Brazil's Largest Contractor, Odebrecht, Looks at the Region
 Odebrecht |
The construction firm saw $5 billion in gross revenue last year, a 42% increase over 2006. The company’s international divisions accounted for almost 70% of its revenue, much of which came from other Latin American countries.
“Everyone’s backlog is growing at an incredible rate.” — Marcelo Odebrecht, construction head at Construtora Norberto Odebrecht |
Marcelo Odebrecht, the 39-year-old grandson of the founder, has run the firm’s construction arm since 2002. He sat down with ENR recently to discuss construction in Latin America as well as his company’s philosophy and strategy. The highlights are below. The full text of the interview is online is here.
What are the areas of opportunity for construction right now?
Related Links: Latin America and Africa are seeing the largest growth internationally in terms of infrastructure. In Europe and the U.S., infrastructure is growing at about the same rate as we have seen in the past.
Another factor has been the growing popularity of public-private partnerships (PPPs), but a lot of countries are financing their infrastructure development in other ways. There are countries like Venezuela where the infrastructure investment is based on direct government outlay. In Brazil I would say it is half and half between PPP and publicly financed works or those by state-owned companies.
How would you describe this situation from the point of view of Odebrecht?
The demand has grown so much we have almost had to stop looking for opportunities. Three years ago our backlog stayed in the range of $3 billion to $4 billion. We are now talking about a backlog of more than $15 billion.
Two years ago our investment in equipment was around $25 million per year; now we are at more than $300 million per year. When we did the San Francisco project in Ecuador it was one of two tunnel-boring machines we had in South America. Today we have 10.
In what types of projects is Odebrecht involved?
Odebrecht is involved in every sector of infrastructure development—logistics, dams, roads, bridges. We are seeing more investment in cities, metros, subways, roadways.
Mining and the petroleum sector are seeing huge infrastructure investments and there is a lot of investment in water treatment and sewage as well. There is so much going on in [mining] that we opened a company specifically for this business. Some of the largest investments in the next few years will be in energy—hydroelectric power dams.
How long will this increased investment in infrastructure continue?
We feel this will last at least through the next five to 10 years. The only thing that can completely change the situation is if there were a huge drop in commodity prices. We are not talking about something like oil dropping from $130 per barrel to $70; we are talking about from $130 to $50 or less. We expect that the commodities will fluctuate, but it would take a huge drop to really disrupt things.
Will the recent economic problems in the U.S. affect this?
The major concern for us with the economic crisis in the U.S. is in terms of bond capability. At the same time, the demand for construction is increasing, and everyone’s backlog is growing at an incredible rate. We are seeing insurance companies decreasing their capability of supplying the market.
Are you seeing more foreign firms in the Latin America market?
We haven’t seen a lot of foreign companies entering our market. The companies here are quite strong. What we have seen are outside companies, especially European companies, coming here to be investors. Good examples are the Italian and Spanish companies.
