present & future of cm in spain & latin america

PRESENT & FUTURE OF CONSTRUCTION MANAGEMENT IN SPAIN & LATIN AMERICA

1

Miguel-Angel AlvarezRIBA Chartered Architect, PMP

INDEX1- A BRIEF REVIEW: SPAIN & LATIN AMERICA

1.1- The Beginning1.2- Some Data1.3- The Relations

2- PROFESSIONAL ACTIVITY OF CM IN SPAIN2.1- The Beginning2.2- The Associations2.3- The CM Business2.4- The CM during Real State Boom & Crisis2.5- The Future

3- PROFESSIONAL ACTIVITY OF CM IN LATIN AMERICA 3.1- The CM Business3.2- The Future

4- CONCLUSIONS

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1- A BRIEF REVIEW: SPAIN & LATIN AMERICA

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1.1- The Beginning

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Europe in 1492


- Spain is an old country

- Situated in the south-west of Europe

- As we know it today was founded by The Catholic Kings in 1492

- The reunion of the precedent small kingdoms and the lastdefeat of the Arab domination was finished by them

- Simultanuosly the Catholic Queen of Spain Isabel I promotedthe adventure of discover a new land overseas, wich wascalled: Las Indias, thinking that the sailors were going to India in Asia

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-Instead of that on October 12th 1492, three spanish shipsunder the leadership of Cristobal Colon: La Pinta, La Niña andLa Santa Maria arrived to a small island in the Caribbean Sea, which was called La Española, later it was called Santo Domingo

- Along the next decades many other spanish and portugueseexpeditions went there, discovering the new world: LatinAmerica

- In one form or another Spain remained in Latin America until1898 when it was defeated by the USA in the Cuban War


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1492


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1898


- The Tordesillas Treaty divided the new world in two separate parts: One for Spain and the other for Portugal

- That is why Brazil was born from portuguese origin

- The rest of Latin America was recognized to Spain

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- In red the Spanish Empire in Latin America in its maximal extension, about 1790, including: California, Florida and the south of the USA

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- During the years that Spain remained in Latin America, our language, our traditions, our religion and many other forms of identity were delivered to the american people by the spanish

- The south of the USA was lost by Spain at the end of XVIIIth. Century

- Since the beginning of the XIXth. Century many new countries were born in Latin America as a result of different independence wars that were held against Spain

- Mostly in the first years of the XIXth. Century: Argentina, Chile, Venezuela, Colombia, Ecuador, Mexico and others were created

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- In 1820, Perú was born

- Finally in 1825 until 1830, Brazil got its independence from Portugal and Paraguay, Uruguay and Bolivia were created.

- The last possesions of Spain in Latin America were Cuba and Puerto Rico and in Asia The Philippine Islands (named Philippine Islands as a tribute to our King Felipe II). All of them were lost in 1898


13Years of the independence in Latin America


1.2- Some Data

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Spain:

Population: 47.000.000 peopleExtension: 500.000 Km2PIB: 1.500.000 million dollars per yearPer Cápita Income: 30.000 dollars per yearWorld Economic Position: 12th.

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Brazil:

Population: 200.000.000 peopleExtension: 8.500.000 Km2PIB: 2.290.000 million dollars per yearPer Cápita Income: 12.000 dollars per yearWorld Economic Position: 8th.


Mexico:

Population: 112.000.000 peopleExtension: 2.000.000 Km2PIB: 1.650.000 million dollars per yearPer Cápita Income: 10.000 dollars per yearWorld Economic Position: 14th.

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Argentina:

Population: 40.000.000 peopleExtension: 2.800.000 Km2PIB: 425.000 million dollars per yearPer Cápita Income: 10.500 dollars per yearWorld Economic Position: 22nd.


Perú:

Population: 30.000.000 peopleExtension: 1.300.000 Km2PIB: 300.000 million dollars per yearPer Cápita Income: 10.000 dollars per yearWorld Economic Position: 41st.

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Chile:

Population: 17.500.000 peopleExtension: 750.000 Km2PIB: 280.000 million dollars per yearPer Cápita Income: 16.000 dollars per yearWorld Economic Position: 43rd.


Colombia:

Population: 45.000.000 peopleExtension: 1.150.000 Km2PIB: 405.000 million dollars per yearPer Cápita Income: 9.000 dollars per yearWorld Economic Position: 35th.

