Santiago sits at the base of the Andes Mountains, their dazzling peaks a potent reminder of the soaring heights of the city's economic promise—and the treacherous freefall it may face as the worldwide fiscal slump hits home.
Santiago's presence looms large in Chile. Home to more than five million residents—nearly one-third of the country's population—the city generates approximately half of Chile's GDP. In great part due to the copper boom, Santiago secured a spot on City Mayors’ list of the world's 50 richest cities based on personal net earnings in 2008.
The city is a vital business hub—not just for Chile, but for neighboring countries as well. In an annual MasterCard survey of the best financial and commercial cities worldwide, Santiago was the highest ranked in Latin America for 2008.
But the world's economic crisis and, more importantly, a steep decline in copper prices, have rocked Santiago's solid fiscal foundation. The downturn also has stalled some major projects. Yet it's also forcing companies to take a more disciplined approach to project management as they look for ways to navigate the global economic storm.
SUSPENDED ANIMATION
As the main processing center for Chile's copper exports, the city and its economic fate are inextricably linked to the commodity's price, which has plummeted in recent months. Chile's state copper commission estimates the average copper price for 2009 at $1.60 a pound ($3.5 per kilogram)—less than half of what it was going for in July 2008. Not surprisingly, copper companies have put many projects on hold. Chile's not-for-profit copper industry think tank, CESCO, estimates companies in the sector slashed their investment plans by as much as 25 percent from September 2008 to January 2009. The organization doesn't expect these companies to rebound any time soon and actually forecasts a potential 1 percent drop in Chile's copper output.
Among the companies experiencing difficult times is the state-owned Codelco. One of the world's largest copper producers, the Santiago-based company announced in December it was delaying the $450 million expansion of its El Abra mine.
But mining projects aren't the only ones being affected by the dire economic conditions.
In March 2008, one of Latin America's largest retailers, Santiago-based Falabella, announced a $914 million investment plan that included projects to build new stores and malls. By January 2009, though, the company slashed the plan to $305 million, citing the precipitous drop in consumer demand.
Cencosud, another major Latin American retail developer, also announced heavy cuts, slicing its $500 million 2009 investment plan by $97 million. The move has already affected the retail giant's ambitious Costanera Center project—and the Santiago skyline. In February, Cencosud halted construction on the Costanera Center tower. The project is designed to house 300 stores, a food court, movie theater and a game center with a bowling alley—making it Chile's largest mall. But populating the site requires a large number of business tenants, a tough proposition in the current environment.
| Organizations don't always have a defined process that supports the mission of the project manager. —Claudio Madariaga Cádiz, PMP, Triada Solutions, Santiago |
MASS PROBLEMS
Santiago's ambitious public transportation transformation hasn't exactly been a smooth ride.
Launched in February 2007, the Transantiago initiative called for replacing the city's outdated buses with energy-fficient versions. Those green machines would then be rerouted to connect passengers more easily with the city's metro, an underground rail system that's also being expanded.
It didn't turn out to be so efficient.
Time magazine dubbed Transantiago “The Mass Transit System From Hell” in late 2007.
Apparently, many residents agreed with the assessment and complained their commute times had more than doubled.
At the time, the system was hemorrhaging more than $1 million per day. To combat losses, Santiago's metro president requested a system-wide increase in fares in late 2008, but when the price jump went into effect, there was another project snag.
Software from Chilean IT firm Sonda wasn't designed to handle the fare adjustment, and officials said the glitch could lead to further financial pain.
In 2008 alone, the system lost $580 million and that number could reach $550 million this year—and that's not counting the drop expected from the IT problems.
Complicating matters was the fact that the metro infrastructure also needs urgent assistance. And the government looks to be planning a revamp. In December 2008, Business News Americas reported that Chilean President Michelle Bachelet expressed interest in developing the city's metro system in 2009.
To accommodate a growing number of metro passengers, Santiago will add capacity to two major lines, adding 32 kilometers (20 miles) to the system. Scheduled to begin in December 2009, the project will be run by Systra S.A., a French consulting firm specializing in public transportation and project management. After the upgrade, the metro system will connect 105 stations and cover more than 104.5 kilometers (65 miles).
In the meantime, the work on Transantiago continues. In March, the Chilean transportation ministry submitted a $1.5 billion financing request to congress to support the project through 2014. The nation's transport minister also proposed that the same amount be invested in other regional transport initiatives during the same period.
BUS PHOTO COURTESY OF WIKIPEDIA
“For now, it makes no sense to keep construction going at its current pace if we are unable to rent out the installations of the Costanera Center,” a Cencosud spokesperson told The Santiago Times.
The paper also reported that Chile's Secretary of Labor called the project closing “a worrying sign.”
The 300-meter (984-foot) structure will rank as Latin America's tallest building, but for now the completion date remains a mystery.
HELP ON THE WAY?
Chile's government is well-aware of the warning signs and is taking action. In January, President Michelle Bachelet announced a $4 billion plan designed to create 100,000 jobs. Beyond stimulating the economy, the initiative would also open up opportunities for project managers. Approximately $700 million may be earmarked for public-works projects ranging from repairing streets to building schools.
“It will generate economic activity and jobs and leave projects that will benefit the entire community for decades,” said President Bachelet, according to the Associated Press.
But the real growth area for Santiago's project managers might come from environmental endeavors. Situated in a basin, Santiago produces and traps a significant portion of the country's airborne pollutants, a concern that's fueling interest in projects aimed at improving the environmental conditions of both the city and the nation.
GREEN GIANT
PHOTO COURTESY OF WIKIPEDIA
TITANIUM LA PORTADA stands as one of the most prominent buildings in progress on Santiago's skyline. When complete, the 52-story skyscraper will be among the tallest buildings in Latin America. It's also taking Santiago's green aspirations to new heights. Titanium La Portada is the first project in South America to be pre-certified by the U.S. Green Building Council LEED (Leadership in Energy Efficient Design) program.
