Guatemala construction chamber expects 2021 to be a record year

Guatemala's construction sector has grown rapidly this year after a disappointing 2020, when works were shut down due to the pandemic.

But rising prices, threaten to dent growth next year, according to the head of Guatemala's construction chamber (Construguate), Erwin Deger Asturias.

He talked to BNamericas about the outlook, priority projects and the obstacles facing several public-private partnerships  (PPP) that remain stuck in congress.

BNamericas: How did the construction sector in Guatemala perform during the peak of the pandemic in 2020?

Deger: For us, 2020 was a negative year, a contraction. We complied with all presidential restrictions and construction had to be shut down because we are not considered an essential sector. 

For a long time, we were unemployed. But thanks to the support of the government, we were one of the first sectors to reactivate; we were authorized to return to work fairly quickly. If I'm not wrong, I think we were the first non-essential sector to return to work, given that many of our activities are outdoors.

After that negative year, 2021 is projected to be a good year, one of our best years, and we expect to have a 7% growth. Broadly speaking, and in rounded numbers, we expect it to be more than 7%; we are employing more than 500,000 Guatemalans and we hope to maintain our 4% share of GDP.

BNamericas: What is the expectation for 2022?

Deger: In 2022, what worries us a bit is the increase in the prices of materials. Local production covers a good part of our construction system, but much [of the materials] are imported and that may, in some way, affect the trend we see. We would like to maintain that rate of 7%, but we foresee that on the issue of housing, which is one of the sectors served here, these raw material prices may affect it a little.

BNamericas: What type of materials could be subject to this increase?

Deger: Steel. It is an extremely important and imported material, so if it increases it will hit us strongly.

However, in the post-pandemic stage – if we can call it that – another effect has occurred, and that is the one that we want to take advantage of right now. We still hope to catch that wave of property sales [real estate projects] by 2022. On a construction project scheme, this takes months, sometimes even years. So, 2022 is going to be a year in which prices may affect us, but we hope this wave reaches us.

BNamericas: What are the most outstanding projects that have helped the construction sector to get out of this pothole?

Deger: There are a range of projects. On the one hand, there are the strongest, which is the infrastructure that is being executed by the state. There are some private infrastructure projects, but few compared to the rest. The communications, infrastructure and housing ministry (CIV) is a generator of infrastructure work. There are no new projects, but there are renovations and some modifications, mainly overpasses.

Then there is the construction of housing, both vertical and horizontal, which is where there have been no large industrial projects at the moment. To some extent also due to the effect generated by the [indigenous] consultation, which is something that has somewhat slowed down investment in [areas] such as mining, hydroelectric plants. The issue of [ILO] convention 169 on where communities should be consulted before executing projects has somehow stopped investment in these megaprojects. Vertical, horizontal housing and infrastructure issues have reactivated the construction sector.

BNamericas: The government is expecting congressional approval for construction start of the 1.2bn-quetzal (US$153mn) stage one of the Aerometro cable car system this year. What other transportation projects are essential?

Deger: There is [line No. 5 of BRT system] Transmetro. The municipality of Guatemala already has everything planned and covered, and the chamber is very interested in this.

Speaking specifically of some projects, there is the monorail project that would use an existing metro rail line and that would connect the municipalities of Guatemala and Mixco, and the Escuintla-Puerto Quetzal highway. This project must be addressed.

BNamericas: Public-private partnerships have to be approved by congress, even when awarded through a transparent process. Approval of seven PPPs, involving 12bn quetzals, remains pending. Are there ways to encourage private investment not involving congress?

Deger: The means exist and the projects already exist. Several investment projects are obviously not public because, until they are known and certain, they do not come to light. But there are several innovative projects. Guatemala has mountainous terrain and there is one of those projects, for example, that involves a tunnel to connect two mountains. The project is 100% private.

I believe we must continue to support PPPs and for this, there is a proposal to amend the law. We are part of the board of PPP promotion agency Anadie and we have supported reforms, and precisely what is sought is that other types of projects be attended to.

[Anadie] has been very focused on road infrastructure issues and a little on airport issues, but we believe it can diversify more toward hospitals, prisons, garbage issues, processing, collection, even generation of energy with garbage. Sometimes they are compared to road projects that are a little smaller but just as interesting to attract investment.

On the government side, which presides over the agency's board, is a lot of interest in seeing the reform pass. There is appetite, there are interested parties with the capital to invest when it opens.

BNamericas: What would Construguate like to see approved in congress this year?

Deger: We would like this year to see the Escuintla-Puerto Quetzal highway authorized, respecting the time of congress and all the priorities it may have. I see the road infrastructure law as somewhat difficult. The approval of Aerometer must also pass through congress.

So, our dream is that both Aerometer and the highway can be authorized this year so that in January 2022 both projects will start generating investment and work that spill over in the economy.

In addition, we have another bill pending approval, which is the preferential interest law. It is a law that is pending from the third reading, that is, it is already the last and that is to promote the purchase of a first home for families that do not qualify for a bank loan. That would also be a tool for economic reactivation because it is national coverage.

BNamericas: What about the Guatemala-Mexico Bicentenario train between the Atlantic coast and the San Marcos-Chiapas border?

Deger: We know very little. What do we think? We welcome the proposal. I think that area of the rail line that today is being occupied by people who have nowhere to live should never have been given up.

I believe that traffic would be greatly reduced if that system were used. In fact, many of the accidents and much of the road problem that we have is the excess of heavy transport that crosses the capital.

There we have the railway line that already connected the [Puerto Quetzal and Puerto Barrios ports] and a border also, Mexico, Guatemala, El Salvador. So we don't know much, but we believe it is something that would facilitate, reduce time of deliveries, that perishable products can be much faster at the exit door to the world. It would surely generate a lot of work and if there are investors interested in it, welcome to Guatemala.