project in recent times for the country. During the tenure of Mr. Vargas Lleras as a Minister of Housing, the policies implemented meant a significant change in the conditions, which lead to the construction of 100 thousand new homes, especially in the areas of lower income.
There was also a program of free houses for people with one or two minimum wages, called Vivienda PIPE, and now there is a new program called Mi Vivienda Ya, for people with incomes equivalent from two to four minimum wages.
The interesting thing about these programs is that they help to bridge gaps by creating jobs, because the construction sector involves a high level of job creation per money investment.
Mr. Alfonso Prada from SENA told us about workers’ training for the 4G project. How are you collaborating with SENA?
At Valorcon we have a payroll of around 2,400 direct employees and an indirect subcontractor payroll of more than 1,500 employees. We have very interesting agreements with SENA, which regulate the number of interns per employee we can hire.
We are interested in this because that organization has very good technical degrees and send us high standard labor force. Roughly 50% of the people who enter the company through SENA end up staying with us.
They are so good as interns that we decide to hire them as employees.
We know that you are a company that is highly committed towards society. You have several corporate social responsibility programs, for example you provided grants for people who had suffered damage because of the flooding in the Atlantic region. What other programs like this are you particularly proud of?
The housing programs. We are a part of the program for providing free houses. We also have agreements with several organizations. We are giving our support to the soccer field in a region where we are also building these houses.
That stadium is now the home to the Real Madrid little league, we are supporting these young people because we think this can be the cradle for the next great soccer players.
Steve Jobs once said that “innovation distinguishes between a leader and a follower”. How important is innovation for Valorcon?
In terms of technology, we are constantly acquiring new equipment. Everything is computerized here. Our urbanization projects have an important component of technology and platforms for online access.
The government has required us to offer wide connectivity, for example by providing free Wi-Fi.
The works for the restructuring of the port of Miami, the inauguration of the tunnel, and the subsequent opening for traffic, mark the ending of one of the most expensive and complex transportation projects in the history of Southern Florida. The tunnel, which cost a billion dollars, is one of the three fundamental reforms that this port is preparing for the expansion of the Panama Canal. What opportunities will this create for Barranquilla and Colombia?
We have a similar project here, a port called Aguas Profundas, which is being developed very slowly because it is very costly. The idea is that this new port receives vessels after the Panama Canal.
This, together with the dredging of the Magdalena River, will place Barranquilla as the main exporting port in the country.
You are also working with the Houston airport in regards to their concession for the Barranquilla airport.
Yes, the Houston airport is helping us with this operation; they are an integral part of it.
In which areas would you like to see a closer cooperation between Colombia and the United States? What opportunities for collaboration and cooperation would you highlight to potential investors?
This country is wide and safe for the foreign investors, and especially from the United States. The problems derived from the conflict with the guerrillas are now over, the post-conflict protocols are already being secured. Colombia now must look ahead.
For example, at the bottom of the ocean near Cartagena there is the San José galleon, which was sunk during the Carlist Wars in 1708. This galleon carried a fortune of at least ten billion dollars; it took treasures from Peru to Spain via Colombia.
When it reached Cartagena, a British squad opened fire and sunk it. The galleon is still down there, for some reason it hasn't been retrieved. That is a significant amount of gold, it could perfectly finance the entire post-conflict process.
Minister of Finance Cárdenas and Minister of Trade Álvarez have the goal of doubling the non-traditional exports to the United States in the next four years. Do you think this is possible? What is Barranquilla's say in that process?
I think it is very viable. The crisis in the oil prices has forced the country to focus on a great deal of products that are not manufactured in the United States, and the conditions are being created for those products to penetrate the market in a competitive way.
In this context, here in Barranquilla we have the mission to promote, together with the Minister of Foreign Trade, the opening of a free trade zone at our airport.
Joe Arroyo used to sing “From the Caribbean it grows/Beautiful and enchanting/With ocean and river/A great society”. What does Barranquilla have that makes it different from Bogota, Medellin, or Cali?
We have the river. No one can compete against Mr. Isaac Newton and the law of gravity, everything must go down and eventually gets here. Our main advantage is gravity, which is free.
You are carrying out very important projects. I guess you put the same amount of love, passion and professionalism into all of them, but which is the one that you are particularly fond of?
We are working on an agreement with a company from Medellin called Cóndor, to develop a road concession called La Vía De Las Américas. These are small roads that are spread everywhere.
We are working on six different fronts at the moment. We have many teams working there; we need to be very dedicated. Every single day, from 5:30 AM to 7:30 PM, I am at the phone monitoring the whole thing.