Argentina Procurement News Notice - 36255

Procurement News Notice

PNN 36255
Work Detail The jump in the price of the dollar, added to the obstacles that the sector already had to build in a context of soaring inflation, forced the main players in the activity to rethink their movements. Guzmán resigned, Batakis took over and the price of the dollar began to rise like a balloon that a child lets escape on a summer afternoon. In just 20 days a dollar went from trading $239 to $260, later $293, reached $338 and now it is parked at $291, all within a framework of general inflation of between 5% and 7% monthly and close to 90% annually . With each jump in the exchange rate, each one of the economic sectors of the country was affected and many look at the ascent to the skies of the green ticket with the sadness of the aforementioned infant who knows that he will no longer see his red balloon. Prices change almost daily and there is one area that is in constant motion and for which stopping its activity until the economy stabilizes would make it fear total paralysis: that area is construction. The process of a work includes from the dreams of who is going to build, the dedication to find the right company or professional, planning and execution. In all this development there is a brick kiln worker, the owner of a corralón who sent his employee to offer him a fixed price for cash payment, the purchasing manager of a construction company who must give the go-ahead to later acquire that asset and the relationship between a client and an independent architect or company. Lets translate this example from the brick to each item. In order for it to be built, there are endless prices that must be maintained with a certain constancy. How much was the increase in construction costs in May Inflation plays a fundamental role, because although the value of construction per m2 in dollars has been somewhat stable over the years (between US$600 and US$850 m2) going through a construction process may require high psychic stress. What is it like to build in the context of a dollar jump of this magnitude? How did the activity change getting used to building in a context of maxi-inflation? Enrique García Espil is one of the most prominent urban planners in the country. In addition to dedicating himself to teaching and being one of the members of the young Argentine Academy of Architecture and Urbanism, he directs the construction company that he founded more than 40 years ago. “The first problem of inflation for a constructor today is the lack of prices; You cannot know how much a brick costs, and the fact that there is such high inflation makes it impossible to talk about the value of the materials, and if there is no value, we are unable to work. Ours is a job that requires prices” he declares. The same happens with the hiring of labor. "The guilds have adjustments planned until December, but you dont know if thats going to be the case or if theyre going to make new ones." Fernando Romay, the largest developer in the western area of ??Greater Buenos Aires, expressed the same opinion: "the current economic context affects the construction and real estate activity mainly in two variables: costs and income." In terms of costs, the greatest difficulty is evident in the scarcity or lack of construction materials "especially those with imported components or that are commodities" (equipment, steel, copper, aluminum, PVC, glass, etc)". He reports that “in parallel, the material price lists are modified with increases every two weeks on average, and the budgets for the execution of works sent by the contractors are valid for an average of 10 days, this scenario makes it difficult to project costs in the medium term. term". Among Romays ongoing projects is the new Parque Leloir Thays, a mixed-use urban development that ranges from an indigenous forest to offices, a commercial space, hotels, residences and garages. And on the client side? Altered markets The key is given by Martín Mieres, who was in charge of high-volume developments and has a vast track record. He warns that a middle-class couple who has savings for their first home must hire a turnkey and fixed price, "not one more peso." Because it is unknown what the cost will be in the future and that wear and tear is something that those who build today cannot bear. What is necessary is that the company in turn has everything ready (foundation, structure, masonry, installations, etc.) to resolve quickly and be able to solve with agility the purchase of materials or even have them already stockpiled. “We are working to execute the works faster.” He details that due to the lack of prices, and the reluctance of suppliers to sell, they must buy the materials dynamically and sometimes obtain them all together. "For example, there are works in which we quickly define what carpentry is and we go out to buy it." And that is transferred to each element. Romay says that in what is the direct relationship in a sale with a potential client that requires an apartment, garage or office, construction continues to be one of the most important reserves of value, for which the goods continue to be listed: "the instability in the exchange rate, demand retracts, which is reactivated as soon as the exchange rate stabilizes lateralizing, this is because the purchase of real estate is historically in our country a refuge of value for being quoted in dollars, and even more so in contexts such as the where access to the purchase of goods valued in dollars is restricted”. In conclusion, it provides that economic crises such as the current one require real estate developers to optimize costs and generate alternatives to traditional sales "in order to generate the necessary income to maintain the works at their normal construction rate." The concern is that not all real estate projects will be able to achieve this, so it may end up affecting the payment chains. This would lead to a breach of the commitments assumed towards the buyers of functional units. "Only the most experienced, financed and trained developers will be able to complete their projects in the midst of this context of economic crisis." More testimonials Miguel Corbalán is a bricklayer, he is 42 years old and lives in Merlo. He says that the prices of the corralones change every day. Even so, he found his work in the construction of houses in gated communities, given the post-pandemic migration of the middle class to greener places. Miguel "does everything from scratch" from remodeling, blacksmithing, metal structure work, roof assembly to home extensions. At the close of this note, the value of the labor was $55,000 per m2 (for the construction of a 4 x 4 room to be executed in a month and a half, including its own profit and that of two assistants) and in 10 days the value must rise to at least $62,000. How do you calculate your budget? “It is calculated day by day, it is very difficult, the corralones change prices every day, today you buy a bag of cement and it is $1,050 and then it is $1,070, those changes mean that the construction of the middle class and below is almost stopped completely and only builds the one that has some saving capacity, that can go buy to build later”. Another contribution from Miguel is that since inflation skyrocketed he began to charge a budget. In other words, whoever requests one, given the hard work it takes to do it and especially the time it takes, pays 15% of the total cost of the work at the time. "Because clients usually ask for budgets to then decide, and today making one is much more difficult than before." A curious fact is that I transferred the question to Emanuele Teranchina, a 48-year-old architect who is building three towers in Guadalajara, Mexico. He didnt know (or didnt want to) imagine what it would be like to build with a 6% monthly inflation or a material jump of 30% from one month to another, or even 100% inflation. “I cant answer that for you,” he told me frankly. "Here everything would implode (sic), everything would stop, nobody would buy, or sell, much less build." Teranchina added that it may be common for him to calculate up to 12% annual inflation in Mexico. Still, converting pesos to bricks remains a store of value. But today the juggling that someone who projects, sells, directs or buys a work must carry out each time requires a jugglers agility to pass everything quickly from one hand to the other without everything collapsing.
Country Argentina , South America
Industry Construction
Entry Date 06 Aug 2022

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