Odebrecht hopes airport plans take off
Brazilian construction giant, Odebrecht, won its first job in the region in 2004. But after unsuccessfully bidding for the Dubai Metro, South America’s largest contractor is narrowing its focus to a few specific project areas, including the booming airport construction market.
While Brazil is well known for its beaches and bossa nova,
it is also home to Latin America’s largest engineering and construction firm, Odebrecht, which has its sights firmly set
on the Gulf market. Founded in 1944 in the northeast of Brazil, Odebrecht has since established an international presence by undertaking projects across the energy and infrastructure sectors.
From building thermal and hydro-electrical plants to constructing steel mills, roads, bridges, mass transportation systems, railways, seaports and airports, Odebrecht has a presence in 16 countries worldwide. It also has numerous petrochemicals plants in Brazil, from where it exports petrochemical products to over 50 countries. Last year the entire group had a turnover of around US $9 billion.
While Odebrecht’s expertise covers a wide range of disciplines, the company is planning to capitalise on its knowledge of airport construction in order to establish a strong foothold in the Gulf market. “Airports are a big area for us,” says Marcelo Schuetz Jardim, CEO, Odebrecht (Gulf region). “At the moment we have US $1.1 billion worth of construction projects at Miami airport in the US, to build the south and north terminals.
“We’ve built almost 30 airports around the world, and now we’re looking to translate this to the UAE market,” he adds.
The result is that Odebrecht has teamed up in a joint venture with local contractor Al Jaber Grinaker, to bid for the new runway at Abu Dhabi International Airport — part of a package worth up to US $270 million (AED1 billion). Another joint venture between the two may also be on the cards for the Etihad terminal bid, which will also be built at Abu Dhabi airport.
So what first prompted the Brazilian contractor to set up shop in the UAE? “We knew that the market here was going to grow, so we decided to open an office first in Abu Dhabi around two years ago, with the Dubai office opening six months after that,” says Jardim.
Dubai was where the company won its first job in the region in 2004 — a contract from Dubai Ports International for an oil and liquid terminal — but the work was actually carried out in Djibouti, Africa. Odebrecht’s next move was to bid in a joint venture for Dubai’s Metro project, but the bid was unsuccessful. It was then that Jardim says that the company decided to narrow its focus and concentrate on a few specific project areas.
“We don’t want to spread ourselves too thinly in the beginning. We want to wait and focus — we’re by no means desperate to win projects at any cost. “What we’re mainly focusing on in this region is ports, airports, bridges, infrastructure and wastewater treatment plants.
“Bridge work in particular is featuring heavily in Dubai at the moment e.g. the new Garhoud bridge and Ras Al Khor bridge — there’s lots of bridges coming up here.” He adds that the company’s ultimate aim is to do a quality job, with client satisfaction being our main goal: “At Odebrecht we work on a long-term basis — every country that we enter for work, we stay for a long time,” he says.
While Odebrecht may still be holding out to win an airport deal in the UAE, the Brazilian giant nonetheless bagged its first major contract in the region a few weeks ago in the form of the US $132 million (AED488 million) Ras Al Khor road — part of the Creek crossing project in Dubai.
Bidding in another joint venture (this time with Abu Dhabi-based contractor Bin Hafeez), the new road will link up with the fourth crossing from the Al Jaddaf side of the Creek. Odebrecht will be responsible all the concrete work on the project — including the flyovers — while Bin Hafeez will do the road works.
Joint ventures form an integral part of Odebrecht’s modus operandi in the region: “In terms of what made us go for the partnership with Al Jaber Grinaker for the runway at Abu Dhabi airport, it’s because we complement one another well,” says Jardim. “We have a lot of experience in airport construction, and Al Jaber has the local experience and the resources here,” he adds.
In addition to the recent successful bid with Bin Hafeez for the Ras Al Khor road contract, Odebrecht also has an association with the local contractor for a wastewater plant in Dubai for developer, Nakheel. As with joint ventures, Jardim says that PPPs (public private partnerships) are something the company will be looking towards as it gets underway with projects in the region. “We’re very interested in this as a way of going forwards in this region.”
Winning contracts is all well and good, but what of
the margins available to contractors in this part of the world? “It’s a very tight market,” admits Daniel Chicahuala, director, Odebrecht (Dubai branch).
“But one of the main differences between the Latin American market and the market here is an adjustment clause for inflation. “Since there is a culture of inflation in most of the countries in Latin America, when you bid for a job and you give a price, this may be adjusted to take into account inflation, therefore you don’t lose so much,” he adds.
But there’s no safety net like that here in the UAE. Besides the margins being low, Chicahuala says that contractors need to have a crystal ball to foresee potential changes in price. “This can be a real problem when you take into account factors such as the price of steel, which has risen considerably in recent times.”
According to Jardim, this was one of the reasons why Odebrecht only entered the UAE’s construction market relatively recently. “In the beginning, we weren’t so keen to enter the market here because we knew steel prices were going up,” he says. “So we waited until the prices stabilised a bit before really going for the projects. “But I don’t think we’ll see a huge rise again in steel prices — from what we’re seeing in the industry, steel prices are gradually coming down, possibly because China is now buying less.”
Investing in people is at the core of Odebrecht’s business strategy and long-term plans, says Jardim. “It’s not just about economic growth and client satisfaction — hiring and training the right people is vital. “In every new country we operate in we go to the universities and identify the key people that will soon graduate. Here, we’ve already identified five that we are going to hire.”
He says that the company has made the decision to invest in the region, and while this may mean bringing in more people from Brazil, Jardim says it is also important to train local people so as to have good management by local people. “The idea is that these people can grow within the company and can become the company’s future management here.
In the competitive and fast-moving world of contracting,
what differentiates Odebrecht from the competition? “Decentralisation,” answers Jardim immediately. “Odebrecht is a very decentralised company — a project manager can make almost all the decisions by themselves or with the country manager. “The way we operate is like a lot of small companies — most of the decisions can be made on site,” he adds.
The result of this is a very fast decision-making process, which, according to Jardim, clients seem to like since it means they don’t have to talk to Brazil and wait to get an answer about something across time zones.
In terms of future plans, it would seem Odebrecht is content
for the time being to concentrate on winning projects in the emirates, although the company may also be looking at opportunities in Qatar.
“We want to establish a good presence in the UAE, and I think that Abu Dhabi will be the next market to boom here.” The large number of bids the company is working on means there are now around 30 people working in Odebrecht’s Abu Dhabi office, compared to just a few in the Dubai branch.
It’s an interesting market here, and is very fast moving,” summarises Jardim. “Our current goals are to have at least three projects in the UAE this year.”
With one major contract win now under its belt and numerous other irons in the fire, Odebrecht is getting ready to bring a Latin flavour to the region’s construction industry.