José Raúl González, CEO of Guatemala’s Cementos Progreso, speaks about the history and development of the company, particularly its recent expansion into new markets in Latin America.
Global Cement (GC): Please could you introduce the background of Cementos Progreso?
José Raúl González (JRG): Cementos Progreso traces its roots back to Carlos Novella a young Guatemalan who wanted to become an engineer. To study he had to go to Europe, where he discovered cement. He resolved to go back to Guatemala and become the country’s first cement producer, founding Carlos Novella e Compania at La Pedrera in 1899. He imported machinery from Europe and started to make cement, but the market for cement was slow to materialise. Guatemalans mostly preferred to use cheap and abundant local clay.
As time went on, Carlos bought his other investors out of the business, until he was the only shareholder. However, the situation changed
in 1917 - 18, when a series of earthquakes hit Guatemala City. The only structures left were those made with Carlos Novella’s cement. Suddenly the public saw a major advantage of cement and concrete.
Not that it was easy-going after that. Reconstruction was hampered by the Spanish Flu pandemic, and the company also had to weather the Great Depression, the Second World War and, once all that was over, internal conflict in Guatemala.
GC: Where are the company’s cement production facilities today?
JRG: Most of the company’s cement capacity remains in Guatemala. The San Miguel plant began production in 1974 to replace the plant at La Pedrera, which had exhausted its limestone reserves. It now has three production lines, following the opening of two further lines in the 1980s and 1990s.
In the late 1990s it was again clear that Guatemala required further capacity. By 2008 the company decided to build the San Gabriel plant. However, the credit crunch arrived and cement consumption fell by 25%. It was three years until the project could restart and another seven before it was completed. The plant entered production in 2019, just in time for the Covid-19 pandemic of course!
GC: The San Gabriel project sounds very frustrating. Why did it take seven years to build?
JRG: As well as market uncertainty in the early 2010s, we also faced the concerns of the local population regarding the consequences of such a large industrial project. However, the delays and uncertainty actually helped us to convey our message to local stakeholders. We could highlight the benefits and opportunities for the community. It took us seven years, but I think it was time well spent. We built confidence and goodwill in a community where we will produce cement for the next 100 years.
GC: Please could you outline the company’s recent expansions into other Latin American markets?
JRG: The period since 2019 has been very busy, with acquisitions and expansions in Panama, Belize, Costa Rica and El Salvador. Taking Panama, where we acquired Cementos Interoceanico, we were lucky,’ if ‘luck’ is a combination of being prepared and seizing the opportunity. Some of the Panamanian investors, as well as Cemex, which owned a minority share, wanted to sell. We entered the negotiations and were able to complete the deal in late 2019.
Belize was a different story, as we built a grinding plant to capitalise on our previous cement import activities. We contracted the Spanish modular grinding plant manufacturer Cemengal to build us a 0.1M/yr Plug&Grind Classic mill. This now grinds imported clinker from Guatemala to guarantee the freshness and the availability of the product.
While the technical challenges of the Belize project were far smaller than at San Gabriel, there was extra complexity due to the Covid-19 pandemic, especially with respect to getting the right people on to site, but we are paid to solve problems, not complain about them. We are glad that the Panamanian authorities and Cemengal shared this ‘can do’ mentality.
Costa Rica and El Salvador are the markets we have expanded into most recently, with the acquisition of Cemex’s assets. The transaction was completed at the start of 2022 and remains subject to local regulatory approval.
GC: Why acquire these assets in particular?
JRG: Each of the assets was a good fit with Cementos Progreso’s Guatemalan asset base and we are very glad to have them as we expand across the region. However, that is not to say that other assets would not have fitted well too. Indeed, we reviewed several other potential transactions. It is like going hunting. We selected a region to stake out and kept watch for passing assets. As I said, it is a combination of being prepared and seizing the opportunity.
Wider discussions
GC: Does Cementos Progreso use alternative fuels to make its clinker?
