Brazil is the world’s third-largest exporter to Ecuador, the first and second being the United States and Colombia, in that order. In 2002, Brazilian sales to Ecuador totaled USD 405 million. In 2003, that figure totaled USD 360 million. Since 1988, when the Group began building its first project in Ecuador, Odebrecht has been making an important contribution to the solidification of relations between the two countries. As it marks 16 years in Ecuador with two new projects, now underway, and several completed projects that are producing important results for the nation’s development, Odebrecht can look back on a track record characterized by participation in ventures with a major social impact, and the continuous education of the Group’s team members.
“Ecuador has tremendous potential for growth and resources generated by exports of oil, its main product,” stresses Sérgio Florêncio, the Brazilian Ambassador to Ecuador. “This country needs infrastructure projects, which present opportunities for Brazilian businesses. The energy sector, for example, will be a target of large investments, including the construction of hydroelectric plants.” Over the years, Odebrecht has obtained loans totaling USD 874 million (from Banco do Brasil and BNDES, Brazil’s National Economic and Social Development Bank) for projects in Ecuador. For eight of those years – the length of time he has lived and worked there – Fernando Reis, 39, Construtora Norberto Odebrecht’s Senior Officer for Ecuador, has kept a close eye on the results of those investments. Fernando was the Contract Director for the Manabí Project, where another project is being developed with Odebrecht’s participation: the Carrizal-Chone Multipurpose System. Another new enterprise is the San Francisco Hydroelectric Project, the result of the Ecuadorian government’s prioritization of investments in the energy sector that Ambassador Sérgio Florêncio mentioned.
“Odebrecht is focusing on special projects in Ecuador,” observes Fernando Reis. “We want to add quality to the domestic market in this country instead of simply being the competition.” According to Fernando, the contractor is achieving this aim on the basis of the full application of the Odebrecht Entrepreneurial Technology. “We are satisfying our clients in Ecuador through TEO (the Odebrecht Entrepreneurial Technology), which also enables us to groom new team members who will ensure the organization’s future in this country.”
The San Francisco Hydroelectric Project, Odebrecht’s first venture in the Ecuadorian energy sector, will have a generating capacity of 212 MW (megawatts). It is located in Tungurahua Province, in the central part of the country, near the town of Baños. The contractor is a joint venture of Odebrecht, Alstom and Vatech. Under construction on the left bank of the Pastaza River since November 2003, the project includes a system of tunnels that will connect the San Francisco plant to the existing Agoyán hydroelectric plant on the same river, resulting in the completion of the Agoyán-San Francisco hydroelectric complex. This is a strategic undertaking for Ecuador, because the nation is suffering from an electricity shortage and currently imports energy from neighboring Colombia.
The San Francisco project consists almost entirely of tunnels, galleries and underground caves. A 7-meter-diameter tunnel begins at the point where the San Francisco facility is connected to the Agoyán hydroelectric plant, and runs through rock for 11.2 kilometers. This tunnel will convey water to the powerhouse, where two generator units will be installed (see infographic). The project also includes the installation of a 230 kV (kilovolt) transmission line leading to the Totoras Sub-Station in the Ambato municipality area.
The San Francisco project will increase Ecuador’s electricity generating capacity by 12%, supplying 1.427 GWh (Gigawatts/hour) per year to the National Interconnected System. When it begins operations, it will save Ecuador USD 30 million per year. This amount corresponds to the price of oil now being used to fuel thermal power plants, a commodity that will become available for export. At present, thermal power plants are the nation’s main source of electricity.
The teams building the San Francisco project are currently at work on the access tunnel leading to the powerhouse, and the Ventana (Window) 4 Tunnel. “The execution of such a complex undertaking, which is almost entirely underground, is a challenge that we are surmounting with the help of our team members’ experience,” says Contract Director José Conceição, from Odebrecht. He adds, “The Brazilians who form part of the project’s Management Team have either spent a long time in Ecuador or have previous experience on EPC projects in other countries. The non-Brazilians on the team have been with Odebrecht in Ecuador for 15 years, which adds value to the company’s performance.” The project is being built under an EPC (Engineering, Procurement and Construction) contract.
The San Francisco Hydroelectric Project is part of a program aimed at fully developing the central Pastaza River Basin. Feasibility studies for the project began in 1976. In 1986 and 1987, the developers determined that the best way to execute the project was to establish a direct connection with the Agoyán hydroelectric plant. Following a tender whose results were announced in March 2000, the Ecuadorian Government signed a concession agreement with HidroPastaza S.A. authorizing the company to finance, build, operate and maintain a hydroelectric plant with a maximum capacity of 230 MW and a 230-kV transmission line for 30 years.
Two companies form HidroPastaza: Hidroagoyán (80%) and Odebrecht (20%). Hidroagoyán is a private-sector company fully maintained by the Ecuadorian Government’s Solidarity Fund, an agency of the Presidency of the Republic (see box). The construction of the San Francisco plant will require a total investment of USD 286 million, USD 243 million of which will be financed by BNDES, Brazil’s National Economic and Social Development Bank. HidroPastaza’s shareholders will supply the remainder in the same proportion as their holdings: 80% from Hidroagoyán and 20% from Odebrecht.
