Transcript Cuban Investment Environment: Making the Process Work

Eduardo Rodríguez de la Vega
Delivered at
The University of Texas at Austin
January 29, 2009
Eduardo Rodríguez de la Vega
BFA, Architecture, 1965 . University of Havana, Cuba .
Master’s Degree, Planning & Strategies for Investment Development & Mgt., 1978. Economy
National School.
Key positions in the Cuban Economy:
Executive Director Ministry of Industrial Development.
Managing Director of the Enterprise for the Commercialization of Construction Materials and
Tourism at the State Committee for Economic Cooperation.
Secretary of the Investment Group in the Central Planning Committee.
Analyst for the Vice President of the Council of Ministers in the Central Planning Committee.
Head of the Tourism Central Negotiating Group.
Vice Minister of Tourism.
Head of Planning and Strategies for Development of Policy for Cuban Tourism Industry
Investment and Joint Ventures.
In 1995 cooperated with Price Waterhouse, Toronto, Canada, in an analysis of a tourism
macro study for the period 1996-2000.
In 2001 cooperated with Ernst & Young, Spain in a similar tourism study for the period 20012005.
Root Cause Analysis
We will be discussing the following elements:
•Investment Methodology
•Execution
•Human Factors Issues
Leading Causes
INVESTMENT METHODOLOGY
Planning.
Organization and functions.
Control.
Budgets and prices.
Funding.
PROJECT EXECUTION
Preparation and evaluation.
Civil Construction and Electro-Mechanical Erection.
Procurement.
Other Project Elements.
Investment Commissioning.
HUMAN RESOURCES ISSUES
Investment Methodology
PLANNING.
Need for harmonious and balanced development.
Lack of direct access to funding sources.
Centralized use of expenditure indicators for each
investment.
Little use of efficiency indicators.
Lack of a proper approach to regional planning.
Lack of optimized solutions; primarily
infrastructure.
Investment Methodology
ORGANIZATION AND FUNCTIONS.
Incompatibility of the organization's current process
with modern management techniques.
Lack of regional stakeholder input in site selection.
Delayed start of the planning process.
Contractor objectives in conflict with facility
operator needs
Investment Methodology
CONTROL.
Lack of a comprehensive control schedule
encompassing planning through commissioning of
the investment.
Inaccurate grasp of the integrated investment
process.
Need for direct, meaningful progress reports
from project manager to principal stakeholders
Investment Methodology
BUDGETS AND PRICE.
Shortcomings in the system of preparing budgets.
Inadequate project scope definition and budget.
Shortcomings in using the budget as an
instrument of control.
Ministry of Construction (MICONS) imposed
labor and commodity prices.
MICONS intervention in agreed contract terms
and conditions.
Investment Methodology
FUNDING.
Lack of state resources to fully fund development
projects.
Need to allow for both capital equity and bank loans
in investments.
Loan payback period shorter than necessary to provide
adequate return on project investment.
Short term loans create continual need for refinancing to meet project budget needs.
High interest rates from international sources.
EXECUTION
PREPARATION AND EVALUATION.
Investment front end planning based on poorly
defined budgets, and unrealistic project execution
schedules
Projected investment income does not recover project
costs that have escalated due to inadequate front end
planning
Absence of a real exchange rate of the peso against
the dollar or any other currency.
Business case fundamentals further undermined by
inadequate project execution and commissioning.
Lack of evaluation of other efficient investment
alternatives.
EXECUTION
CIVIL CONSTRUCTION AND ELECTRO-MECHANICAL
ERECTION
Lack of implementation of proven EngineeringProcurement-Construction process execution
methodologies.
State assigned construction company with no
competitive bids
Contract negotiation limited to bill of material
discussion and acceptance of state imposed unit
prices.
Deficiencies in project execution.
Lack of commitment to provide a competent
workforce and adequate materials and resources.
Absence of adequate quality control systems to ensure
project objectives are achieved.
EXECUTION
PROCUREMENT
Poor management of procurement.
Insufficient internally sourced constructio
materials, equipment and obsolete assembly
techniques and skills.
Lack of management and control of receipt
inspection, especially in long-lead imported items.
Frequent missing and/or damaged long-lead items
prevents schedule and budget compliance.
EXECUTION
OTHER PROJECT ELEMENTS.
Poor documentation during the project life cycle.
Inadequate project estimate preparation process.
EXECUTION
INVESTMENT COMMISSIONING.
Lack of planning for future facility operation.
Failure to promptly staff the new facility wit
competent management.
A gap between the operator training phase and actual
asset commissioning.
Planning and execution deficiencies lead to missed
production windows and projected facility output.
HUMAN RESOURCES ISSUES
Lack of pro-active recruitment and retention policies.
Failure to provide staff with adequate resources to
execute their mission.
Lack of adequate succession planning.
Compensation is not commensurate with the required
skill level of the workers.
The difference in aptitude and attitude between
project execution managers and facility operations
managers is not fully recognized.
SUMMARY OF THE PROBLEM
PLANNING
CONSIDERATIONS
Investment Methodology.
CURRENT REALITIES
Inadequate
Business Case
Unanticipated
Changes
Execution.
Human Resources
Issues
Failure to Follow
Accepted
Investment
Implementation
Methods
OUTCOMES
Low Return on
Investment
Uncontrolled
Budget
Growth
Adverse Effects
On Available
Funding For
Economic Growth
RECOMMENDED PATH FORWARD
MULTIDISCIPLINARY TEAM APPROACH
PROBLEMS
Define them in clear terms.
ANALYSIS
Unbiased analysis of existing conditions.
SOLUTION
Provide clear description of the proposed solutions.
DECISION
Provide clear proposals for decision making.
EXECUTION.
Promptly implement the agreed solutions.