Exporting Prefab Homes - Chile and Haiti

Published: 16th September 2010
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During the last several years the systems for transporting and installing panelized homes, prefab homes, and kit homes have developed to the point that there is a highly competitive international market for selling prefabricated building systems.

Companies from Russia, Europe, China, and the US vie for business for large social projects, as affordable housing for temporary workers at large hospitality and infrastructure construction projects, and as shelters for remote outposts of all kinds.

In addition to prefab housing and prefab building projects that are part of long-term government planning or long-term private business development, there have been many natural disasters that have wiped out a large swath of housing stock and quickly created a market for the international trade in export prefab packages. In 2010, Haiti and Chile's earthquakes have been the major international markets for new construction created by natural disaster.

Our company has been involved in the process of proposing our prefab systems to clients and government in both countries. It has been striking to see the difference in the two.

Haitian projects typically come with limited information and require a lot of creative assumptions to allow for a healthy and detailed proposal to be generated by our company. I do not believe that any of the projects we have bid have either been awarded or started yet, as of 8/27/10. To my knowledge, the only projects that have started in Haiti are small private jobs, typically funded by speculative prefab factories or church and community groups rebuilding the social and religious buildings in Haiti like schools, orphanages, and churches. I do not have any experience to report on the type of construction and development companies from Haiti, but I can tell you that the larger companies that we have met have all been non-Haitian companies hired by outside NGOs to manage work there. These companies must have Haitian sub-contractors, and workers, in Haiti, but these outside groups appear to be the ones managing the projects because of Haiti's limited construction and development experience.

Chile's process of providing RFPs (Request for Proposals) and obtaining detailed public comment has been surprising to me, and I have visited the country twice prior to this year and have spent a total of about three months in Chile. Their government and professional class is equal to the level of their US counterparts, without question.

The Chileans that are provided vouchers to pay for housing reconstruction are required to group up with a minimum of 50 other homes, set up through their local municipalities. This gives the people both buying power when they go to contract a job and also allow for efficient, and fast reconstruction. The voucher program will help rebuild the community quickly while providing a near-term economic benefit to the construction companies and materials suppliers and via wages to their employees that then generates economic benefit back into the community. There are projects of reconstructing an entire neighborhood that are almost completed now, with today being the 6 month anniversary of the earthquake.

Our meetings in Chile have been with large, professional construction companies that may see a boost from getting a large social housing reconstruction project, but they do not expect to have much of a difference in total revenue as they were already completing $100 million + projects every year. The plans and engineering we have received has been thorough, detailed, and our questions have been answered quickly. We were provided accurate information about the project types to be built, the design, style, and structure of these buildings, and it appears that our information was thoroughly reviewed.

The available market for future projects is markedly different.

Haiti is completely dependent on foreign donations to fund the reconstruction. They can't accomplish anything without donations, and donations breed a lot of unsavory characters waiting with their hands out for a piece of the action. If the foreign donors decide every house has to be made out of mud, then that is what will have to happen or nothing will be built with the donors money. Or they could force the Haitians to use stacked rocks, or the donors friends building system, or anything other than the best and most efficient modular or panelized building system for the specific project that is being built.

Chile has a sovereign wealth fund primarily from taxes on copper mining that can almost pay for the entire reconstruction, if they wanted to empty the account. This means that Chileans can confidently act to fix their situation in the best way they can come up with because they control their own destiny. If they want to borrow money, their Standard and Poor's Credit Rating of A+ allows them to borrow it at very low rates. If they want to pay cash, they pay cash. At no point can an outside government or entity force them to do anything that they do not want to do. This means that unless the contractor or developer of a project is not exposed to all of the available options, they will choose the most efficient and best system of construction for their project. Building systems like panels or prefab packages are the most efficient way to build construction projects, and the best supplier should be picked, not the one with the best connections.

Chile and Haiti are a study in contrasts, and they will continue to diverge on their paths to reconstruction as we get farther away from the time that each earthquake happened. Haiti still has an opportunity to come through and rebuild their country in a positive and sustainable way, as they have one major benefit that Chile does not have. There is a long way up to go. Many of the best minds in the construction, development, city planning, and social and government industries are focusing on Haiti and putting human and financial capital into the country in a way that has never happened before. It is like people woke up one day and realized there is actually an island off the coast of Florida where people are are starving and terribly suffering, even though it has been happening for a long time. That wake up call has created an extremely valuable opportunity for Haiti and benefits are being seen, although at a slower pace than everyone would like (especially the Haitians living in tent cities), and at a high cost in human lives.

In both Haiti and Chile, the competition for business is fierce. I have heard anecdotal stories from associates who visited Port-au-Prince that there are guys with their factory brochures on the streets trying to find anyone they can to buy their product. If true, it demonstrates the efforts people will go and the personal danger that they are willing to risk to sell product. I guess if you can get tens of thousands of entrepreneurs to go across the world to Iraq to help rebuild a country in a time of war, it isn't that much of a jump from the US to go to Haiti. In Chile, one of the government ministers of China and several European nations have visited with contingents of private businessmen, trying to secure business for their constituents. We are aware of plans and bids from companies in at least ten different countries for projects in Chile.

Companies can use the internet to provide information via the internet so that different parties can understand where the others are coming from, and what services they want to buy and provide. A big positive now is the prevalence of automated translation engines for websites, which while still imperfect, can translate in most cases the general intent of the website into almost any language. This has the effect of providing a data multiplier of many, many times on the available information in each individual language, and brings businesses closer together and closer to making deals.

When the market grows for construction materials in places that cannot build enough of their own with domestic sources, there is a great opportunity for prefabricated building suppliers. Haiti is a huge market if the cash donations ever arrive for this because they need strong structures built quickly and simply, and hopefully at a low cost, and their experience in large projects practically does not exist. Chile's is already thriving, with professional project managers, engineers, superintendents, and all of the people you need to accomplish large projects, but most importantly the money is already there. The challenge in Chile is that they may be able to complete many of the projects using their large domestic lumber reserves and locally sourced materials, rendering importers without as large of a market. The next six to nine months should flush things out, when Haiti gets past the wet (Hurricane) season and Chile starts reporting on the projects for housing, schools, and hospitals that have been bid out but not started yet.

http://www.cuttingedgehomes.net/

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