Bolivian cement initiative

Bolivian cement initiative
Published: 02 July 2004

Bolivia’s President Carlos Mesa and the country’s cement producers have developed a three-pronged strategy to promote the use of domestic products and inject funding into the country’s highway program, Armando Gumucio, general manager of Soboce, the country’s largest cement producer, told BNamericas.  President Mesa issued supreme decree 27592 Tuesday to encourage the use of rigid paving in highway construction with cement producers providing credit for highway works.

The agreement is part of a three-part strategy that could be a benchmark for other Latin American countries according to Gumucio. He says the strategy will level the playing field between cement and asphalt to allow cement to more fairly compete, as it establishes a flat price for cement used in highway projects, and allows cement companies, pension funds and other entities to finance highway projects.

"Bolivia does not produce asphalt so we think under the ’Buy Bolivian’ initiative it is more interesting for the government to buy cement in place of imported asphalt products as it is better for the trade balance. In the past, international bidding processes were for asphalt so it was difficult or impossible for cement to compete for highway projects," he said.

The lower initial cost of asphalt gives it a 5-6% cost advantage over cement. A methodology has been developed using specialist software provided by World Bank to performs an economic evaluation based on initial cost, the cost of building the highway, and maintenance through which cement can be fairly and competitively compared with imported asphalt. Future projects will solicit bids for both materials.  "This is an opportunity for the cement companies and constructors that have the technology to build rigid paving to participate. A comparison of the economic value gives cement a 10-25% advantage depending on the characteristics of the section," he said.

With the establishment of this rationale, the cement companies and the government agreed a flat price of US$89/t for cement for works on the country’s primary highway network. "This is 20-25% lower than the market price and avoids corruption and other complications," Gumusio said.  Bolivia’s cement producers Soboce, Fancesa, Coboce and Itacamba have also agreed to invest US$50m over the next five years on highway projects in the regions in which they operate.