July 26, 2011 Rain Makers

Volume 14 | Issue 2

Mexican construction company Constructora Makro had to weather the rough waters of the financial crisis like everyone else, but they're emer

Constructora Makro was in just the wrong place when the global economic crisis hit in 2008 and deepened in 2009. The construction and earth-moving company had concentrated the majority of its efforts in Baja California, Mexico, which – like much of the rest of the world – had been experiencing a remarkable real estate boom.

From one year to the next, Makro found itself fighting for survival. But the company did some quick thinking and came up with a strategy that focused on national expansion and public sector infrastructure projects. Now, the company’s mix of business has shifted and it is growing once again with some major public sector infrastructure projects under its belt.

What’s more, the water infrastructure projects that have become Makro’s calling card have given it depth of experience and expertise that should serve it well in the medium term, as government concessions to the private sector take on more significance in its business portfolio.

NORTHWESTERN NATIVE
Makro was founded 14 years ago as a construction and earthmoving company in Hermosillo, Sonora, in the northwestern part of the country. According to director of operations Jorge Ojeda, the company got its big break in 2001 when the Japanese government granted funding to construct an extensive potable water and draining system for Tijuana, Rosarito and the surrounding suburbs.

“That’s what really jump-started Constructora Makro,” Ojeda said.

The project took a full five years, so Makro decided to move its headquarters from Hermosillo to Tijuana and has been there ever since. Today, the company has more than 500 employees and 350 pieces of heavy machinery. In fact, Ojeda said Makro is perhaps Caterpillar’s most important company in the northwestern part of Mexico.

For the most part, the company specializes in earthmoving and building infrastructure, water systems, bridges and roads, though it has also built a number of 10-12 story buildings in Tijuana as well.

BOOM AND BUST
When Makro moved to Tijuana, the company began riding the construction boom that was taking shape in Baja California.

“In parallel to [the project with Japan], we took advantage of the expertise and infrastructure that we had here, we worked with all of Mexico’s most important housing promoters and developers,” Ojeda said.

Those builders include most of the majors, like URBI, Kecasas, Fincamex and Homex. Since Baja Mexico has a very uneven landscape, Ojeda said Constructora Makro’s service were much in demand, and they moved many cubic meters of earth and installed lots of water infrastructure for the new housing developments springing up around Tijuana and beyond.

When the crisis hit in 2008 and 2009, Makro had 70 percent of its business concentrated in the private sector and 30 percent in the public sector. Management quickly realized that this was going to be a problem.

Ojeda said that Makro’s size and expertise have proven significant advantages to the company as it has branched out. Today, it has projects in Durango, the state of Mexico, Guanajuato and Oaxaca. Makro now does a full 80 percent of its work outside Baja California.

In addition to this geographical diversification, the company has also managed to shift the weight of its business portfolio toward the public sector. Now, 70 percent of Makro’s work is on public sector projects, with the rest in the private sector.

EMPHASIS ON CONCESSIONS
Going forward, public sector infrastructure concessions will be an important part of Makro’s growth strategy, Ojeda said. In May, Makro inaugurated a major aqueduct that brings water to the Tijuana area from the Colorado River in Mexicali. The so-called Río Colorado project involves 65.5 kilometers of 54-inch steel pipe that brings the water down from a height of 1,000 meters above sea level.

The project took 1.5bn pesos in investment, of which Makro put up 48 percent and the government the rest. Ojeda said Makro has a 15-year concession on the aqueduct, meaning they will receive a fee for every cubic meter of water that moves through the pipe to Tijuana.

Makro did the project in partnership with US pipe manufacturer Ameron. Ojeda said that partnership will continue and be an important one for the company going forward, as it provides Makro with an edge over the competition due to the high quality of the materials and the engineering that Ameron provides.

The Río Colorado project was only the second aqueduct ever constructed in Mexico to be concessioned out to the private sector, and Ojeda said the Mexican government is planning to commission six more like it over the next five years.

Ojeda said that with Makro’s newfound emphasis on public works construction, he expects 80 percent of the company’s income to come from concessions within the next 10 years.

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