Construction enterprise sees Latin American opportunity

China Road and Bridge Corp plans to expand its presence in Latin America, a market expected to transform the project contractor's business model, CRBC's president told China Daily on Monday.  [Special coverage]

"The Latin America market has both opportunities and challenges. We are determined to enter the market. It's a necessary move for the company to enhance its global competitiveness," said Lu Shan, president of CRBC, a leading project contractor.

CRBC started tapping the Latin American market four or five years ago, and business operations in the region account for about 10 percent of the company's annual total, which is "very small", Lu said.

"Our business in the Latin American market is still at a beginning stage, but the market has huge potential with an infrastructure demand of more than $500 billion. We may get some breakthroughs this year with deals probably from Colombia, Argentina and Chile.

"As we add more investment of resources and employees into the market, Latin America will outperform our traditional markets of Africa and Asia to be a new growth engine with business centers on ports, bridges, roads and railways," Lu said.

He added that the market is "totally different" from the traditional markets like Africa. With a well-developed economy and a sound legal framework, Latin America welcomes but is also suspicious of the influx of Chinese companies.

"Chinese enterprises' advantage of low labor costs is not applicable in Latin America. It's impossible, and not economical, to send Chinese workers into the local market, as the region has its own construction teams and strong labor unions," Lu said.

"The best way of tapping the market is localization and joining hands with local partners. Our success in the market depends greatly on the localization level. This also requires us to send advanced talent there who can adapt to local markets, have global vision and understand international contracts," Lu said.

He added that capital shortages are common in the Latin American market, while governments in the region are "prudent or not flexible in using Chinese loans".

In 2013, Chinese companies in Latin America achieved an accumulated realized turnover on project contracting of $54.4 billion, about 6.9 percent of the country's total, and the value of newly signed contracts was $94.6 billion, about 8.1 percent of the total, according to the Ministry of Commerce.

From January to May, China's contractors in the region realized a turnover of $3.98 billion, while the value of newly signed contracts reached $2.33 billion, the ministry said.