Bidding boom attracts foreign construction companies

The strong depression of the European economy and the fiscal squeeze on public accounts made the foreign construction companies crossing the ocean to fight for new business in Brazil. With an eye on the long list of works that will be bid in this year and in the coming years, they landed in the country with redoubled appetite and has contracts totaling more than $5 billion. Until now, the most active companies are Spain’s Isolux Corsán, Acciona and Copasa.

The project portfolio of these companies includes major ventures such as four lots of São Paulo’s Stretch North of the Beltway, the transmission line between Macapá and Manaus, the highways BR 116 and BR 324, line 4 of the São Paulo metro and the breakwaters of the superport of Açu, of the entrepreneur Eike Batista.

Despite the limitations of local legislation for the entry of foreign construction companies in Brazil, it is expected that the list will increase with new packages of highways, railroads, ports and airports, launched in the second half of last year. Furthermore, the work of the High Speed Rail (HSR) should be bid next year, which will require companies with experience in this type of project.

Copasa, who has just won a lot of the Stretch North of the Beltway in partnership with the Brazilian company Constran, has warned that it is considering a consortium with Spanish companies to participate in the bidding.

According to the CEO of the company in Brazil, Hermenegildo Moreno, there are many business opportunities in Brazil. Before the Beltway, the company had built a real estate project in Bahia, in addition to winning the bid to a bus terminal in the city of Belo Horizonte, state of Minas Gerais.

In the small office installed on the Pacaembu district, in the city of São Paulo, he noted that the company has an eye on everything, especially in rail and road projects that will be bid this year. In Spain, the situation is very complicated. A natural outlet is Brazil, where the volume of work is too large.

More than willingness to push the boundaries, entering Brazil is a lifeline for the foreign companies that need to increase revenue in decline in Europe. The international bid of the Stretch North of the Beltway, for example, showed this need. The process involved 18 foreign companies, including Spanish, Italian, Portuguese, French, Argentine and Korean.  The foreign companies took four out of six lots.

Investment. Alone, Spain’s Acciona took two lots of the work, whose investments totaled $703.2 million. The company already participates in other projects in Brazil and has often been seen in concession auctions of the federal government. One of the first ones was the concession of the highway BR-393, bid in 2007 by President Lula. The company also won major contracts with the Eike Batista’s company to build a shipyard and breakwaters in the superport of Açu. In total, the projects in the country totaled something around $1.75 billion.

As aggressive as Acciona, Isolux Corsán went further. It transferred the headquarters to Brazil and took strategic projects of São Paulo’s government. In addition to the Beltway, whose contract totals $324.96 million, the company is also responsible for the construction of Line 4 of the São Paulo metro and the transmission line that will connect Manaus and Amapá to the interconnected system. The Spanish company has about $2.5 billion in contracts in Brazil.

The presence of foreign construction companies in the country, however, has already raised unease among domestic companies. Some of them are practicing very low prices and, in the end, they will not deliver what they promised, said the president of the São Paulo Association of Public Work Entrepreneurs (Apeop), Luciano Amadio.

He refers to the case of Spain’s OHL (acquired by the compatriot company Abertis), which took 5 out of 7 lots of federal highways, but did not fulfill the schedule of investments.

Another executive of the civil construction industry, which prefers to remain anonymous, recalls that the Companhia Siderúrgica do Atlântico (CSA) has contracted China’s Citic to build a coke plant and had complications. Nevertheless, the Asian companies are still around the country trying to expand the business there. Unlike Spanish, Italian and Portuguese companies, the Chinese have adjustment problems because of language and culture.

Most foreign companies eventually bring the whole management team to lead the works in the country. Because of this, the Chinese have more difficulty. The Spain’s Copasa has already begun to select the team that will come to Brazil to command the works of the Beltway. Besides directors, it will bring engineers. There is plenty of this type of professional in Spain. Here we do not have that, Moreno said.

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