|
|
 |
|
Viewing report
|
|
|
|
Ecuador Infrastructure Report Q1 2012
Business Monitor International, Dec 2011, Pages: 67
Business Monitor International's Ecuador Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Ecuador's infrastructure industry.
BMI View:
Construction activity in Ecuador surged through the first six months of 2011, with infrastructure and mining projects drawing strong capital inflows into the country’s construction sector. As a result, we estimate that Ecuador’s construction sector will have grown close to 17% (y-o-y) in 2011 in real terms, and we expect solid growth levels to be maintained over the coming quarters. We are therefore forecasting the sector to grow by 5.6% in real terms in 2012, but moderating to just over 2% from 2013 onwards.
Major recent developments include:
- In October 2011, the Export-Import Bank of China (China Exim Bank) signed a loan contract to offer EUR416.6mn (US$571mn) for the development of the Sopladora hydroelectric power plant (HPP). The 15-year loan carries a 6.35% interest rate and a grace period of four years. The plant, which will be designed to generate 487MW of power, is one of several large hydroelectric projects planned by Ecuador's government. The news highlights our continued concerns over the Ecuadorean government’s ability to sustain investment in the sector over the medium- to longterm. While cash-for-oil deals with China will provide some relief in the short-term, the recent softening in oil prices is a timely reminder of the longer-term fundraising issues facing the sector.
- In March 2011, President Rafael Correa public announcement called for private investors to finance infrastructure projects in the country. It was also announced at the time that the government is seeking US$7.5bn in infrastructure concessions over the following five years, with port and airport concessions up for grabs. A string of highway projects are due to be launched over the course of 2011 as part of an ambitious programme by Ecuador’s transport and public works. The US$800mn programme will be concentrated on the Manabi province along the coast.
- Having been largely subdued in recent years, residential construction surged in the first nine months of 2011. A factor behind this rise in activity has been the Ecuadorean government’s creation of a bank in October 2010, which is designed to facilitate greater lending to low-income families. The lending body - an arm of the country's social security institute - intends to approve US$845mn in mortgage loans in 2011, according to Bloomberg, and will allocate a further US$600mn for the financing of housing projects.
- Our mining team's increasingly constructive outlook towards Ecuador's nascent mining industry also has positive implications for the construction industry, with infrastructure and industrial construction both likely to benefit. Indeed, with the mining sector’s output value expected to grow from an estimated 1.2% of GDP in 2010 to 4.4% of GDP in 2015, the mining sector should prove a useful source of value creation for the construction industry over the medium-term.
While a number of factors have boosted the outlook for Ecuador’s construction industry over the medium-term, weaknesses within the country’s business environment will continue to present risks to the outlook. Chief among these will be the issue of financing. Ecuador's growth trajectory still remains heavily dependent on oil prices, which is concerning, especially as the global growth outlook is weakening. Although elevated oil prices have kept revenues from this sector at a healthy level, prices have been softening since mid-2011 and our Commodities team expects this trend to continue throughout H211 and into 2012.
Meanwhile, political risk will continue to provide cause for concern for investors in the country, with anti-democratic nuances and populist policies at odds with attracting international investment into infrastructure. Ecuador and Venezuela continue to score poorest among South American countries featured in our Latin America infrastructure risk reward ratings.
Product samples
A sample for this product is available. Please Login/Register to download this sample.
|
|
|
|