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Venezuela:

Population: 29.000.000 peopleExtension: 900.000 Km2PIB: 350.000 million dollars per yearPer Cápita Income: 12.500 dollars per yearWorld Economic Position: 31st.


Uruguay:

Population: 3.500.000 peopleExtension: 175.000 Km2PIB: 52.000 million dollars per yearPer Cápita Income: 15.000 dollars per yearWorld Economic Position: 85th.

Panamá:

Population: 3.500.000 peopleExtension: 80.000 Km2PIB: 48.000 million dollars per yearPer Cápita Income: 14.000 dollars per yearWorld Economic Position: 86th.

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1.3- The Relations

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-Between the half of the XIXth Century and the beginning of the XXth. Century, the relations between Latin America and Spain were not very fluent. There was even very near the Spanish domination and the remembrance of the battles held by the americans against Spain for its independence

-But from the last years of the XIXth. Century until the half of the XXth. Centrury, many spaniards began to arrive to different countries of Latin America to work, due to the difficult economic conditions in Spain. This made that the image of Spain completely changed


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-The approximation between both sides of the Atlantic Ocean were a matter of time. The same language, culture, religion and many other customs made that as time passed the relations will emprove until a level of absolute familiarity

-The latin americans call Spain: Madre Patria (Mother Homeland) and nowadays our relation with Latin America is deep and permanent in both directions


Photo of the XXI Summit between Latin America and Spain in Asuncion (Paraguay) held in October 2011

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Photo of Old Palace of Linares in Madrid, actual seat of the Casa de America (House of America)

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2- PROFESSIONAL ACTIVITY OF CM IN SPAIN

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2.1- The Beginning

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• The Dr. Industrial Engineer and Professor of the Superior School of Industrial Engineering of Madrid Rafael de Heredia Scasso is the pioneer of the CM in Spain

• From his classes of Construction for Industrial Buildings in the School already mentioned, he began to teach about CM proceedings

• In 1980 he began also to apply this proceedings to the professional practice in his company: Heredia y Moreno Engineers (HEYMO) founded in 1959

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• Between 1980 and 2000 several industrial buildings were managed by HEYMO applying CM techniques , which Professor Heredia continuosly improved with the practice

• In 1994 he publishes his book: Dirección Integrada deProyectos (Project Management). Other two editions of this book were published, in 1995 and 1999. It is truly “The Spanish Bible” of CM and the first sistematized book on the matter published in spanish

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Buildings managed by Professor Heredia1992 Alcatel Center of R+D, Tres Cantos, MadridArchitect: F. Rodríguez de PartearroyoCM: Rafael de Heredia (Heredia y Moreno)


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Buildings managed by Professor Heredia1993 Exploitation Regional Center of the Spanish Electrical Network in SevillaArchitect: Mariano BayónCM: Rafael de Heredia (Heredia y Moreno)


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Buildings managed by Professor Heredia1994 Exploitation Regional Center of the Spanish Electrical Network for the NW of Spain in La CoruñaArchitect: Andrés PereaCM: Rafael de Heredia (Heredia y Moreno)


2.2- The Associations

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•In 2002 was founded the PMI Madrid-Spain Chapter, initially thinking that one chapter was enough for the whole Spain

•The Chapter has a reduced activity until a new Board in 2007 begins to push firmly the activity, which nowadays is very intense

•In 2004 is founded the Barcelona Chapter and in 2005 the Valencia Chapter

•The presence of the PMI in Spain is focused more in techniques of IT than in construction

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•In 1994 several engineering companies which were working in CM, founded the Asociación de Dirección Integrada de Proyecto AEDIP (Spanish Association of Project Management), following the expression which was created by the Professor Rafael de Heredia in his book

•Since its foundation AEDIP has made a very good effort to apply and extend the CM proceedings in Spain

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• In 2009 several masters, PMP and professors of the Master MeDIP of the Superior School of Architecture of Madrid, who belonged to the PMI Spain-Madrid Chapter founded the Construction Management Work Group, inside the Chapter, to empower the professional activity of CM at individual level

• This group is the base for the constitution of the Construction Management Association of Spain (CMAS) in 2010, working from individual point of view in the empowering of the CM

