Q&A > Federico Martinez Urmeneta - Chairman of the Tradeco Group
| March 18th, 2011
As President of the Tradeco Group, Federico Martinez Urmeneta has overseen some of the most ambitious infrastructure projects in Mexico’s recent history. Under Martinez’s leadership, the recently inaugurated Baluarte Bridge broke the Guinness World Record for the highest cable-stayed bridge in the world, garnering praise from President Calderon. With a foothold in Latin America and the US, Martinez is hoping to bring the Tradeco Group’s proven construction knowhow and expertise to the world stage.
The Report Company: To what extent do you agree that the National Infrastructure Program, that has characterised President Calderon’s administration, can be considered a success and has achieved its objectives?
Federico Martinez Urmeneta: The Mexican administration is, for the first time in 15 years, investing close to 5% of GDP in infrastructure. I think there needs to be even more investment, but these are much greater figures than in the two previous administrations. They have developed large projects, but there is still much more to be done.
TRC: In your opinion, where does there need to be more investment so that Mexico becomes a truly competitive country in terms of infrastructure?
FMU: In the port sector, they need to expand the ports of Veracruz and Mazatlan. They also need to re-launch the Punta Colonet project.
In the airport sector, the new airports in Mexico City and the Mayan Riviera need to get off the ground quickly.
In the railroad sector, it is essential to develop transport systems from Mexico City to other major locations – within a radius of 500 km – such as Queretaro, Guadalajara, and Leon.
Another important aspect is urban public transport in Mexico City, which needs a lot of work, including the metro, trams, cable cars and suburban rail, which is definitely something that must be developed. We need trains that come from Toluca, Cuernavaca, Querétaro, Puebla, and Pachuca so that residents can work or live in Mexico City.
In the tourism sector, we still need to build new centres where the federal government, through the National Trust Fund for Tourism Development (FONATUR), can invest in an airport, and build hotels and golf courses, to later auction the land to investors without the need for principal investments, as was done before. But it is a ‘chicken and the egg’ problem; there are no hotels because there is no airport, and there is no airport because there are no hotels. The government’s tourism leadership should look to what was done in Cancun, Los Cabos, Ixtapa and Huatulco. Although this administration has made a good effort, tourism needs to be promoted much more.
TRC: In your opinion, what has been the effect of the recently passed Public-Private Partnership (APP) Act in attracting investment for new projects?
FMU: The APP Act, recently signed into law by President Calderon, gives legal certainty to investors in infrastructure projects where private capital is involved, which allows credit to be more affordable and the projects more profitable. This law regulates these products and supports the proposal of projects. So the private sector can design a master plan, purchase land, carry out the traffic studies for a particular road, and propose this project to the government, who decide if they can go to tender and recover the costs. On the one hand, this forms part of a policy that allows for a better pool of ready to build projects, and accelerates the construction of infrastructure. On the other hand, this is a breakthrough in terms of legal security for investors with profitable and viable projects, and acts as a spark to ignite future projects in Mexico.
TRC: In this final stage of the administration, how do you consider the cooperation and commitment between Tradeco and the Department of Communications and Transport (SCT) to carry out these projects?
FMU: We have been working with the SCT for 20 years, and it has always been a pleasure to carry out projects such as the Baluarte Bridge, which was a very good experience, as well as the recent certification of the bridge by the Guinness Book of Records. We are in a good moment as over the past years we have done many projects for the SCT. It is one of the agencies with the most experience in construction, infrastructure development, and managing public works, and we work very well with them.
TRC: After breaking records and attracting worldwide attention with the inauguration of the Baluarte Bridge, what is the next step for your company?
FMU: We want to participate in every project of this type – cable or suspension bridges – which are going to tender in the upcoming months all over the world. We have spotted some interesting projects, such as in Panama where there is an important bridge needed over the new and expanded canal. It is a suspension bridge which is going to have a span of 520 meters. It is much lower than the Baluarte Bridge, but it is much longer, and we want to participate. There are other bridges of this type that we have discovered in Asia, the Middle East and Canada. We are evaluating how to transfer our experience to compete in other markets, and we are soon going to be delivering good news in this respect.
