Currency Fluctuation and Inflation Impact on International Mega-Projects: A Mexican Case Study

摘要

This paper examines the challenges of accurately estimating construction costs for international projects. A case study is used to illustrate the challenges that construction projects in Mexico faced with the 2009 devaluation of Mexican currency. This paper presents a hypothetical example and a case study of the Durango-Mazatlan highway. The project consists of 143 miles of highway, 115 bridges and 63 tunnels. This paper finds that the construction costs of highway Durango- Mazatlan in Mexico increased by 20 percent because of cost increases tied to the peso-dollar parity. This paper analyzes the impact to the project and discusses strategies that cost engineers can use to minimize the risk of economic loss in international construction projects resulting from political and economic instability. The study concludes that using cost reimbursable contracts, transferring the risk of cost uncertainty to the owner, maintaining contact with local subcontractors and suppliers and maintaining international project databases minimize the risk resulting from currency fluctuations on international mega-projects.