/// Interviews

Interview with Mr. Hector S. Ovalle Favela, General Director of "Coconal", Mexico

- UPCOMING REPORT ON MEXICO: “Invest in Mexico, The Opportunities of Latin America’s Giant”

Engineer Hector Ovalle Favela’s Professional Development Background:

I started working at a young age, shining shoes, delivering newspapers, selling gum and working at a grocery store to earn pocket money. I was born in Gomez Palacio, Durango, where I conducted my studies through high school, until I headed to Mexico City to study civil engineering at the National Polytechnic Institute, then fate led me to work at ICA for 25 years. I began as a project manager, the lowest position for an engineer in the company and ended up as vice president and member of the board. When I completed 25 years at ICA, I decided it was time to leave the company, which coincided with the opportunity at COCONAL, which was in poor condition and a friend, who was a senior executive of the company, invited me to work there. I refused at first, but was then appointed CEO and now I’ve been part of it for 15 years.

What were the first challenges you faced at COCONAL?

During those 15 years, the company had a major metamorphosis; COCONAL came with a great background, but its top executives were already close to retirement and that held the business back. When I arrived, I decided to restructure everything, starting from recruitment and personnel, creating internal rules and working arrangements. After many long hours; we created a new order, reforming the company almost from scratch. My 25 years of experience in ICA supported me, allowing people to have confidence in the company.

What are the company’s competitive advantages over its main domestic competitors?

When I arrived, COCONAL invoiced 300 million pesos and now after 15 years, the figure has grown to 5.5 billion, meaning it is now making money. Most of the people who work here are recent college graduates, people who can be molded and adapted to the way we work. We train them and give them a number of challenges to solve and grow with us; we teach them to work and to be results-oriented. COCONAL’s team comprises 3,500 people, 250 of them are professionals, mainly civil engineers; they own shares and this also acts a motivational tool. Investing in our people is one of our advantages, everybody is in a win-win situation. We also have a great environmental program: we recycle materials and use photocells on the roads and in our offices. As such, there are two key days for our company. The first is January 12, COCONAL’s anniversary, which is dedicated to reforestation in our 125 workplaces. The second is World Environment Day, when we fix rural schools that are close to us, investing in their infrastructure: we paint, create sidewalks, basketball courts and teach about the environment. We have company biologists who advise us on environmental issues and best practices to benefit of our planet and how to engage people in that matter.

Mexico’s Moment and approved structural reforms has attracted a great deal of interest from investors and boosted economic growth. How is COCONAL making the most of such opportunities?

Opportunities are plentiful. During the first year of the current government our sales increased by 10% and by the second year another 20%. We have major projects in store like the construction of Mexico City’s new airport, road infrastructure, Jalapa’s airport, freeways; we’re venturing into wastewater treatment plants and we’ve already built our second one. We’re looking at a very large infrastructure program in the country.

COCONAL’s approach to date has been to focus on public works, d you intend to maintain this approach or you will seek to expand your services to other markets?

Yes, we’re looking to expand our range of services. There’s a major boom in the energy sector, so we’re looking at two opportunities. The first is gas pipelines, a lot of them will be built and in that area we have a North American partner to address the subject. The second category consists of hydroelectric dams; Mexico promised to generate more clean energy and to have 70% of generating sustainable energy by 2020; to reach that goal, about 10,000 kilometers of pipelines will be built and a dam each year. COCONAL wants to participate in the business, social and environmental benefits that these infrastructure works bring. Like all countries, Mexico has poverty issues, but it’s also a noble country with many investment openings that will create jobs and opportunities for all.

Is COCONAL a potential partner of foreign firms who don’t know the Mexican market and are uncertain how to succeed in the country’s construction industry?

COCONAL is a great partner for companies that want to come and invest in the construction sector. The main thing to understand is for your investment to generate profits, you must work directly on the project, not through a third party.

On the issue of major projects, the new airport in Mexico City will be stunning. COCONAL is part of the consortium that will help create this exciting project, so how are you preparing for this challenge?

The consortium is formed by nine companies, all of which are very proud to be involved and united in a great effort to achieve this magnificent project. The government has relied on us to meet the requirements of the work and provide the infrastructure required for the new airport: a terminal building, three runways, two of them civilian and one military. A task of such magnitude can only be done through a consortium like ours, which adds strength, work and talent to finish in the required time. Building this airport is a priority because the current airport handles 32 million passengers per year with limited runway space, which only allows a landing and take-off every hour, which cannot occur simultaneously due to the proximity between the runways. The airport is now too small for Mexico City, so the construction of a new one is urgent and not only for operational reasons, but also for national security. These are several reasons why the government chose a consortium to build such a showcase project. Within this consortium, there are highly-experienced constructors of waterworks, tunnels, runways and roads that will go around the airport area. There are three main areas that make up this great work, the waterworks, roads and the airport itself, which will add a great infrastructure with a value of close to 150 billion pesos. It is estimated that by 2020, three runways and the terminal building will be completed, with the new terminal able to handle 50 million passengers per year. At the end of the project we expect to have six runways and a building that can serve 120 million passengers a year.

What does COCONAL expect of water works, roads and runways?

We have extensive experience in these kind of works and believe our contribution to this project will be of great importance, not only for the company, but for the country as whole.

Where would you like to see COCONAL in 10 years?

I would like to see it has grown, increased its profits and gained a well-established presence in other countries. I would like the company to focus on young people with fresh ideas, who can lead the company on a path of constant innovation, always ready for new challenges. I would like to see greater growth and earnings and a consolidated presence in 1-2 countries.