Arquitecto José Graña Miró Quesada - Presidente Grupo Graña y Montero

Jose Graña President Graña y Montero

Press Tribune: Could you make a brief historical overview of Graña y Montero?

Mr. Graña: Our company was founded in 1933, with real estate construction as its main focus. By the late 40's we had expanded our business to road construction. It wasn't until the 60's that the company, riding on the back of a booming Peruvian economy, started participating in large scale industrial projects and became a relevant player in the local construction business. With the early 80's came the 50th anniversary of the company and a second generation of family members to its helms. It was my generation that started thinking about using our engineering knowledge to diversify into other sectors of the economy, establishing the base of what we have become today: a publicly traded group, with a market capitalization adjacent to US$1 billion, that operates through subsidiaries that are leaders in the local construction, engineering, oil and gas, infrastructure and information technology sectors.

Press Tribune: What are the main challenges that you experienced and how did you overcome them?

Mr. Graña: In our 74 years of existence we have experienced -and suffered- many economic and political crisis, typical of developing countries, and especially pronounced in the construction sector. Our focus of the past 5 to 10 years has been to shape the group to make it less vulnerable to economic downturns by strengthening our capital structure and increasing our participation in businesses that provide us with stable long term cash flows, such as toll road concessions and oil pipelines.

Press Tribune: What would be the main competitive advantages of Graña y Montero?

Mr. Graña: Definitively our brand and our outstanding track record. Nearly 75 years in business have allowed us to make our name stand for quality and reliability. These qualities have permitted us to participate in many of the most important development projects in Peru, and to establish a leadership position in the sectors in which we participate.

Press Tribune: Lima's landscape is changing rapidly with a construction sector that enjoyed the highest growth in 2006 with 15.5% growth. What is the latest major project that Graña y Montero undertook in Lima?

Mr. Graña: Graña y Montero has played a primary role in Lima's development. We have built one of the city's key express ways (the Via Expresa), most of its largest hotels, a significant part of its modern office space and numerous apartment buildings. We also developed and own Larcomar, an entertainment center in Lima's coastline that welcomes more tourists each year than Machu Picchu in Cuzco. Improving economic conditions of Lima's population, and broader access to credit, are driving us to focus on the rapidly growing and increasingly important low income housing segment. We were recently awarded a contract to develop a 3,000 unit housing complex, and aim to be building 10,000 units per year in the near future.

Press Tribune: Most of the company's revenues in 2006 came from mining and energy activities. According to you, which sector will generate the most revenues for Graña y Montero in 2007?

Mr. Graña: We believe commodities will continue to enjoy a favorable pricing environment over the next few years. We are confident that the mining and energy (especially hydrocarbons) sectors will continue to show significant dynamism and, therefore, will continue representing a significant proportion of our activity. Most of the players that are already operating in these sectors are undertaking expansion programs, and there are a large number of medium and large scale projects underway.

Press Tribune: Since the creation of the Camisea Project, Peru has become a place of interest for companies looking to invest in the energy sector. Do you have the necessary infrastructure in Peru to support the new projects in the energy sector?

Mr. Graña: No. Recent estimates indicate that Peru's overall infrastructure gap is approximately US$23 billion. Even though, there have been some recent examples of successful collaboration, such as the IIRSA (South American Integration Initiative) PPP program under which approximately US$1.3 billion is already being invested in building and upgrading road infrastructure that will interconnect the Peruvian Pacific coastline with Brazil, we believe that there is an urgency to step up the pace of development of public and private infrastructure. I am sure that the government and the private sector can work together to create the mechanisms to quickly address this situation. Today, Peru, with its political and economical stability and broad access to capital, is in an unprecedented position to drastically reduce the infrastructure gap. Likewise, Graña y Montero is already participating and is very well positioned to take advantage of the numerous opportunities that the infrastructure gap reduction will present.

Press Tribune: Once the FTA will be ratified with the U.S., what is the mutual benefit that you foresee for both countries?

Mr. Graña: I believe the FTA will provide the country with a framework of rules that will set the stage for a boom in private and foreign direct investment in the industrial sector, which is critical to the creation of jobs and the capacity of the country to export more value added production, rather than raw materials. Job generation will lead us into a virtuous cycle of economic expansion and wealth distribution.

Press Tribune: Over the past five years Peru has become very stable and very reliable, what can you comment on that?

Mr. Graña: Peru is living extraordinary times. The country is experiencing high levels of continuous growth in every sector of the economy and enjoying a fair degree of political stability. We are starting to focus on improving our competitiveness by enhancing infrastructure and establishing a more flexible labor regulatory framework. Our country risk premium is at record lows, and investment levels are at all time highs. However, both the private and public sectors need to further focus on making progress in achieving and consolidating social stability by targeting our efforts to the reduction of poverty and the improvement of the quality of life of many Peruvians.