TRC: About your internationalisation, Tradeco has a presence in many countries in the Americas. Can you comment a bit on your growth strategy in the United States?
FMU: We have a branch in Texas, which is currently developing a couple of small projects for the Texas Department of Transportation. We have been there for two years, and our office in Houston is responsible for covering Canada and the US. We are looking for opportunities and working with local transportation departments. This is a different market than what we know here in Mexico and Latin America. It is a market of outsourcing, and contracts are obtained in a different manner. For this reason we are beginning with a specialisation that we have mastered – bridges - but with smaller investments than here in Latin America. I think that in less than three years we will be building infrastructure with investments similar to what we work with in Latin America. We are approaching this cautiously, but with plenty of enthusiasm. We are also beginning tenders in Canada and Texas, while evaluating the potential of other markets, such as Florida and California.
TRC: The Tradeco Group has various divisions. Which segments of your company are leading your growth?
FMU: We have a part dedicated to the heavy construction of infrastructure such as the Baluarte Bridge, which builds dams, ports, airports, roads and tunnels. We also have the Oil & Gas segment, which does a lot of work for the state-owned PEMEX petroleum company. This segment is dedicated to making processing plants, production pipelines, offshore platforms, and all activities related to the production and transportation of oil and gas. There is also the civil construction aspect, which is dedicated to vertical construction, building prisons, hotels, hospitals, public housing and skyscrapers.
TRC: How do you integrate all of the elements of construction, from financing and supervision, to project maintenance, in your company?
FMU: We do almost everything in vertical construction in the Latin American market. We only subcontract on very few occasions and for specialised niche activities.
In private investments, every day there are large-scale infrastructure projects required by our clients. Not only do we have to build, but we finance the project and operate it for twenty or thirty years or more. You have to develop other specialities in order to sell your main product and get it going. Yes we are outsourcing some activities, but we are learning alongside our suppliers. We are creating special purpose companies, partnered with experts in these particular areas, and thus gaining experience. We are trying to manage our integration as vertically as possible.
TRC: As Chairman, what key values are you trying to instil in your company?
FMU: One thing is very clear: our principal asset is our human capital. We want to be a leading, world class, international construction company, and take advantage of our position to do things well in the coming years. We currently have an operational presence in five Latin American countries, but I think our values set us apart. We must nurture and develop human resources as our main asset, because with this we can achieve any goal.
Our reinvestment of profits over 20 years has allowed us to grow with an ever-increasing capital; we have never distributed a dividend. We are the largest private construction company in Mexico, but we are evaluating our future participation in the stock markets. However, we do not see it as a necessity in the short term.
We believe that infrastructure is not an end, but a means; a necessity so that all economic activities can fully develop and compete on a global level. We believe that we cover a continuing need in order for the country to grow and develop its domestic market. Mexico’s challenge is growth, having failed to achieve the percentages of other Latin American countries, and our country needs more than 5% growth in the coming years. Insofar as this growth is achieved, the construction of infrastructure is going to be very necessary.
TRC: Where would you like to see Tradeco in the next six years? What values would you like people to associate with your company?
FMU: Our vision for the next six years is to have a company participating not only in the Americas, but in other continents. We want to nurture talent, and remain the company with the best human capital in this industry. We want to continue being identified as a socially responsible company, with the capacity to export what is done in Mexico to other parts of the world. We also want to diversify our products and increase our value. For example, in technology we also export our added value in projects. This not only has to do with construction or raw materials, but our distribution channels, which can be purchased by our clients. We believe that the opening of Mexico’s market in six years’ time will be much greater than today. We see ourselves drilling and exploiting oil, perhaps in partnership with certain foreign companies, but developing our own technologies. In six years there will be a lot of participation from companies like ours.
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