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2.3- The CM Business

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PRESENT & FUTURE OF CONSTRUCTION MANAGEMENT IN SPAIN & LATIN AMERICAPRESENT & FUTURE OF CONSTRUCTION MANAGEMENT IN SPAIN & LATIN AMERICA

• Between 1990 and 2000 many overseas investors came to Spain to invest in real state sectors like: Commercial Centers, Touristic Centers, Offices, Hotels etc. this rushes the appliance of CM methodology which they ussually applied in their original countries

• Numerous overseas companies of CM established branches in Spain to deal with demand

• Many spanish companies which also work in the same field grew up very quickly

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• Between 2000 and 2008 the CM is applied, besides the already mentioned sectors, in the Residential one by spanish real state companies, furthermore by the stranger companies

• During this period some Public Companies with public capital but private mercantile form begin to apply also the CM methodology

• Between 2008 y 2011: Crisis and absolute stop of the building activity in Spain and therefore of the CM also

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The number of companies that in 1994 practiced CM in Spain was very reduced, initially only few were associated to AEDIP when it began to work :

• GABINETE DE INGENIERÍA• TYPSA• MÁSTER• AYNOVA• MORO & SUCHEIRON• GPO• IDOM• ALATEC. Etc.

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Simultaneously other overseas companies are established in Spain practicing CM, initially they were not associated to AEDIP:

• BOVIS LEND LEASE• GERENS HILL• HEERY• MDM• GLEEDS•JONES LANG LASALLE. Etc.

All of them are branches of British or North American CM companies that were looking for business in Spain

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Partially based on the Survey of DBK about the CM in Spain, published in September 2011:

•Nowadays there are 50 companies operating in CM sector in Spain, 38 of them are affiliated to AEDIP

•This companies generate a gross volume of employment around 1,500 workers, i.e. a promedia of 30 workers per company

•65% of the companies are located in Madrid, a 20% in Barcelona and the rest is located in other several cities

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• The turnover is very concentrated, in fact the ten leader companies have a turnover which means the 72% of the total turnover of the sector

• The companies proceed basically from two groups: Spanish engineering companies that operate in the CM field, or branches of specialized companies which proceed from British or North American origin, which operate exclusively in CM


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Evolution of CM in Spain (source AEDIP)

In blue the gross volume of work managed in Spain between 1997-2010 in million euros

In red the turnover of professional fees charged in million euros


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Professional Fees of CM in Spain along the years in million euros (source AEDIP)


2.4- The CM during Real State Boom and Crisis

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• Between the years 2000 and 2008 a Real State Boom happens in Spain, with a production of the record figure for the sector of 1,000,000 new homes finished in a year

•Our normal level of production was always around half of that number during the years before the Real State Boom

•This of course impacts in an important manner to the companies of CM which began to increase its number and its turnovers significantly each year

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• The increase of the turnover is produced not only in the residential field but also in other tipologies

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Turnover in % per Tipology

Commercial Centers

Offices and Corporative Buildings

Sanitary Buildings

Education

Hotels


• The total volume of work managed by CM companies passed from 1,510 million euros in 2000, to 8,386 million euros in 2008

•The total fees perceived by the CM companies passed from 77 million euros in 2000, to 306 million euros in 2008

•The number of companies operating in the sector in 2000 were around 30, which employed less than 1,000 people, and many of them not dedicated fully to CM

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• In 2008 were operating in the sector more than 60 companies, giving employment to 2,500 people

•The distribution of the work was: 55% in Madrid, 25% in Barcelona and the final 20% in the rest of Spain

•The requirement of this kind of services by the Public Administration was almost meaningless in 2000, but passed to have a significance of a 30% of the total turnover during 2008

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Distribution of the work of CM in Spain in 2008 (source AEDIP)

50

20%

25%55%

MADRID

CATALUÑA

OTROS


Works constructed with CM proceedings: 2004 Forum, Barcelona

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Works constructed with CM proceedings: 2008 EXPO, Zaragoza

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Works constructed with CM proceedings: 2008 Ciudad de la Justicia de Madrid

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Works constructed with CM proceedings: Polígono Los Molinos-Buenavista, Getafe, Madrid

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• In 2008 an absolute stop of the intense building activity in Spain is produced, this even increases during the next years between 2008 and 2011

• During the present year 2011 only 70,000 new homes will be finished in Spain, remember that we arrived to produce until 1,000,000 in the same period. This represents perfectly the magnitude of our Real State crisis

