Construction and Real Estate, Dynamo Combo to Move Mexico AgainBy Federico Cerdas | Tue, 06/09/2020 - 09:20
WHAT IS HAPPENING NOWADAYS?
These are challenging moments. The world is changing radically and the effects of this pandemic will be stuck like a tattoo in on our society.
We are dealing with the largest sanitary and economic crisis of the modern age. And Mexico is no exception to this crisis. We will experience a catastrophic fall like many other nations.
Some companies in our country will have to close their doors due to the lack of liquidity and scarce sources of financing. The pandemic will not only kill many Mexicans, but it will also permanently close the curtains of many businesses. Unemployment will be colossal, and people will be both emotionally and economically devastated; there will be great hopelessness.
In only three fortnights of March and April, almost 685,000 formal jobs have been lost and more than 4,000 companies have closed down. The numbers of related to the informal economy are not available but we estimate they may be quite similar. The International Monetary Fund has forecasted that by the end of the pandemic the loss will reach 3,000,000 million formal and informal jobs. Do you have any idea what this number is equivalent to? This figure is equal to the entire population of Sonora or the population of Nayarit, Campeche, and Colima taken together.
It sounds harsh but it is the stark reality.
CONSTRUCTION AND REAL ESTATE IN NUMBERS
Faced with this adverse outlook, the construction industry will acquire relevance because we are a line of business that can generate more than 10 million jobs at full capacity. From those, around 5 million jobs will come from real estate development.
At the end of 2019, our industry generated around 6 million direct jobs and 3 million indirect jobs. This number reveals the immense potential our sector has to contribute to the country. We are intensive in material resources and labor; therefore, we drive a large part of the productive chains when we carry out our projects. This peculiarity makes us very special.
We can be the engines that create millions of jobs for those who are in more need. We can be that dynamo generating the prosperity that Mexico needs to pull through.
Our sector plays a fundamental role in the economic life of the country; we are the support of more than 2,000,000 million families and we account for almost 6 percent of the GDP.
WHO AM I AND WHY AM I TALKING ABOUT THIS TOPIC?
I am Federico Cerdas, co-founder and CEO of Global Businesses Inc., a more than 18-year-old real estate developer. Our mission consists of generating more and better jobs that trigger well-being in the areas where we operate.
I consider companies as the core of Economic Value and Added Human Value. Both have to be intertwined in order to bring about growth to communities, regions, states, and to our country.
I came to this forum to contribute with my experience as a Mexican businessman who has confronted, struggled, and overcome adversity I have encountered along the road. I am here to convey certainty to you, as what is yet to come may be very good.
THE MAIN IDEAS THAT WE SHOULD FOCUS ON TO BE SUCCESSFUL AFTER THIS PANDEMIC
When it comes to recovering what we have lost, it would be an epic mistake to think that everything will remain the same. We must be clear that everything will be different after this long confinement. That would be the best beginning we can have.
I consider that for this new stage there are three points upon which we must focus as an industry:
Firstly, we must take advantage of the transferring of manufacturing from China to Mexico and the USMCA entry into force, which will give us the golden opportunity we have been waiting for over decades.
Secondly, we must understand how the use of new technologies will have an impact on our sector, allowing for greater operating efficiencies, serving new markets and having access to new forms of financing.
Thirdly, we must adapt to the new reality, as the way we have been doing business will be forever modified.
USMCA, OUR NEW DRIVER
COVID has evidenced the weakness of the US when leaving the supply of materials and the manufacture of strategic equipment on the other side of the world. This trend that has reigned during the last decades limited its rate of reaction and endangered its own survival. The most powerful nation in the world realized that integrating 100 percent of its productive chains in closer geographies is of vital importance.
Mexico shall be the biggest winner of that discovery. We are the ideal place in terms of cost, distance, and commercial integration for the relocation of its facilities and if we add the fact that the USMCA will become effective on July 1, we have an unparalleled competitive advantage to displace the greatest factory in the world from its position.
This will detonate the need for more industrial hubs, which, in turn, will need roads, railroads, ports, airports, residential areas, offices, and services to support their business activities. There will be a greater demand for the real estate sector that will need to develop all those industrial parks, residential areas, offices, and commercial establishments. There will be an economic inflow like we have never seen before.
It shall be our obligation to rise to the challenge of these new times and build sound companies that will underpin the growth and well-being of our nation. We, as Global Businesses, Inc., are now investing and working with this vision for the future.
INNOVATION, THE PATH TO SUCCESS AND PERFORMANCE
This pandemic has whetted our appetite to innovate as an industry. We will go from being a traditional sector to being one that will consolidate its growth with cutting-edge technology. From an operating point of view, there will be greater industrialization and digitalization in all the processes that make up our sector.
