 Infrastructure and Construction |
 Infrastructure - renaissance around the corner |
Thanks to successive oil booms, Venezuela had the capacity to implement massive infrastructure programs during the decades leading up to the tremulously unstable 1990s. That foresight has given the country good radial connections especially in the industrialized parts of the country like south eastern Bolivar state and petroleum intensive areas like western Zulia state. Its also has an impressive road network along Venezuela's heavily populated coastline. Roads and highways total more than 95,725 kilometres of which 32,800 are paved, 28,000 gravel covered and the remainder compacted earth. Today, the country has 280 authorized airports of which 40 have scheduled commercial service and seven are international. The country's ports on the Caribbean provide direct access to the North American gulf coast, the Panama Canal, Central America and the Caribbean islands. "The problem is that public investment has totally overtaken private investment in the last 20 years," complains Venezuela's Planning Minister Jorge Giordani.
Political turmoil, corruption and large-scale fiscal deficits, have led to a reduction in infrastructure spending in recent decades. Infrastructure investments were traditionally the first area to be chopped from the budget when the government couldn't pay the bills. Social housing, road upgrading and cancellation of projects that could help boost tourism and commerce were cancelled as government struggled to pay workers and keep the IMF from the door. In an effort to reverse the situation infrastructure in 2001 will receive over a billion dollars in direct funding as the government looks to deal with a huge housing crisis and finalizes highway and railroad projects, long placed on the back burner. Construction firms now say that 2001 will bring real growth in the sector as government plans come online. Once again with oil receipts high, a new administration intends on making Venezuela a trade and tourism force to be reckoned within the region, infrastructure has become the 'raison d'être' of the new Chavez administration.
In 1999 construction was one of the hardest hit sectors with a dramatic 33% plunge in the sectors GDP. It continued to register a contraction in 2000 despite four straight quarters of growth in GDP overall. Bottlenecks in government funding and the greenness of the new government in terms of understanding the twists and turns of public finance were blamed for the slow start. However with most of the teething problems out of the way, analysts say that positive growth should start to kick in throughout 2001. One of those areas is expected to be public housing. According to government statistics the nation currently has a housing deficit of 1.4 million homes. It says that in order to keep pace with a growing population 100-150,000 homes will need to be built annually for the next ten years. In 2000, the first step in the ambitious program was initiated with the government building 70,000 low cost houses on large estates with a budget of $1 billion. "We scrapped around to come up with it but we did it," says Minister Giordani . The chronic housing shortage has been further exacerbated by 1999s environmental catastrophe.
In December 1999, Venezuela central coastline was struck by massive mudslides, which caused thousands of rickety shantytowns to be swept into the sea and the deaths of an estimated 30,000 people. "The Vargas tragedy gave us a chance to convert the catastrophe into an opportunity; to build houses, create jobs and bring wealth," says Andres Simon Azpurua Rodriguez, President of the Venezuelan Construction Chamber. While the government tries to rescue the state's basic infrastructure particularly roads, and looks at constructing massive flood channels and drainage networks, the private sector is expected to come through and rebuild houses, hotels and shopping centres, the mainstay of the coastlines tourism industry. "In some of the reconstruction, the private sector will have to be involved. The government expects to put in $1 billion while the private sector should invest around $ 43 billion," declares Science and Technology Minister Carlos Genatios, whose portfolio includes the reconstruction of Vargas state.
Through two government slush funds - FIDES that collects excess oil revenues and the Special Assignations Law which holds a portion of national VAT income - Venezuela's Governorships will also be investing heavily in infrastructure in 2001. In Barinas state, the Governor Hugo de los Reyes Chavez will be investing in schools, roads and hospitals in 2001 in line with government policy to upgrade educational and health facilities nationwide. "We are obliged to build schools. These are the priorities for the regional Governorships and the government," Governor Reyes says. In northern Falcon state the Governorship is hunting for private sector partners to invest in major project to redesign the state's water systems. "When we arrived we were met with total anarchy," says Falcon Governor Jesus Montilla. He is initiating several public works in telecoms and power to get the state's infrastructure back on its feet. "We need to redesign the water system because the state has a constant water shortages because it is so arid, we are looking at a cost of $350 million for the project," Governor Montilla adds.
| Opening up the interior |
Following the Vargas tragedy the government became even more aware that sustainable homes were needed away from the over-populated coastline on which 80% of Venezuela's 24 million live.
| Led by Minister Giordani the government has embarked on an ambitious plan to encourage immigration to the centre of the country, in a project dubbed the Orinoco-Apure development belt. Located in the central belt of the country, the government is looking to build self-sustainable industrial and agricultural projects as well as provide the labour force for new projects in gas and telecommunications that are about to come on line in the area. "This project will allow us to decentralize and de-concentrate. Most of Venezuela's development took place in the northern coastal area," says Antonio Rojas Suarez, Governor of Bolivar state, which is intersected by the belt. "Undoubtedly the government does not have the resources for this type of investment, it is necessary for the private sector to step in" says Andres Simon Azpurua Rodriguez, President of the Venezuelan construction chamber, adding that the opportunities for the private sector will be huge once government contracts are put out for tender.