To achieve that distinction, the $120 million project had to meet strict requirements ranging from indoor air quality to the efficient use of materials, water and energy. To maximize the use of natural light, for example, the building features floor-to-ceiling windows. In addition, sensors control electric lights, so the building is expected to use 20 percent less energy than comparable structures. Titanium La Portada will also include high-efficiency thermo-panel walls to filter solar radiation. And each floor will include recycling stations, while 70 percent of the building's ground level will consist of public spaces, including gardens and galleries.
Senarco, the Chilean construction firm commissioned to build Titanium La Portada, began work in December 2006. The official project website reports the construction pace is 2,500 square meters (26,910 square feet) per week, but that wasn't enough to keep the effort on schedule. The original completion date was slated for December 2008. Now it's expected to finish in 2009.
Over the course of the project, the team has had to overcome a number of engineering challenges. For starters, the building had to be able to withstand strong winds and earthquakes. Rodolfo Saragoni, civil engineer and academic of the faculty of engineering at the Universidad de Chile, told the Chilean newspaper El Mercurio: “We are designing these towers to withstand the largest earthquakes that could occur in the central zone of Chile ... and register around 8.5 on the Richter scale.”
To prevent damage caused by earthquakes, the skyscraper uses reinforced concrete to absorb shocks. Steel plates inserted every three floors should also help diminish vibrations. Extensive wind tunnel tests were conducted to assess structural stress caused by turbulence, and modifications were then made for safety and efficiency. “Wind is as important a factor as a severe earthquake,” Mr. Saragoni told El Mercurio.
A recent report from the state-run National Energy Commission indicated Chile currently produces about 0.3 percent of the world's carbon dioxide, and the country's emission levels could quadruple during the next 20 years. Chile's energy minister, Marcelo Tokman, says the country will focus more on wind and solar power to conserve energy and reduce emissions. The idea has promise. A recent study conducted by the Universidad de Chile and the Universidad Técnica Federico Santa María suggests that within the next two decades, Chile could address 40 percent of its electricity needs with environmentally friendly energy sources—if they're available.
CHANGING LANDSCAPE
The economic uncertainty is changing the way project management is being viewed and implemented in Santiago and in Chile as a whole.
“Initially, project management was assigned to the functional staff of the company,” says Franco González Lecaros, president of the PMI Santiago, Chile Chapter and project manager at BancoEstado, a local financial institution.
“These people were working on temporary and part-time ways to manage projects,” he says. “In this scenario, the projects were managed by informal methods and techniques.”
But the intense economic pressure to do more with less is putting the spotlight on the value of project management.
“Global uncertainty and issues of funding, as a result of the international financial crisis, have caused indefinite suspension and changes in the schedule and scope of projects,” Mr. González Lecaros says. “Today, organizations recognize that to be viable, they need to carry out successful projects. Projects must be managed by professionals with training and experience, using formal techniques and tools. In this context, companies have made changes to adapt their structure to organizational management projects.”
Companies are also reevaluating the way they hire project managers. These days, they simply can't afford to bring on anyone without a real evaluation of that person's skills in managing projects. The shift has led local universities to offer postgraduate and master's programs in project management.
But not everyone is convinced.
Despite the growing interest and importance of project management, Chilean business leaders haven't yet fully embraced the profession, says Eduardo Rodriguez, senior project manager, civil engineer, industrial operation and IT specialization at Santiago-based E+PM Project Management.
“Some old-fashioned people view project management as something that requires them to fill out too many papers and do a lot of work before they can benefit from it,” he says.
That means project managers often have their work cut out for them.
“Organizations don't always have a defined process that supports the mission of the project manager,” says Claudio Madariaga Cádiz, PMP, a project manager for Triada Solutions, a consulting firm based in Santiago.
Project managers sometimes have to rely on their own skills and expertise to function effectively.
“The project manager better have the ability to assess the situation and generate processes, and a methodology that allows him or her not only to lead the team, but also to [provide] serenity to the project sponsor because he or she needs timely and reliable information,” says Mr. Madariaga.
Although the reluctance to embrace formal process can be a stumbling block, Mr. Rodriguez does see progress.
The increasing complexity and scope of Santiago's projects is creating a demand for project managers who bring different skill sets and knowledge to the table. Companies are looking for “project managers who can manage multiskilled teams, part-time people and subcontracting companies,” Mr. Rodriguez says.
IT projects in Santiago, for example, are not only getting larger but also increasingly integrated, he says, and companies need project managers who offer more than technical skills. Project managers must be able to take ownership of projects and provide direction to a wide variety of teams.
“They need people with leadership capacities and a strategic view. I think half of [project management] problems could be solved with better planning and control, but the more difficult ones need to be solved through good people relations,” Mr. Rodriguez says.
The increasing presence of multinational project players is also sparking changes in project management.
“Global projects in Santiago need to be viewed well by international partners. That's pushing companies to have project management based on certified skills,” he says.
“Recently, some big projects, especially public IT projects, are requiring Project Management Professional (PMP)℠ certification,” says Mr. Rodriguez.
Chile's economic ministry, for example, launched an IT initiative financed by the International Development Bank (IDB). But to get the funding, IDB requested that a project management office staffed with professionals familiar with PMI and project management methodologies be put in place to manage the effort. And on an automation project for BHP, IBM Australia specifically requested a PMP® certification holder to manage the project in Chile and to work with the Australian team.
The need for certification has not been lost on Mr. Rodriguez. After more than 20 years in project management, he is planning to obtain his PMP certification this year. “It's a priority for me now.” PM