In my case, as a real estate developer, BIM, or Building Information Modeling, technology will allow me to centralize the design, modeling, and planning of our projects in one point. For us, this will generate efficiencies when calculating costs and planning for the supply of inputs as well as optimizing the structural, electric, hydraulic and sanitary design, which will provide us with accuracy to complete each project on time and within the planned costs. Other developments such as augmented reality and the use of drones will provide me with real-time updates on my project progress.
From the administrative standpoint, the integration of specialized software allows us to maximize the use of resources, have better yields, and take advantage of our economies of scale by 100 percent. This system will provide us with historic information of prices, precise amounts for each process, labor output and many field lessons that would normally get lost due to the lack of order when collecting them.
Moreover, the use of social networks, virtual tours, and e-commerce platforms for the closing of sales enables me access to markets that I otherwise could not serve. With the use of technologies, I can satisfy the appetite for foreign and national buyers who are located far from my developments. I can practically sell wherever I want. We should not forget that Mexico is still very appealing for the returns and capital gains it is capable of generating.
From a financial standpoint, access to capital has been diversified from traditional channels to fintech companies that offer options such as crowdfunding where many co-owners can purchase an apartment and earn returns by renting it. This causes an additional demand that has been underserved for many years because of the lack of technological innovation. Even the prop-tech platforms have created new channels to rent these properties and grant greater benefits and returns to those co-owners.
Ultimately, green technologies have evolved to a point where their cost and benefit are within the reach of a majority. By using the most efficient methods of heating, cooling and lighting, they represent an additional added value that we can give our clients, users, and, above all, our country.
Regarding our company, technology gave us scalability and has allowed us to exploit our know-how. This has made us attractive for domestic and foreign investment, which, in turn, has enhanced our capacity to generate jobs.
A HUMAN APPROACH FOR BUSINESSES
This period has allowed us to reflect on what is truly important and to stop solving our day-to-day urgencies. It is the best exercise to make our industry and our companies more humane. It is a unique opportunity to reflect and be clear on where our strengths and weaknesses are.
Our business models will have to adapt to the new reality of social distancing and sanitary precaution. This time has made us aware that having the best product or service is useless in a depressed market that has been hit by a virus. Our decisions are transcendental to improve the future conditions of the country or to make them worse.
Health goes before profits. We have to look after our team and suppliers in order to strengthen our own companies. It has made it evident that we need to look after others and understand that we are interconnected. What happens on the other side of the world will also affect us: an event that started in a Chinese city whose name we didn’t even know affected the world and harmed millions of people.
We have come to realize that we all share one same fate. That, despite all we have done in our lives, we are fragile before this invisible enemy. That one person’s mistake can cost the lives of thousands. And that teamwork to follow the instructions of the health authorities to the letter is the best weapon we have to keep this enemy from gaining ground.
In fewer words, we have become aware of our shared responsibility as businesspeople, professionals, parents, children, friends and citizens. We have understood that it is useless to accumulate wealth without generating well-being and having a positive impact on the country where we do business.
This lesson, in my opinion, is the true disruption of this crisis.
CRISIS MEANS OPPORTUNITY
Last year, I had the chance to travel to Hong Kong. There, I could confirm what we have heard in those motivational talks: the word “crisis” in Chinese (“wei-chi”) is made up by two characters [ 危 机 ] “wei” which means “risk” and “chi” which means “opportunity.”
Undoubtedly all risks beget opportunities. The most transcendental discoveries of humanity have been made when a need appears. Risks always forces us to be more creative. Crises dissolves the old to let in the new. They destroy some concepts so others may be built to allow us to evolve as humanity. And that is the cycle of life; the old must die to let the new flourish.
Imagine how boring and monotonous life would be if everything always remained the same.
We must understand that this drastic transformation of our country’s condition will require bold people who capitalize on their knowledge and create companies that generate jobs and well-being to many families who need them. It is in those moments when true entrepreneurs get up and go despite any adverse circumstances, when true leaders emerge and when cowards appear unexpectedly and lag behind, paralyzed with fear.
And it is that fear that will not let them take their place in this new reality. Because after the storm comes the calm. And when the calm comes it will be too late to start whatever it is that you want, as all spaces will be taken again. It is now or never!
As a generation, we are living a historic moment. In our hands lies the great responsibility of defining what humanity will look like in the future.
Never lose faith, because the worst disease lies within the soul and the most profound crisis lies within the heart; there will always be a solution for all the rest. Go forward without fear, as the world needs entrepreneurs who will generate well-being and create jobs.
So, if we take a step back may it only be to gain momentum.
Don’t ever stop!
Go, Mexico, go!