The Inter-American Construction Federation (FIIC) met with the Inter-American Development Bank (IDB) on April 20, 2020 around the topic “Hands on the Job – Towards a Safe and Efficient Resumption of the Construction Sector amid the Current COVID-19 Pandemic“.
The discussion between FIIC and IDB depicted how to promote the resumption of the construction sector while coexisting with COVID-19 in a safe and viable manner. To this end, several short and medium-term orientations and possible action plans were issued to put the construction sector at the heart of the economic recovery of Latin America and the Caribbean (LAC).
It was acknowledged indeed, that the construction sector plays a major role in LAC. It has enabled the provision and maintenance of essential infrastructure in the current context of COVID-19, such as water, transport and energy infrastructure networks, and their associated services: residential, freight and passenger transport. The construction sector also constitutes a major pillar of the LAC economies: more than 19 million jobs are generated in LAC, important supply chains are activated and the competitiveness of the countries in the region is supported.
Short-Term Orientations
These orientations are divided into two aspects:
- Return to the works and
- Viable return of the companies to the construction activity
The return to the works must be achieved in an environment that does not expose the employees working on the projects, their families and the population in the area of influence of the projects.
- The main measure would be to generate protocols and good practices in the construction sector, as well as to achieve their effective dissemination at the regional level to support the countries that are reactivating the sector;
- These protocols should be considered as living documents that require constant updating and adaptation to the particularities of each country. In addition, mechanisms for accompanying, supervising and following up on them are seen as necessary to ensure that this activity will not represent a risk for the community.
Concerning the viable return of the companies to the construction activity, financial measures were proposed to support construction companies in the context of the resumption of activities.
- The proposals include, among other aspects, the deferral of tax obligations, the establishment of solidarity funds for salaries and severance pay, and granting credit to small and medium-sized enterprises with public guarantees;
- In order to provide the necessary liquidity to companies, the proposal was made to speed up disbursements and advances in public works, ideally within 30 calendar days, since this type of payment usually involves longer periods;
- In contractual matters, there is a need to carry out analyses at the sector level on the possible effect of the restrictions imposed by the COVID-19 on the projects’ price, mainly at the operational level;
- In line with the above, analyses and assessments of risks associated with the resumption of works and their effect on project insurance policies would also deserve more detailed analysis;
- The unions expressed the need to carry out contractual assessments in order to consider force majeure causes as valid within the current pandemic.
Long-term Orientations
- The multiplier effect that construction activity generates, in addition to providing jobs, makes it an exceptional energizer for the region’s economies, which will be faced with recession scenarios exacerbated by pre-existing conditions that are not favorable to the sector. Carrying out a detailed analysis at the local level that allows for a more precise quantification of the multiplying effect of this activity on the region’s economies is depicted as essential;
- A fundamental need for LAC is to have project portfolios at the country level that guide and prioritize investments, and thus support economic reactivation. Projects that are quick to start, with a high level of maturity in their structuring (engineering already developed), of a medium scale that facilitates the allocation/consumption of resources and with an intensive use of labor are outlined as the most attractive to comply with this objective;
- In terms of prioritizing interventions, the multi-criteria evaluation carried out for the portfolio of future projects presented by FIIC-Venezuela, which incorporates: i) Gap closure, ii) impact on national competitiveness and iii) social impact, may constitute an interesting starting point for subsequent exercises in LAC;
- The Chilean experience in paving interurban road networks was mentioned as a success case that can be replicated in other countries of the region. Rural water and sanitation projects were proposed by the chambers as flagship projects to lead the recovery;
- The IDB and FIIC reiterated their willingness to continue building a collaborative technical agenda such as: strengthening the construction sector’s transparency, generating detailed information to inform decision-making, reviewing safety protocols for safe return to construction sites, and conceptualizing project portfolios to lead post-pandemic economic recovery in the region.
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COVID-19 Impact in LAC (April-June)
The current pandemic has severely impacted construction activity, in many cases paralyzing it. The most recent projection of the Chilean Chamber of Construction projects a 10.5% drop in aggregate investment in construction. In Mexico, losses are estimated at 6.6% of the national GDP and 7.1% of the construction GDP. In Guatemala, 40% of operating jobs in the construction sector are projected to be at risk. While, for the last 8 years, the Venezuelan construction sector has been registering a drop that now reaches 97% of paralysis.