• The CM sector was of course greatly impacted by this drastic reduction of the activity

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• In the present year the total amount of fees expected for the the CM companies in Spain is about 130 million euros, wth a 25% of anual decrease from the beginning of the crisis

• The requirement of CM services from the Public Administration is totally stopped nowadays

•The internationalization, specially to Latin America, will allow the CM companies to invoice overseasother 65 million euros in fees this year

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• Madrid continuous being the Spanish Community with the major percentage of CM work but have descended a lot since 2008, at the moment represents only the 33% of the national market, by the other hand Cataluña has raised and now represents the 30%. In the rest of Spain is distributed the final 37%, with special incidence in the Pais Vasco

•The number of companies that mantain the CM activity have decreased to appoximately 50 which give employment to 1,500 people, many of them overseas residents to attend the projects contracted there

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Evolution of the different sub-sectors in Spanish Market from the 2006 refference in constant prices:

- Refurbishment

- Civil Engineering

- Not Residential

- Residential


2.5- The Future

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• The future for CM companies in Spain is promising if the economic conditions get better and the construction returns to a normal activity

• 2012 forecasts are of standstill or small reduction of the activity, but with a trend to improve in the second half of the year and specially in 2013

•2014 is expected to be the year of returning to normality in construction in Spain, but never at the level of the passed Real State Boom. The production of 500,000 homes a year, expected for 2014, could allow a sustainable maintenance of the sector

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• Spanish CM companies should undertake a concentration path, to acquire greater volume, specially to look for the commitments in Spain and to compete in the international market with reliability. The actual average of 30 workers per company is very small to compete in actual CM world

•For mainteining business they should enter new fields in complementary spaces related with CM

•For competing they have to increase and improve the training of their professionals in CM techniques

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• Due to the economic crisis in the Euro Zone it is expected also an increase of the use by the Spanish Public Administrations of the Public Private Partnership (PPP) system for developing every kind of infrastructures and facilities. This method has been used during the last years, specially for building hospitals, but it is expected to increase in the next years

•The complexity of the management of this kind of buildings is an open field for working for CM companies. To achieve correctly the goals of this activity, the Companies should constitute strong professional teams with a good level in CM tecniques

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Buildings made with PPP and CM: 2007 Igualada Hospital, Barcelona

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Buildings made with PPP and CM: 2008 Puerta de Hierro Hospital in Majadahonda, Madrid

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Buildings made with PPP and CM: 2008 Denia Hospital, Alicante

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We know the traditional services offered usually by the CM companies aditionally to the CM ones, as an alternative or complementary with the core business of the methodology:

•Management Contracting

•Project/Work Monitoring

•Cost Management

•Design Management

•Due Dilligence

Everything has still strength

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But the evolution of Techniques and Standards besides the new needings that arose with the economic crisis, contribute with new opportunities complementary to the CM services:

•Refurbishment

•Alternative Energies

•Sustainable Studios

•Improvement of the Energy Efficiency and Leed Certification

•Adjustment of Buildings to Standards

•Facility Management

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3- PROFESSIONAL ACTIVITY OF CM IN LATIN AMERICA

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3.1- The CM Business

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• In the same way that Spain received the arrival of many British and North American Companies of CM during the 90´s decade, Spanish CM Companies must look for the internazionalization of its services and consolidate its position overseas during the 2010-2020 decade

•In a demand contraction context of CM services in Spain, it is necessary to look for new markets and they could be found overseas specially in Latin America

•The companies are already increasing its activity overseas in a permanent way

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•From an almost insignificant overseas turnover of 15 million euros during 2008, we have arrived to 25 million euros during 2009, 45 million euros in 2010 and 65 million euros in 2011. In 2012 it is expected an overseas turnover of 80 million euros by the Spanish CM Companies.

