Interview: Fernando González Olivieri
Do you foresee delays with infrastructure projects in Mexico if low oil prices persist?
FERNANDO GONZÁLEZ OLIVIERI: We believe that the budget cuts instituted for 2015 will not affect the construction industry, or at least not the segment with which Cemex is concerned. The projects affected are the Querétaro and Mérida railway lines, and since these do not require large amounts of cement and take time to prepare, we were not considering them in our 2015 plans. Even with the cuts, the country’s 2015 budget is 16% bigger than it was in 2014, leading us to maintain our positive outlook for the year. Supporting that position is growth in informal and formal housing, which will help the construction industry expand by somewhere in the mid-single digits in 2015.
How do you see cement prices behaving in 2015?
OLIVIERI: The recent strengthening of the US dollar by more than 12% has affected the price of cement, especially since many of our inputs are priced in that currency. Since the dollar’s strength is partly due to volatility in Europe, economic uncertainty in Greece and the fall in oil prices, we expect our price policy to continue its trend for the foreseeable future, within a reasonable range.
Will energy reform affect the construction sector?
OLIVIERI: We are not expecting any impact from the energy reform in 2015. The year will be one of consolidation and of finalising the environment in which the market will operate. It will be a year dominated by the bidding rounds of oil blocks, rather than one marked by investment in oil and gas infrastructure. We will not see the impact of the energy reform in the construction sector until 2016.
What is your view of the public-private partnership (PPP) law passed in 2012?
OLIVIERI: The 2012 law is very complete, and I do not see many areas where improvements are needed to encourage the private sector to use this as an investment vehicle. In due time, more companies will start using it and some unforeseen obstacles could arise. Several important infrastructure projects have the potential to develop into PPP projects, especially if low oil prices persist and more budget cuts are needed. Cemex has participated in some PPP projects and never encountered any problems. Its participation was mostly in highway development, an area in which we will probably continue to be involved.
Are commercial banks currently geared towards financing infrastructure projects?
OLIVIERI: There is a lot of interest and vast financial capacity at Mexican commercial and development banks to finance most of the projects in the National Infrastructure Programme 2014-18. Still, there is enough room for everyone to participate, and due to the low risk and long-term profit of these projects, foreign investors will doubtless want to join. Banobras, the state-owned development bank, will probably be involved in many of these and, as with previous projects, its involvement will serve as a seal of approval that will increase private sector interest.
How have lower oil prices affected operating costs?
OLIVIERI: Cement is an energy-intensive industry. Its production requires coal, petroleum cokes and a mixture of alternate fuel products whose prices are not directly related to that of oil. Our production costs, based mostly on the prices of these products, can vary, but since these prices are not as volatile as oil prices, we rarely see a marked increase or decrease. The other energy-intensive part of our business is transport. Here we have seen a significant price drop in the US, but not so much in places like Europe and Mexico. We did benefit from the oil price drop, but only because our US operation is one of the most important worldwide. Our energy costs decreased not in production of cement but in transporting it.
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