As deregulation in telecoms, gas and electricity gathers speed, so will the government's need for private partners. "More and more we see that outsourcing has reached our country, and we are active in this," says Mauricio Iza, President of the engineering firm Technoconsult, which recently won a contract for the operation and maintenance of the petrochemicals facility at the Jose dock in eastern Anzoategui state.
One example of the government backing away from strong state control are the plans for Venezuela's main International Airport, Maiquetia, 30 minutes away from Caracas. Founded 24 years ago the airport has a traffic passenger of about seven millions a year; it is also the main gateway for accessing the rest of Venezuela as well as a jumping off point for Latin America and the Caribbean. It is currently going through a makeover as part of a plan to increase the airport's category rating and transform it into a cargo hub for Latin America. "We intend to transform the airport into a serious business and we are looking for partners to do that," says Ovidio Poggioli, President of Maiquetia International Airport (IAAIM). In 2001, the airport will be putting out to tender security equipment, construction of an airport hotel and an operation license for the cargo area. "We are going to give the cargo area to one company via a concession," says Poggioli. "The company will be in charge of building the cargo zone and the operation of the area." IAAIM will also petition the government to be allowed to act independently from the Infrastructure Ministry so that it can unilaterally set its own rates on business within the airport. The counter system for airlines is also due to be changed so that airlines are only charge for the hours that they use the facilities, this will bring more lines to Caracas, according to the IAAIM. Applying to state oil company PDVSA to make fuel cost cheaper will also make Caracas a more convenient destination for international carriers.
Venezuela's leading airline, Aserca Airlines with three million domestic passengers a year says that it will look to increase its cargo facilities through the Maiquetia cargo expansion plan. Simeon Garcia, the President of Aserca that operates Aserca Express a cargo delivery service for multinationals based in Venezuela's regional outposts, says that the company's customer base and turnover will expand significantly with the airport expansion. "Our idea is to open up the cargo service to Bogota. The Andean pact countries have a lot of cargo trade with Venezuela and we are going in that direction," says Aserca's Garcia.
Deregulation across the gas, telecoms and electricity sectors in 2001 and government budgets putting aside billions of dollars in kick start money, private companies now have greater opportunities. For companies specialized in road construction and engineering, the future looks particularly bright. In 2001, two of the country's electricity companies are due to be sold off, eleven gas exploration and production licenses will be auctioned off while telecoms companies will begin searching for contractors to set up new Wireless Local Loop (WLL) and Local Multipoint Distribution System (LMDS) technology. "There should be a participation of private, local and foreign entities, in association with the government, in order to develop the electrical grid and also to provide more generation," says Valentin Bagarella, President of the Sadeven engineering company that manufactures electricity towers and constructs transmission lines. With the new electricity law that requires old state companies to divide into separate operating units of distribution, generation and transmission, more contracts are expected to put out to tender as the transition period draws to a close at the start of 2002. "We see our business concentrating in the near future in standard construction contracts, waste management maintenance and industrial construction," says Fernando Bolinaga Hernandez, Director General of Dragados Y Construccion Obras y Proyectos, a major civil engineering company. Dragados is currently involved in constructiing the massive 42.8 billion Curuachi dam complex in South Eastern Venezuela. While Bolinaga admits that Venezuelan companies often rely too much on government contracts, he believes that openings in the gas and oil sectors will lead to private sector projects.
Pedeca, a well-known Venezuelan construction company, and member of Grupo UP believes that companies need to be tenacious and prepared to ride out the political and economic shifts if they want to see positive returns on their investments. "When there's a crisis we have to go looking for projects," says Umberto Petricca, President of Grupo UP. "In fact during periods of crisis our company usually grows because we hunt out opportunities and develop them." Pedeca has been responsible for some of the major road building projects in the country pioneering schemes whereby Pedeca self finances the project in return for controlling toll booths once the road is completed. One project currently underway is the higher education institute the Ciudad Universitaria which Pedeca says is being constructed despite of and not because of recent political upheavals. Set to be the home for 60,000 students it will have the most up to date facilities for engineering and sciences. "Sometimes you have to work against the current to do something good," says Petricca. |
