OBG talks to Víctor Alberola, President, Fomento de Construcciones y Contratas (FCC) Central America

Interview: Víctor Alberola

Where and on what scale do you foresee new infrastructure investments?

VICTOR ALBEROLA: Panama will retain its current infrastructure investment level irrespective of who wins the upcoming elections. The compromise is maintaining future investment, which is expected to be more than $10bn. Tourism and other services are yet to reach their potential due to a lack of certain infrastructure. The Inter-American Highway, for example, needs to be duplicated from Panama City to Santiago. I foresee this happening soon, and it is likely to be extremely profitable for the country in the long run. Another key development is a new highway across the Caribbean coast from Colón to the east, avoiding Guna Yala, which will help develop tourism. Other infrastructure that needs to keep pace with economic growth includes water-related services and sewage systems, not only in Panama City but also in the provinces. The east of Panama City will need more investment in water supply to service the massive development already planned there. Rubbish collection is another challenge. The next government will need to address reorganising it and ensure an optimal waste collection service. The use of incinerators generating electricity would be a possible solution.

Given that the FCC is working on several key infrastructure projects, what level of interest does it have in bidding for additional projects?

ALBEROLA: Our global strategy is based on identifying “key countries”. Panama has been identified as one of these and we are convinced that it will continue as one for at least the next five years due to expected GDP growth of around 5-8% for the coming years. The next two megaprojects will be lines 2 and 3 of the metro. The need for new energy generation plants will open construction opportunities too. Panama needs more energy and the next government should clarify a long-term energy plan. There is no more room for major new hydro projects, and renewable sources are still not able to cover all the supply needs. Thus, we need to know where Panama is going and how its energy needs are evolving. I do not see further opportunities in constructing new hospitals over the next 15 years as the country is now sufficiently served. This follows construction of the 220,000-sq-metre Ciudad Hospitalaria and other hospitals of more than 50,000 sq metres each.

How strong is competition for the large tenders, and what differences are there in the bidding process compared with other countries?

ALBEROLA: Competition is getting tougher. Firms arrive in Panama attracted by the security the legal system offers to investors. Panama is a zero-risk country for construction groups. Small profit margins and strict deadlines, together with more competitors, are transforming Panama into a difficult country in which to compete. In terms of bidding, my experience has been that it is similar to Spain or North America. Processes are fair with clear and strict entrance barriers that firms have to meet if they want to join the bid. During the last hospital construction bid, for example, there were nine construction companies. Even newcomers to Panama were fighting for the tender, which showed us again how transparent the processes are. One of the strengths of the bidding process is the “recklessness limit”, meaning that companies cannot offer a price below a limit fixed by the government for each tender. Panama also offers a strong legal framework in bidding processes.

How is the private sector dealing with skill shortages in construction and engineering?

ALBEROLA: The real estate boom, fast-track GDP growth and full employment have eliminated the need for workers to be technologically skilled.

However, in the long term, through building employees’ technical skills, we will be able to enhance the attractiveness and investment potential of Panama.