• Between all the overseas markets susceptible of thinking of: BRIC Countries, Middle East, Arabian Countries etc., without no doubt, the most important destiny, almost exclusive at this moment for Spanish CM Companies is Latin America, especially: Mexico, Venezuela, Colombia, Brasil, Perú, Argentina and Chile

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•This is based on multiple factors: Language, way of life, historic relation, in many cases relationship, weather, mutual knowledge of people and costumes, cultural interchange, etc

•The economy of the Latin American countries mentioned before is experiencing a strong growth. They are at this moment receptors of overseas investments, and suppliers of raw materials of the highest interest for the industrialised world, China, India and many others

•They have a built environment quite obsolete and unadapted to the actual construction standards

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•They are building a lot and in this new constructions they want to observe the technical international standards of which they have no examples inside

•Their academic preparation in CM is very small, they do not have a sufficient number of well prepared professionals trained on this matters

•There is almost no teaching of CM techniques and the few Associations that exist are more focused on IT technologies than on CM

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• We can find newly many PMI Chapters, but I repeat, they are not specially focused in construction, but in PM in general

•They are very interested in implementing CM tecniques for construction and all the technological progress that exist on the matter in industrialised world

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•Many Spanish Companies are already stablished in different sectors and in recent times also in construction. Generally they are well considered as serious and trustables

•There is a respect for the Spanish University and our technical preparation, which is considered of good level

•Definitely Latin America is a unique opportunity for the Spanish CM Companies

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Latin America is no more USA Backyard, it has its own voice in the world and is rapidly growing

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Source: The Economist


The new Comunidad de Estados Latinoamericanos y Caribeños (CELAC), founded in Caracas (Venezuela) on last December 2nd. with 580 million people, is one of the most important centers of power in the world

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PIB 2010 Comparative in Million Dollars of Latin America Countries


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Forseen Growth 2011 in Percentage of PIB in Latin America Countries

Country PIB

Chile 6,0

Panamá 5,0

Perú 4,5

Brasil 4,5

Argentina 4,5

Uruguay 4,0

Bolivia 4,0

República Dominicana 3,5

Paraguay 3,0

México 3,0

Guatemala 3,0

Cuba 3,0

Costa Rica 3,0

Colombia 3,0

Venezuela 2,5


3.2- The Future

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•There are some voices telling that Latin America will slow its growth the next year 2012, because of an infection from the North America and European economical problems, specially the ones proceeding from the Euro Zone

•But the interest in raw materials that Latin America produces and the increasing interest of emergent economies like China and India for investing in Brazil, Mexico, Chile, Peru, Argentina etc. will sure reduce the negative effect. Perhaps in inmediate terms the growth will be reduced, but looking further it will not mean a change in the growth path of these countries

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•One problem that has to be seriously faced by the governments in Latin America is the inflation, the governments are now increasing the measures to control that and it is hoped that they will be effective

•Other big problem in Latin America is the corruption. This is also slowly changing with severe measures to punish the offenders. Of course not all the countries are the same dealing with this problem, but the most important like Brazil, Chile, Colombia, Argentina etc. are improving

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•Also these countries have to fight against poverty, they have to progress a lot in social attention

•The social failures are very big and they want to invest now that their economies are improving in better life for the people. This impacts positively the CM companies because there are many new equipments that are going to be constructed in the follwing years: Schools, Health Centers, Hospitals, Residences for Old People...

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•In the most important countries of Latin America: Brazil, Chile, Peru, Argentina, México, etc. there are also very extense programs for developing new homes for the lower class. The governments want to improve the way of life of the poor families, and this is also an interesting field for CM companies

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4 - CONCLUSIONS


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-Spain has a long relation with Latin America that comes from the XVth. Century

-The CM Techniques are well implanted in Spain since 1980, with an special increase of activity since 2000 until 2008

- The stop of building activity in Spain since 2008 determined that many CM Spanish Companies went to Latin America to work in CM


-The economies of various countries of Latin America are growing very fast: Brazil, Chile, Colombia, Perú, México, Argentina, Venezuela, Panamá, etc.

- These countries are very interested in establish CM proceedings for the high building activity that they are maintaining during the last years and for the future

- Many foreign investors are coming to Latin America to build new infrastructures and they want the construction be managed with CM

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- There is a great interest in Latin America in improving the quality of their built environment applying all the new techniques of Sustainability, Renewable Energies, Energetic Certification, etc. that are being applied in other countries

-There are extense programs of improving the social equipments and homes in many countries of Latin America that need to be managed with CM

- There is also space for working in Latin America in Facility Management


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MANY THANKS AND GOOD LUCK

Miguel-Angel AlvarezRIBA Chartered Architect, PMPwww.agarquitectura.com

CConsonsMMaa 20122012Construction ManagementConstruction Management

http://www.agarquitectura.com/

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