The project was made possible by project financing – financial engineering that makes the venture self-supporting. This is the first project-financing venture Odebrecht has undertaken in this country. “This undertaking is a milestone for Odebrecht in Ecuador,” says José Conceição, also referring to the fact that the project marks the contractor’s debut in the nation’s energy sector. “It is also a milestone for Ecuador.”
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According to Odebrecht’s Sadinoel de Freitas Júnior, Executive Vice President of HidroPastaza, “Odebrecht’s familiarity with Ecuador’s realities, laws and agencies was a key factor in winning this contract.” In his view, this makes the company’s responsibility even greater. “There are high expectations that this project will be delivered quickly so that it can start generating energy as soon as possible. The nation can’t wait.”
In regional terms, expectations are just as great. German Anda Naranjo, Executive President of HidroPastaza, cites just a few of the project’s socioeconomic advantages: “The demand for goods and services will increase in Tungurahua Province. As the project moves forward, new job opportunities will arise, not to mention the tax revenue generated, which will have a decisive impact on a region that is not an economic leader. If it is well managed, the venture will add value to the province’s assets.”
German is referring to the province’s natural resources. Baños (literally “baths”) is famous for its waterfalls, which gave the town its name. The area’s mountains, rain forest and lush valleys drained by several rivers attract visitors from around the world, particularly ecotourists. However, the region’s biggest natural attraction is the Tungurahua volcano, which has been in constant activity since 1999. A constant source of delight and danger, its mouth is 5,016 meters above sea level. Members of the San Francisco joint-venture contractor each carry an emergency kit containing a flashlight, a mask and other equipment that might come in handy at any moment. It could even save lives.
Providing support to the local communities is a priority among the social projects Odebrecht plans to carry out during this project, including job training for work in the tourist sector and environmental education. “We have undertaken commitments to the community. We want to build a project that helps improve people’s socioeconomic situation,” stresses Eduardo Barbosa, from Odebrecht, the joint venture’s officer responsible for Administration and Finance. However, education is the main focus of the company’s initial contribution to the community, which is remodeling a school in the village of La Marced. Fifteen children study in the school building, which was built in 1965 and is in very poor condition, with a damaged roof and crumbling walls. Odebrecht is supplying the materials and technical know-how needed to put the school in shape. Members of the community are providing the workforce. Community leader Manuela Saravia, 62, contacted Odebrecht to get the company to help with this project. “Children are the future of life,” says Manuela. “I’m poor, and I’m interested in helping poor people, particularly children. I do everything within my power to help them.”
The San Francisco project is already creating job opportunities for local residents. Most of them used to do farm work, but now they have fresh prospects for professional growth. This is the case with Ivan Pozo, 34, who was born in the village of San Francisco. Until the project got started in November 2003, he planted tomatoes. “This is a chance to grow,” says Ivan. “It’s an opportunity for people like me and a lot of childhood friends of mine who are working on the project. It’s also good for our area, because jobs bring development.” Excavation supervisor Cicerón Chávez, 57, was not born in those parts, but he understands how his team member feels. A native of Babahoyo, a town near Guayaquil, the largest and most populous city in Ecuador, Cicerón has been with Odebrecht for 15 years, working on the company’s projects in Ecuador. He is motivated by the fresh challenge the San Francisco Project presents. “I like to learn, and I want to learn more. You can always learn something new.”
Odebrecht is partnering with Hidalgo e Hidalgo, Ecuador’s largest contractor, on another project that will have a strongly positive socioeconomic impact for the entire nation and Manabí Province, where it is being installed: the Carrizal-Chone System, part of the Trasvases de Manabí Integrated System.
Located in Western Ecuador, Manabí is the nation’s third most populous province, having 1.2 million residents. Its main cities are Portoviejo (the provincial capital), Manta, Chone, Bahia de Caráquez, Calceta and Tosagua. Begun in September 2003, the Carrizal-Chone System project will solve the problem of water shortages during the dry season and prevent winter floods. The project is part of the Integral Manabí Water Plan (PHIMA), which is being carried out under the responsibility of CRM – the Manabí Water Management Corporation. PHIMA is the result of a painstaking process of technical, economic, financial, social and environmental assessment undertaken from 1987 to 1991, and includes 8 projects. Carrizal-Chone is one of them.
“PHIMA was created to carry out projects that will have a major social impact,” says CRM engineer Juan Peláez, the head of PHIMA and the person responsible for the conception, execution and administration of all the projects included in the plan. “More than just building the projects, however, we want to see them benefit the local communities. And Odebrecht is helping us do that. The CRM, PHIMA and the joint venture of Odebrecht and Hidalgo e Hidalgo enjoy a harmonious relationship, particularly because we all want to improve the local population’s quality of life and generate wealth.”
