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Central America Infrastructure Report Q4 2011
Business Monitor International, Oct 2011, Pages: 72
Business Monitor International's Central America Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Central America's infrastructure industry.
BMI View: This quarter BMI confirm their previous forecasts for the countries in the region. There remains a wide spread in performance between the seven countries– Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. The largest, Costa Rica, is expected to have a construction industry value of US$2.35bn in 2011 compared with Belize – the smallest – with a paltry industry value of US$0.07bn. The disparity between states is only set to grow further with the weakest performers barely changing over the forecast period while at the top, Panama’s industry value will more than double by 2015 to US$5.16bn .The data show that Panama has yet to overtake Costa Rica in terms of construction industry value; yet, BMI maintain that the country will retain significant growth potential and become the largest market in the region by 2013, and then retain this primacy in the following years.
Major regional infrastructure developments include:
- The concession contract to build a new container port in Limon was awarded to the Danish company APM Terminals on August 24 2011. The company was expecting to sign the concession contract as early as September 5. The project will require an investment of US$992mn and, when the first phase is completed, the terminal will reportedly have a capacity of 1.3mn 20-foot equivalent units (TEUs), with the aim of eventually reaching 2.7mn. Approval to start construction operations is expected to be secured in May 2013, with the first berth planned to be operational by mid-2015.
- Central America's dream of energy integration appears a step closer. Although legal and environmental hurdles and disputes over land rights, have slowed down the creation of a unified power system in the region, the long-planned network of electrical towers, sub-stations and a 1,800km high-voltage line linking Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama is 88% complete according to Reuters. Testing is expected to start by mid-2012.
- An international arbitration court has ruled in favour of Italian utility Enel in a dispute on the joint venture (JV) between Enel's renewables subsidiary Enel Green Power and Inversiones Energéticas (INE) for the development of geothermal projects in El Salvador. BMI anticipate that the decision paves the way for Enel Green Power to boost investment in the country, especially since developments in Latin America have been prioritised by the company in its 2011-2015 plans.
- News that Wal-Mart will build a new US$67mn distribution centre in Costa Rica marks the second significant investment by the US retail giant in the Central American country in recent months. BMI notes that Wal-Mart's expanding presence highlights the investment potential in the country, driven by the rising domestic demand for retail and commercial projects.
- BMI expect political risk in Central America to rise over the next 12 months, as electoral uncertainty aggravates existing tensions caused by gaping social divisions and spiralling levels of violence. In terms of electoral violence BMI believe Guatemala is most at risk, whereas Honduras faces the most serious threat of social upheaval – comparable to the uprisings being witnessed in the Middle East and North Africa (MENA).
- Panama and Costa Rica are stable at the top of the table highlighting the rising competitiveness of these markets and a disparity with the rest of the region. There is fierce competition between states to attract a limited pool of capital and expertise. As a result of increasing openness to foreign direct investment (FDI), we find a plateau of near identical scores in Industry Risks. The implication is that further structural changes to the regulatory, legal or financing environment can present a significant competitive advantage that can make the market that implements them the regional outperformer.
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