Diversification Helps Maintain Growth

Q: What role does GDI play in Mexico?

A: In the last year or so, we obtained a contract for a 1,500km pipeline in the Bajio region so this is the project we will be focusing on in 2017. But we are now seeing a decline in major gas pipelines in Mexico so last year we decided to diversify toward small-diameter pipelines. Most of the equipment we own can also be used for infrastructure development and urbanization. We have been quoting different projects in the Sea of Cortez, which requires a great deal of urbanization to make room for hotels. Highways and telecommunications in terms of fiber optics are areas where we see strong opportunities. We are participating with the Red Compartida project and we are waiting for confirmation of how the EPC contract will be structured. There are nine regions in which the project could be developed and we think that in one of those, the fiber-optic segment will be tendered. One of the machines we want to use is our city trencher, which is a machine that allows engineers to place all the fibers in a small trench. This is much safer than over-ground fiber optics and it also provides a greater deal of certainty and security because the cables will not be broken or vandalized. There is also the aesthetic aspect to consider. This is a specific niche of the telecommunications sector where we feel we could add a great deal of value. It also allows us to find out if there is any hindrance during the installation of the fiber optics, such as a gas pipeline.

Q: How are you working with the players that enter the tenders for PPP projects and what can you offer that no competitor can?

A: We offer a unique flexibility. The proposal alone can cost US$2-3 million and GDI will work with a potential client at this point for free on the understanding that, if the project is won by the company, GDI will be guaranteed a contract. This is usually done with interesting projects in order to provide the client with the necessary alignment to win the proposal. It can be mutually beneficial but it also presents a great deal of risk for both companies. We are aware of cash-flow issues for project owners so we always try to establish a cash-flow schedule to understand our needs and why we have them. With cash flow, it is important to outline the appropriate amount of money we will need to carry out the project.

Q: What are the most challenging aspects of starting and managing a project in Mexico?

A: Everything comes down to planning. In Mexico, it is easy to find those who have a closed mind to new, innovative ideas. At GDI, when we draft a proposal, we try to involve the commercial team, the logistics team and the operations team in order to review the project from each point of view. This allows us a general, comprehensive perspective on how to start a project. When we start, we outlay a detailed cash-flow plan and we try to understand the nuances of the project to accommodate the most crucial risk factor. This is normally something out of our control like a permit or the acquisition of land that does not fall within our scope. But it gives us a fundamental understanding of the project and removes much of the strain when issues inevitably arise over the course of the project.

Q: Within the infrastructure sector in Mexico, what are the biggest areas of opportunity you have identified? A: I believe building construction in Mexico City needs to stop and infrastructure development must be given a greater focus in other parts of the country, such as San Luis Potosi, Queretaro, Durango and Guadalajara. The country is so big and has many resources but in my view, the current logistics do not work well. Having everything centralized in Mexico City causes companies to incur higher transportation costs. Mexico needs a more intelligent design regarding the allocation of resources in order to become more competitive as a nation. The development of transportation infrastructure would create a more integrated society and would have a significant impact on the distribution of labor across the country. The ability to travel from Mexico City to Puebla or Queretaro in one hour through the use of trains or buses would alleviate many of the problems faced.