The Carrizal-Chone Project is named after two important rivers in the area. It includes the installation of a system of irrigation channels using water from the La Esperanza Dam reservoir (see infographic). Flowing under hydrostatic pressure from the reservoir, the water will travel much further than a gravity distribution system would allow. If necessary, water will also come from the Daule-Peripa reservoir (through an 8-kilometer tunnel), a project that Odebrecht built and commissioned between 1999 and 2001 as part a system that conveys water to the Chone and Portoviejo River Basins.
The installation of a pressurized network resulting from the optimization of the original design made it possible to increase the irrigated area from 5,900 hectares (about 14,580 acres) to 7,250 hectares (about 17,900 acres), including large areas in the highlands. The system is built of polyester pipe reinforced with fiberglass, including an underground trunk line and aboveground branch lines installed at a maximum height of 60 cm, supported by concrete piles made at the construction site. The system will provide access points for over 2,000 users (one for each property) identified through a socioeconomic registry. The system will benefit as many as 120,000 people.
According to Contract Director Eleuberto Antonio Martorelli, from Odebrecht, “We suggested to the client that pipe should be used instead of building conventional channels because this way we can minimize geological risks and silting, and improve water quality. The final objective is to increase farm production levels and provide a better socioeconomic situation.”
The aim of increasing production capacity is based on a farm development plan, which includes the introduction of productive poultry farms. As Martorelli explains, “These poultry farms are actually training centers for water use. Our expectations are that users will be better prepared to more efficiently manage the entrepreneurial, environmental, and technological aspects of their businesses.” Local farmers will be encouraged to plant short-cycle crops, such as manioc, melons, rice, tomatoes, watermelons and maize, as well as growing year-round crops such as bananas, cocoa and mangoes.
Diversification is a must. Ariosto Alava, 46, is the father of six children. He plants cocoa and bamboo and raises cattle in Matapalo, one of the communities that will benefit from the project. He believes that the objective Martorelli stated will be fully achieved. “This project is a major step forward,” he says enthusiastically. “Where there’s water there’s production. Today we only produce when it rains. When this project is finished, the water supply will be guaranteed and we’ll be able to diversify our crops.”
At present, Manabí is experiencing the drama of the rural exodus. The province has a tradition of producing emigrants. Many go to Spain, Italy and the United States. Ariosto’s own family is in that situation: the eldest of his five daughters has moved to Spain, leaving her four-year-old daughter Liz in the care of her grandparents. Ariosto has four steady employees. At harvest time, he needs another 10 hands. He wants the families in his community to stay together. He also wants to create more jobs on his farm.
Construction of the first stage of the Carrizal-Chone should be finished by December 2004. In addition to 7,900 hectares of farmland, the project will also benefit 5,400 hectares used by shrimp growers. Shrimp is one of Ecuador’s main exports, and Manambí Province is one of the country’s leading producers of this commodity, which is grown in an estuary environment where salt water and fresh water come. If there isn’t enough fresh water, the oxygen level drops and productivity falters. In this context, the New Simbocal Dam, which the Hidalgo e Hidalgo contracting company is building at the mouth of the Chone River, is a crucial project. The dam will regulate the amount of salt water from the Pacific and fresh water from the Chone River that enters the shrimp-growing area.
Hidalgo e Hidalgo Director Aurélio Hidalgo observes that projects like the Carrizal-Chone System are essential for improving Ecuador’s infrastructure. A far as its execution is concerned, “We have to join forces to build major projects like this one. It makes it easier when the contractors building a project have already worked together.” Odebrecht previously subcontracted Hidalgo e Hidalgo to help build irrigation systems on Santa Elena Peninsula.
One of the main characteristics of Odebrecht’s work in Ecuador is grooming new company members. The Carrizal-Chone Project reflects this spirit. Young Ecuadorian and Brazilian professionals are finding growth opportunities on this project. Ecuadorians Giovanni Palácios, Mário Costa and Gonzalo Díaz are on the Management Team. They are respectively responsible for the Joint-Venture Administration, Contract Administration and Farm Development programs.
Ricardo Vieira and Juvenalito Gusmão are Brazilian civil engineers who arrived in Ecuador in January and February 2004. A native of São Paulo, Ricardo, 32, is married with two daughters and works on the Commercial Program led by Nilton Teti. Juvenalito, 33, is married with one daughter and works on the Production Program under the leadership of Marçal Silva. Their families are already adapting to their new life in a different country. For the two men, work is a constant source of motivation.
“This is a tremendous personal and professional challenge,” says Ricardo, reflecting on his first international experience. “At Manabí, we are going beyond engineering by bringing job skills to members of the community.” Juvenalito is also openly enthusiastic about this experience. “It’s a different language and culture, and mainly an opportunity to work on an important project for this country’s development. All this is highly motivating.” On the San Francisco Project, a Brazilian from Bahia, Gustavo Belitardo, 30, is working on the Engineering Program under the leadership of José Roberto Brandão.