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Argentina Infrastructure Report Q1 2011
Business Monitor International, Dec 2010, Pages: 67
Argentina Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Argentina's infrastructure industry.
Political risk is elevated in Argentina following the death of former president, Néstor Kirchner, which potentially marks the end of a policy course underpinned by populist rhetoric and policies. The political situation is therefore thrown into a deeper state of flux than previously (when 2011 elections were the main political risk on the horizon). Initial market reactions indicated that a change of policy course to more investor and private sector friendly policies is widely anticipated. A more conducive political environment can certainly boost infrastructure investments, especially public-private partnerships (PPPs), but until the dust settles on the political front we refrain from changing the forecasted trend for Argentina’s construction industry value.
Our core forecast scenario continues therefore to price in the US$10bn Chinese credit agreement for Argentina's railways as the main factor that will drive growth in infrastructure in the coming years, with risks to the upside. Official data for the first half of 2010 indicate a slightly slower recovery in Argentina’s construction industry than originally anticipated by our forecasts, which have been revised down accordingly.
Railways continue to offer the greatest potential for growth, while tenders released for transmission grids will also create value for the sector in the coming years:
- The US$10bn credit line from China for Argentina’s railways is going to be a key thrust behind growth and most likely will resurrect the plans for the country’s high speed railway, which only a few months earlier the government said was unable to finance. Of course, this will also drive industry value, which is forecasted to experience anaemic growth over 2010.
- Railway projects that have been earmarked for funds include, inter alia, the rehabilitation of the Belgrano railway, the freight corridors in the north and centre of the country, as well as metros in Buenos Aires and Cordoba. The biggest hope, however, is for the revival of the US$2.9bn highspeed railway project, which was declared unviable in June 2010, owing to a lack of funding.
- In November 2010, the government launched a tender for the construction, operation and maintenance for two 132 kilovolt (kV) transmission lines, part of the Norte Grande transmission project. The two lines will be in the provinces of Corrientes and Missiones. The IDB has approved loans worth US$880mn for the two projects and bids are due in by December 21 2010.
- BMI notes that with investor risk likely to be further heightened over the medium term (2011-2015), ahead of the upcoming presidential and parliamentary elections in October 2011, we see scope for delays in the implementation of large-scale infrastructure projects.
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