FIRM GROUND TO BUILD ON

Colombia 2014 | ECONOMY | INTERVIEW

TBY talks to Jose Luis Cabal Sanclemente, General Manager of Constructora Meléndez, on the mechanics of the construction sector, past projects, and taking measured risk.

Jose Luis Cabal Sanclemente
BIOGRAPHY
José Luis Cabal Sanclemente has close to 40 years in the real estate and construction business. He holds a Civil Engineering degree from Universidad Javeriana in Bogotá, and completed his MBA studies at Icesi in Cali. He has occupied several positions within key project development and construction firms, including General Manager of Pedro Gómez & Cía for 14 years. He was also responsible for high-impact regional infrastructure projects, such as the Malla Vial del Valle del Cauca y Cauca private highway concession, and was one of the promoters of the Sociedad Portuaria de Caldera in Costa Rica, which holds the concession for the Port of Caldera on the Pacific Ocean. Since 2009, he has been the General Manager of Constructora Meléndez SA, a company with a 52-year tradition in Cali.

What does the healthy growth of local construction sector mean for Colombia's economy at large?

I think the boom the sector is enjoying is the direct result of the boost the current government has given to the construction sector in recent years. Government policies have contributed to providing lower income citizens with housing units. I think that there have never been so many favorable tools for people to access the housing market with, such as low interest rates, the result of which is the sector's current buoyancy.

What role do public-private partnerships (PPPs) play in the sector?

PPPs are a great tool to promote the development of infrastructure projects, and boost activity in this segment, rendering Colombia still more competitive within the framework of the several free trade agreements (FTAs) it has recently signed. We have also seen a growing trend lately to implement PPPs within the housing segment to boost the development of such projects in municipalities across Colombia's regions.

In your opinion, what kind of housing project does Cali require the most today?

Cali and its neighboring municipalities have a characteristic demand trend. Over the past few years, Cali and its environs have received people from other regions, which has increased the demand for low-cost housing units. Therefore, average demand for such properties is higher in Cali and neighboring towns than elsewhere in the country. In other words, 33% of the housing transactions in Cali and neighboring municipalities are for these low-cost types of properties. Since demand is still more than relevant in this segment, we foresee an increase in demand in the market for properties within strata 3, 2, and 1. I think the future of the construction and real estate sector in Cali is quite bright and promising.

What challenges have you encountered through the years?

The construction sector is a rather cyclical one, and our company, like others, has not been oblivious to the crises blighting the sector over the past two decades. The industry suffered from one of the worst crises between 1995 and 1999, a period that saw many companies go bankrupt. Despite its financial difficulties, our company managed to stay afloat thanks to the unconditional and valuable support of its shareholders, and we managed to reverse the situation, positioning the company among the leading companies in the sector in Colombia today. The crisis of the late 1990s taught many companies and authorities to be more cautious when measuring risk. For example, the country adopted the pre-sales model in the industry through real estate trustees, increasing the feeling of security among buyers and making sure constructors appropriately use the money they receive from buyers' down payments. Financial institutions also became more prudent when granting mortgages. The financial and construction sectors are, therefore, stronger thanks to the lessons learned from the crisis. We currently have great interest in expanding business activities to cities and towns around the so-called “Coffee Production Belt" of Armenia, Manizales, and Pereira, and also in Bogotá.

How was 2013 for Constructora Meléndez?

We closed the year with a property sales value of around $90 million, with $70 million from housing properties and $20 million from selling corporate solutions. These are the two main segments in which we concentrate our activity today. These were impressive results thanks to the consolidation of projects we launched into the market between 2011 and 2012. The housing properties we sold were praised for their high-quality designs and unbeatable surroundings. Our main goal is to contribute to the development of the city and its communities through several construction projects. Such ambition proves, once more, our commitment toward the development of the city and the region.