The Chilean government’s decision to purchase construction materials exclusively from the country’s three largest construction material retailers to carry out its earthquake reconstruction plan has sparked a heated controversy.

The government chose Homecenter-Sodimac, Easy and Construmart as the only three construction material suppliers – without holding any tenders – to carry out the reconstruction plan Manos a la Obra (hands to work), the interior ministry said in a release.

Authorities established an 8bn-peso (US$15.3mn) fund for the program, which will be divided evenly between the three companies. In return, the firms will grant 7-13% discounts that have already been established.

To apply for the benefit, citizens must go to their local municipality and fill out a form requesting materials for a maximum of 300,000 pesos. The mayor will then make the purchases through the sales representatives assigned by the firms to each municipality.

SME REACTION

The decision was quickly rejected by small and medium-sized firms (SMEs), which argue the government is benefiting the market leaders.

These companies also questioned the wisdom of not turning to local construction material supply firms located in the regions affected by the massive earthquake that struck Chile last month.

If authorities purchased supplies from these local firms, they would contribute to job creation and economic recovery, they argued.

Internal affairs minister Rodrigo Hinzpeter said the government analyzed the companies’ price list and chose them for their competitive prices and experience.

However, the SMEs argue the three firms obtain the most competitive prices from suppliers because they lead the market. They could also obtain even better prices if they negotiated together, taking advantage of the 8bn-peso fund they will share.

Meanwhile, one frustrated commentator said: “Are there Sodimac or Easy stores in Dichato, Constitución, Chanco, Pelluehue? This [decision] is a joke. The most directly damaged [areas] will not have access to this ‘benefit’”.

CONFLICT OF INTEREST?

Homecenter-Sodimac is controlled by Chile’s Solari family, which recently purchased 8% of Piñera’s stake in airline firm Lan, for US$425mn.

In addition, Piñera’s foreign relations minister Alfredo Moreno served for years as director in retail firm Falabella, controlled by the Solari family.

Justice minister Felipe Bulnes was also linked to the family, as he has defended Falabella in the supreme court.

The Cencosud group controls the firm Easy. Mining minister Lawrence Golborne was general manager of Cencosud before joining the government less than a month ago.

Construmart, on the other hand, is controlled by the families Corbella, Chicharro and Eguiguren.

Gerardo Jofré, the director of state copper company Codelco, is a member of Construmart’s board of directors.

These connections have led the opposition and a large part of the private sector to question the government’s motives. Piñera, who took office on March 11, is being accused of failing to separate his economic interests from his desire to serve the public sector.

The head of state took much longer than announced to sell his stake in Lan, so long that even the company in charge of the sale argued he did not want to lose money.

To review the amounts set aside for each municipality, the sales representatives and the discounts offered by each firm, go to this link

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