Latin America Biannual Construction Market Report 1Q/2Q 2024
Hot topics
Climate change
The El Niño weather phenomenon has brought extreme weather to the Andean region.
The Amazon River, which has its source in Peru, is suffering from severe drought, contributing to wildlife deaths. Whilst the Pacific coast of South America is seeing intense rain and flooding from high tides.
A previous United Nations report highlighted how extreme weather and climate change impacts, including mega-drought, extreme rainfall, land and marine heatwaves and glacier melt, affect the Latin American and Caribbean region with far-reaching repercussions for ecosystems, food and water scarcity, human health and poverty.
In March 2023, the Peruvian government announced it was expecting to spend more than $1 billion to cope with the effects of the El Niño and the ongoing impacts of climate change. Projects run by the National Infrastructure Authority, as well as the private sector, continue to mitigate future effects. Gleeds is part of a joint venture with Mace and Arup to deliver some of these projects.
The impacts, plus projects for mitigation and resilience, have a tremendous financial toll. A study in Science journal, highlighted by Vox, looked at the value of damage from previous El Niño events. The El Niño in 1997-98 led to $5.7 trillion in income losses worldwide. However, the biggest impacts were for countries like Peru, which experienced the greatest effects of the weather. The study found that economic growth five years after the event had declined by 6.2 percentage points, with income for the average Peruvian £1,246 less in 2003 than it would have been if the El Niño had not occurred.
There are concerns about how future climate changes will intensify El Niño events. A vital part of the strategy for events moving forward is anticipating threats rather than just responding to them. The World Bank highlighted, ‘For every dollar invested in risk reduction, you save four dollars in economic impacts.’
At COP27 in 2022, countries agreed to establish a Loss and Damage Fund to assist climate-vulnerable countries financially. The fund was officially operationalised at COP28 in November 2023. There are concerns about whether the level of financial commitment made will be achieved given global economic challenges. Still, funding is critical to protect vulnerable areas from the consequences of climate change.
Seven in ten survey respondents reported longer than usual construction programmes and over half recorded increases in material and/or labour rates as a result of the El Niño phenomenon. Roadblocks from debris or overflows, dengue disease and isolated towns all impact supply chains.
Disruptions to projects due to flooding were noted by 30% of respondents.
These challenges add further pressure to already strained budgets.
Working patterns
The shift in working patterns has spawned from the rapid digitalisation required to maintain working practices during the COVID-19 pandemic, a mass adoption and acceleration that, one RIBA Journal article author notes, might have taken another ten or even twenty years to happen.
Responses to our survey indicate a disparity between the preferences of employees and employers regarding the appropriate hybrid working balance. Of the balance options, the most popular for employees was a split of 60% office working and 40% home working. Survey respondents believe employers' preference is more like 80% office working and 20% home working. This option scored most highly at 50%.
In growing economies such as Peru, much of the professional workforce can consist of migrants from developed countries. In these instances, individuals may have a preference or a requirement to spend more time in the office to pass on skills to local workforces, ensuring best practices are adopted.
The balance is also dependent on the roles and responsibilities required of employees. Traditional roles such as trades and unskilled labour would not allow for home or hybrid working, whereas sectors such as technology, finance and consultancy services are less reliant on in-person interaction, allowing roles to be undertaken remotely.
Digital and AI
With two-thirds of survey respondents claiming to be somewhat or very familiar with digital technologies, it cannot be disputed that the age of digital transformation is upon us. We expect this trend to grow at pace in the short to medium term as advancements in AI and digital tools accelerate, offering the construction industry options for optimising project efficiency.
While respondents to our survey may have varying levels of familiarity with how to use digital technologies, they do appreciate the importance of adopting digital technologies to improve efficiency in construction projects.
In countries such as Peru, where vast volumes of work are being undertaken in an effort to build back after extreme weather events and to prevent such devastating reoccurrences in the future, a requirement to have digital access to buildings can allow progress to be monitored closely by clients and design teams. It will also assist in making informed decisions based on an updated picture of on-site events.
Our survey respondents strongly believe using AI will benefit project planning and scheduling. Predictive analytics can use historical data to predict project delays, cost overruns and resource shortages. Algorithms can generate optimised scheduling, considering many region-specific variables such as weather conditions and other project constraints.
Design and modelling can also benefit as AI tools can enhance building information modelling (BIM). Insights from AI can recommend more cost-effective solutions at the design stage, allowing the team as much time as possible to understand the benefits of the suggestions and implement them into the project.
AI tools can also aid in cost estimating, planning, and post-contract management. Estimates can be improved as their accuracy can be tested against past projects. AI could play a vital part in cost-plus contracts, monitoring expenses in real-time and identifying where works deviate from their budget.
Respondents ranked a lack of knowledge about potential uses (77%) as the top barrier to adopting AI. Indeed, such was the even spread of answers, among other reasons selected, an almost "all of the above" conundrum needs solving to implement AI and the subsequent benefits it can bring.
With the rise of this technology comes an increase in technical jobs available across the construction industry. At a time when skills shortages are impacting project viability, these newer roles can attract talent from further afield who may have yet to consider a career in construction.
Furthermore, construction workers can be vital enablers in the progress of generative AI technology. AI tools still need to interface with existing technology infrastructure and workers to refine their understanding of a working environment better. These processes will need continued optimisation and ought to allay fears of users feeling threatened by AI.
Our survey respondents felt strongly that training and education programmes are measures which should be taken to promote the greater adoption of AI and digital technologies in Peru.
By upskilling the workforce and promoting AI literacy, users will be more inclined to utilise it or recommend its use for their projects.
Acknowledging its key uses will be the first step, followed by investing in technologies and pilot projects before a more regular adoption.
Modern methods of construction
Modern methods of construction (MMC) is a broad umbrella term capturing various techniques developed to enhance efficiencies in constructing the built environment.
The categories of MMC are:
Figure 46
Source: Ministry of Housing, Communities & Local Government (MHCLG) Joint Industry Working Group on MMC, UK
Half of survey respondents (52%) said that their projects use MMC to improve productivity on site. Benefits include reduced on-site labour requirements, programme savings, early engagement with the supply chain and improved and more predictable outcomes.
MMC can also help to meet sustainability and net zero targets as tighter tolerances can be achieved in controlled conditions, improving energy performance.
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