Enrique Escalante
CEO
Grupo Cementos de Chihuahua (GCC)
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View from the Top

National Company Gaining International Positioning

Mon, 11/05/2018 - 14:12

Q: How is GCC impacted by the Mexican and the US governments’ infrastructure commitments?
A: We remain fairly optimistic about the US market. It is a market experiencing a natural growth cycle, which we believe will last at least three to four more years. According to industry data, between today and 2021, the US economy will continue growing, which means that the construction sector will expand too. In addition to this natural growth, the Trump administration outlined a National Infrastructure Plan that would also boost the construction sector, although the authorization and implementation of this plan has been delayed. However, we remain optimistic the plan will be implemented given that the US has a real need to modernize and replace its infrastructure to remain competitive.
In Mexico, business has a different rhythm. Given the political environment, there is a great deal of uncertainty, which halts infrastructure investment. But we see this as a transitory factor. Regardless of the political environment, we believe that Mexico continues to require infrastructure investment in airports, roads, railroads, ports, and housing. We feel that in the medium and long terms, expectations are favorable for the country’s construction and cement industries.
Q: How is GCC mitigating the risks associated with the volatility resulting from the Mexico-US relationship?
A: Our Samalayuca plant has always been oriented to export. Even when we were faced with antidumping sanctions from the US government, this plant continued exporting cement to the US thanks to its proximity to the border and to its very competitive production cost.
In the event that NAFTA renegotiations failed, we would have had to abide by the WTO’s rules. Under these rules, cement would fall into a 0 percent tax bracket to enter the US. In a more pessimistic situation in which there would be no NAFTA and the WTO’s rules would not be followed, we have proven in the past that cement from our plants is extremely competitive so we would not be too worried on the export side.
We would be more worried if we were facing a renegotiated NAFTA that does not favor Mexico, which could impact foreign investments coming to Chihuahua, and then our sales in the local market could suffer. The border of Ciudad Juarez with Texas and New Mexico depends heavily on the manufacturing industry for exports to the US. Whenever there is a local industrial project, such as warehouses, we participate. Employment levels improve and housing and commercial construction follow. It is a virtuous cycle. Should the uncertainty continue or NAFTA’s renegotiation fail, these investments for industrial warehouses would be delayed, which would impact us negatively.
Q: How is GCC adapting its portfolio and innovating in its solutions to comply with your vision of being the best company in solutions related to cement and concrete?
A: GCC is a regional company that can easily compete with the largest global cement companies. Due to our size and our strategy, we can be faster in the development of innovative solutions that can better serve our clients’ needs. Part of our strategy is to continually discover innovative solutions. By this we mean not only innovative products but also innovative processes and services.
We have a specific area for R&D and an innovation area that work jointly to solve problems for either clients or for the industry in general. This is how several of the products and solutions we sell were developed. For instance, for the mining industry, we have developed different products such as Fraguamax, which is used in many mines on a national level and that we also export to Central and South America. These types of products are not sold in large volumes but are specialized, high value-added solutions that allow us to differentiate ourselves from global competitors that are mostly focused on volume or on the traditional construction sector.