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Mexico Infrastructure Report Q4 2011
Business Monitor International, Nov 2011, Pages: 81
Business Monitor International's Mexico Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mexico's infrastructure industry.
Continued investment in Mexico’s transport and utilities infrastructure will drive growth in the industry during 2011. Transport infrastructure is likely to dominate spending within the sector, with a number of new highway and road investments announced between June and August 2011. Nevertheless, a number of public investments in renewable energy projects should boost the utilities infrastructure subsector. Our forecast for growth takes into account numerous possibilities for expansion, as well as the obstacles and downside risks, including global economic uncertainty, which public and private investors must overcome:
- Mexico’s government has outlined its commitment to developing the country’s infrastructure. The most prominent of these plans involves the commissioning of a number of projects to construct and improve highways in the country, which should lay solid foundations for expansion in other areas.
- It is likely that the proximity of state and national elections in 2012 has prompted the government to increase its focus on infrastructure development. The government has pledged to invest US$2.5bn to develop the country’s wind farms, and construction has commenced on solar-thermal and thermo power plants in Sonora and Baja, California respectively. Furthermore, in August 2011, Mexico and Canada expanded their air transport agreement, allowing for increased travel and trade, providing a more attractive background for future investment in Mexico.
- However, a number of risks have restricted BMI’s forecasts for growth in Mexico. The government’s National Infrastructure Plan has proved unable to recover from the financial instability of 2008/9. Furthermore, the government’s targets to construct new power stations are arguably over-ambitious, (and perhaps a response to the mounting pressure of elections in 2012), particularly since a number of projects are yet to be confirmed. Meanwhile, despite the potential for growth in Mexico’s cities and tourist resorts, development of Mexico’s social infrastructure will be restricted by the country’s association with drug-related violence, and the existence of preferable investment opportunities in other regions of South America, including Panama.
Taking these factors into account, BMI expects to report growth of 4.6% in Mexico’s construction industry in 2011, following overall growth of 4.9% in the first quarter. While the transport subsector will continue to dominate infrastructure spending in the immediate term, there is potential to expand Mexico’s tourist infrastructure, and there are a number of investments in the pipeline to develop Mexico’s energy and utilities infrastructure. BMI expects the utilities subsector to account for 57% of the country’s total infrastructure value by the end of our forecast period in 2020.
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