JRG: Cement kilns are a fantastic tool to help clean up the environment and, at the same time, reduce greenhouse gas (GHG) emissions. In Guatemala we have an arrangement with the waste processor Proverde, which supplies us with municipal solid waste (MSW). We also use hazardous liquids and used tyres. We burn this in our San Miguel plant at a thermal substitution rate of 5 - 7%. The bulk of our fuel is petcoke.
Over at San Gabriel, we are currently installing a tyre feeding system to reduce the number of tyres dumped in Guatemala. Tyres are well-known breeding grounds for mosquitos and all of the diseases they bring. Therefore, the use of waste tyres brings benefits in addition to cost savings and lower CO2 emissions. The tyre project should be operational later in 2022. We expect substitution rates of 15 - 25%.
However, there are issues on the supply side. There are currently no regulations regarding the use of waste tyres in Guatemala, so we are working with the authorities to construct legislation that encourages their use as a fuel.
Over in Costa Rica, the ex-Cemex assets have a lot of alternative fuels know-how. Of course, Cemex’s global programmes are well in advance of ours. In El Salvador, the logistics operations are also very efficient. There is a wealth of information we can learn from our new colleagues in both countries.
GC: What other environmental projects is Cementos Progreso involved with?
JRG: Cementos Progreso favours the use of 100% renewable electricity, mainly from hydroelectric power stations. On top of this Guatemala is rich with pozzolanic materials. By using these as a ~35% clinker substitute, we produce cement products with some of the lowest embodied CO2 emissions in the world. We also plant around 1-1.5 million trees every year in Guatemala to counteract deforestation. Deforestation, due to the use of wood as a fuel, is actually the main cause of CO2 emissions in the country. Aforestation also protects the landscape, water reserves and biodiversity. We also teach locals in forest management, for example how to prune trees instead of felling them. The company also supplies efficient wood burners so that less wood is needed. These approaches are not as ‘fancy’ as CO2 mitigation measures are in some developed nations, but environmental solutions have to work locally.
GC: What are some of the company’s other social programmes?
JRG: As well as the reforestation projects, we have established Agro Progreso. This subsidiary has already converted 40 hectares of surplus land owned by Cementos Progreso over to productive use. We have also worked with local farmers to increase the yield of their crops, including fruit, vegetables and flowers, by up to a factor of three or four. This allows them to realise far higher sales and we are able to connect them with our export partners to help them enter new markets.
We also operate Fundación Carlos Novella, which runs our own schools in the communities in which we operate. These schools, in some of the poorest communities in Guatemala, acheive some of the best results in the country. It also runs adult education programmes and provides technical training. We also work to reduce chronic malnutrition in children. This not only concerns access to healthy food and clean water, but other factors too. It is unfortunately still the case that many houses in Guatemala have dirt floors, which are associated with poor health outcomes. A simple concrete floor in a house can contribute to lower levels of disease, with dramatic effects.
GC: How would you like the company to develop by 2030?
JRG: What an interesting question! In Cementos Progreso’s timeline, 2030 is just around the corner, so we are going to be working very hard to guarantee the sustainability of all our operations.
This challenge is multi-dimensional, and we have defined five strategic imperatives for the markets in which we operate: 1. Protect the market position of our products; 2. Contribute to the development of the construction industry; 3. Grow our physical presence; 4. Strengthen our institutional and community relationships and; 5. Constantly improve our operations.
As we make a pause and reflect on the recent events and history of Progreso, I project a 2030 company that will continue to be successful if we continue to be faithful to the values of our founder. As we like to say in Progreso, profit is not the objective, it is the consequence of conducting our businesses according to our code of values, ethics and conduct and according to our culture.
In our 122 year history and beyond, markets will go up or down, political instability will be better or worse, the health challenges will be the new normal. There will be many things beyond our control. The only thing that cannot change is the character of our employees and their desire to live by our corporate purpose: ‘To build together the country where we want to live.’ There is no other way to reach 2030 and beyond. We will continue to be prepared and aware of further potential growth opportunities in the future.
GC: Thank you for your time. It was great to speak with you.
JRG: Likewise. It was a good discussion.