The Report Company: What has been your experience of working in infrastructure development with the Secretariat and with the state in general during this sexenio?

Hector Ovalle Favela: In Mexico, the government is split between the federal, the state and the municipal. The large works are developed by the federal government and that is with whom we have the greatest relationship through its various agencies, particularly with the Secretariat of Communication and Transport.

TRC: New tenders are being put out through Banobras (National Bank of Works); what are they? Are you bidding for any?

HOF: We do public works in all forms of contracting and financing, so we have a good relationship with the federal government because of the quality and performance of our contracts, as well as with Banobras, which holds the concessions for most of the toll roads in the country. In addition to putting out tenders for periodic maintenance works, it is now also inviting tenders with private companies for highway operation and maintenance. Our main focus is on infrastructure, and our projects include bridges, highways and runways.

TRC: As well as your work on highways, bridges and airports, are you diversifying into other areas of infrastructure development?

HOF: We strongly believe that there are several areas of opportunity where the private sector and especially our company can help provide services and improve on quality, service, technology, innovation and results, mainly to the municipalities through the collection, transfer and disposal of solid waste and in water and wastewater treatment. These are areas with great development potential, but which at the same time present a great challenge.

In this country there are more than a hundred cities with over one hundred thousand inhabitants and of those only 30% have a proper solid waste collection service. I believe that our company can contribute a lot to improve this, as well as to improve water and wastewater treatment. These are not just important niche areas of work but also a great help for societal development.

TRC: Do you work with the municipal governments directly?

HOF: Yes, we look for long-term projects, of at least 15 years, and to achieve that we – the private sector, the municipality, the state and the federation – have to work together. In this respect there is much to do. We need to specify and consolidate projects that have been designed for this type of service delivery with the participation of the private sector.

TRC: In your opinion, what is the impact on the sector of the new PPP law, especially when it comes to attracting foreign investment to Mexico?

HOF: The law gives legal strength to the new public-private sector contracts when it comes to financing and developing infrastructure. With regard to the highways, Mexicans are used to paying tolls to use the roads but I think this is now coming to an end. We have a hundred stretches of toll roads covering over 9,000km, which I believe places us first in the world. The other way of doing things would be the multi-year maintenance contracts, although these are somewhat fragile due to annual budget allocations, but the PPP law will provide more security.

In terms of the provision of public services, the law provides more legal certainty and transparency than previously when contracts were based on a complex framework of three or four different laws. Now this new law simplifies both the legal interpretation and management.

This legal certainty encourages foreign investment, as the new law clarifies the rights and obligations of all parties within one single document, providing transparency.

TRC: Are there any opportunities for foreign companies to partner with Coconal?

HOF: Certainly, especially in larger projects or in specific activities such as solid waste, water and wastewater treatment projects which require service delivery experience or technology. Foreigners need a Mexican partner, and Coconal has been present in the Mexican market for 62 years. We have a complete team here and we know our market well, we know how to resolve any problems that arise, be they social, environmental or legal. We know how to negotiate so that everyone wins, and the new law will support this type of partnership between foreign and Mexican companies.

TRC: In your opinion, to what extent has President Calderon’s infrastructure program been successful?

HOF: I’d say it has been a success, because through public-private financing, new ways have been found to contract infrastructure construction and operation, which was sorely needed in Mexico. Although the new PPP law only came out in February, road construction and maintenance concessions have seen a great deal of momentum throughout the whole sexenio.

We were awarded the country’s first multi-year highway maintenance contract in San Luis Potosi. There are also PPPs for highways, hospitals and prisons that, added to all the new methods of procurement and financing have given a big boost to infrastructure development.

TRC: How do you see the future of Coconal in the next five or six years with regard to the country’s development? Do you have projects planned for the next administration?

HOF: We have a base of long-term contracts, such as toll road concessions which were recently restructured, so we still have 20 to 25 years remaining, serving 550km of highways. Politicians globally have realised that infrastructure is very important, both in terms of quality of life of the population and in terms of the country’s economic development.

We have 3,000 employees and with an annual turnover of 5 billion pesos, we are one of the 350 biggest companies in the country and one of the 10 biggest in construction.

TRC: Do you plan to expand internationally?

HOF: Not right now, because it’s very complicated. There are countries that call themselves liberal that are actually very closed, like Brazil and Argentina. Our natural areas are Colombia which is where ICA has worked for many years, Peru, El Salvador, Ecuador, and Panama.

With the large amount of work that there is in Mexico we haven’t needed to go abroad. We’ve also just come through a difficult period, as 15 years ago Mexico’s construction industry was not doing so well and bit by bit it has gradually been consolidated. Now we have a good market in Mexico, certainly better than in Central and South America.

TRC: How do you want Coconal to be perceived in 3 to 5 years? What are you doing to strengthen your image?

HOF: We try to be different and we have several specific goals: the first is to fulfil our contracts; we have never once been fined for breach of contract. The second part is quality. The third is our social contribution. Our employees have medical insurance and overtime pay; we give them a wage and treat them decently. In addition we’ve been engaged in environmental protection for many years. We don’t want to be the biggest company in Mexico; we want to be the best.

TRC: What would you say has been your biggest achievement so far during your time in the company?

HOF: The greatest achievement is to have structured a company with different generational layers, ie, we have very young workers, mature people and people with a lot of experience and this combination gives us strength. Currently we have around 200 professionals working with us and we want everyone to be professional, as this in turn professionalises the company. Because of our approach, the company wins contracts and makes money, enabling us to fulfil our social responsibility scheme and be environmentally friendly.

Looking ahead, I don’t see the growth of the company as a goal; I see it as a consequence. We have adapted to changes in both the government and the country, and thanks to this we have managed to get to where we are today. We are a well regarded and well qualified company in Mexico and that fills us with pride.