The route to corporate success rarely involves reaching out to the poor. However, the Mexican Cement company CEMEX did just that, transforming life in the rural communities and their own economic growth in the process.

The Mexican economic crash of 1994 led to a greatly devalued peso and a soaring unemployment rate. Cemex, a cement manufacturer, faced a financial crisis, as sales to the construction industry were down by 50%. As Cemex searched for new market opportunities, they found that sales to do-it-yourself builders were down only 10-20%.

This group included Mexico's poorest residents. However, their numbers were enormous. An estimated 40% of the country's 110 million people lives below the poverty line. Though sales to each individual were tiny, they promised a large and more stable market. Cemex decided to reach out to these neglected homebuilders as a balance to the unpredictable nature of the rest of their business.

The program Cemex developed is called Patrimonio Hoy. Do-it-yourself builders without credit or property enter into a long-term but affordable financial agreement with Cemex, who provide building materials in stages, along with construction and architectural advice. For Mexico's poor, Patrimonio Hoy leads to homes built faster and better than before, with significantly less waste. For Cemex, this opens up a market that could top $500 million annually.


A Mexican couple discusses their house building plans with representatives from CEMEX’s Patrimonio Hoy program.
Photo courtesy CEMEX Mexico

Based in Monterrey, Mexico, Cemex is the largest manufacturer of cement in the Americas and the third largest in the world, with over 50,000 employees in more than 50 countries. Cemex is also dedicated to social responsibility and has initiated programs in conservation, education, and environmental awareness.

In learning how to reach out to Mexico's poor, Cemex was inspired by the work of the Grameen Bank, for which founder Muhammad Yunus won the Nobel Peace Prize in 2006. First started in Bangladesh, the Grameen Bank pioneered "microcredit," in which small amounts of money are lent to entrepreneurs too poor to qualify at a traditional bank. The Grameen Bank focused primarily on the women of the community, who are more likely to spend the money for their family's benefit. These very small loans helped spur further economic growth in extremely poor communities and boasted an excellent repayment rate.

Most of Mexico's poor live on the outskirts of big cities in shantytowns without electricity or plumbing. They build their own houses, usually simple, unfinished dwellings of cement, poorly constructed and often sporting a crown of metal rods reaching into the sky. These rods are the supports for a second story they will add in the future. But materials cost money, and so cement accumulates slowly, often sitting exposed where it may be damaged by weather or stolen. House additions may take ten years or more to complete.

This means a family of six or more may live in one or two rooms for years, which can lead to tension within the family and children spending more time in the streets. The money a family may try to save to improve their houses often ends up being spent on weddings, baptisms, fiestas, and other community events. This helps maintain social standing, and can take precedence over house improvements, which the community may see as too concerned with self-interest. Each family thus faces a dilemma: building new rooms will improve family life but may alienate their neighbors.

The name Patrimonio Hoy can be translated as "tomorrow's assets today." The name was well chosen for the program, as it helps making building property socially acceptable. People can consider house additions to hand down to the next generations as building for the future. In their 2004 Sustainability report, Chairman of the Board and Chief Executive Officer Lorenzo H. Zambrano said "We are encouraged by the success of the initiatives we have designed to address the distinct needs of customers, from large contractors to individual homebuilders. Now in its seventh year, our Patrimonio Hoy program continues to provide credit, materials, and training to underserved communities."

By any measure, Patrimonio Hoy is a success: since 1998 Cemex has opened offices in Colombia, Nicaragua, Venezuela, and Costa Rica. The goal is to implement Patrimonio Hoy in all countries where Cemex has a presence. So far, the program has helped over 165,000 families in 47 cities throughout Mexico. Cemex reports a repayment rate of over 99%. Building cost is reduced by a third, both from reduced waste and Cemex's generous pricing. The families get better-built homes much more rapidly, relieving the stress of close quarters, creating a new sense of financial self-sufficiency, and improving their quality of life.

Posted May 17, 2007