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Argentina Infrastructure Report Q4 2012
Business Monitor International, September 2012, Pages: 62
The 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.
BMI Industry View
We are maintaining our expectation for a sharp downturn in Argentine construction industry value growth in 2012 – underlined by leading indicators showing a slowdown is starting to take hold.
Growth in 2011 came in largely in line with expectations at 9.1%, however we believe that the deterioration of the business environment coupled with economic mismanagement is beginning to unravel growth across strategic industries. We are thus forecasting 2.8% growth in 2012, with downside risks.
Strong growth in 2011 was largely attributed to government investment ahead of the 2011 presidential elections. In particular, residential and non-residential building drove growth, as infrastructure investments slowed.
Our near term bearish outlook is predicated on recent developments in Argentina’s business environment which could stymie construction industry growth. In line with fundamental issues, leading data is also indicating that 2012 will see a sharp slowdown.
Key elements guiding our negative forecast:
- Construction activity data published by INDEC illustrates a slowdown. Activity fell 8.8% in May 2012 in year-on-year (y-o-y) terms, pushing industry activity into negative territory for the year to date, with a cumulative decline of 0.7% y-o-y. The data is in line with our expectation and presents further downside to our already weak growth outlook, raising the potential for an industry contraction in 2012.
- The deterioration in the business environment seen over the past year will have a devastating impact on infrastructure investment. International investors are becoming significantly more wary of Argentina and the risks are now starting to outweigh rewards. Currency controls, import restrictions and economic mismanagement are all creating a weak business environment.
- Import restrictions are causing projects to stall as the equipment and machinery needed cannot be brought into the country. According to recent reports, equipment must be purchase from local providers where possible. Given the weaker technical standard, high price inflation and lack of economies of scale, this is causing cost overruns and project delays. Local labour requirements are also adding cost pressures as high inflation feeds through to significant wage increases.
- The stagnant electricity tariffs in Argentina have placed extreme financial strain on the country’s electricity provides (with Edesur, a unit of Spain’s Endesa which is owned by Italy’s Enel entering administration for missing loan payments in July). This is hitting electricity generation investments as projects are unprofitable and operators have little money for capital expenditure
(capex). Whilst we have seen some interest in wind power in the country, funding insecurity is hindering the sector’s potential.
Despite this overall bearish picture, the government is doing its best to provide some stimulus for the sector and for this reason we are maintaining a growth outlook, with potential for a pickup in 2013 when these measures filter through to projects.
- The industry will get a boost from residential construction as a result of the government’s subsidies for home construction loans. The programme – ProCreate – announced in June 2012 will see the National Pension Agency (Anses), which was nationalised in 2010, allocate ARS20bn (US$4.4bn) for 400,000 loans for new homes. The loans are being provided at below market rates, offering between 2% and 14% depending on the applicant’s wealth. The government has set aside 1,700 hectares of land for the homes to be built on. The programme saw strong uptake and could provide a boost to the construction sector. Indeed, Holcim Argentina saw its shares rise on the news announcement as demand for the company is expected to tick up.
- The oil and gas sector is also benefitting from government investment following the nationalisation of Repsol YPF. We expect the government will plough money into the company to boost production, and have revised up our production outlook for the near term. This will provide a boost to the construction sector, as investment is filtered through to oil and gas support projects. However over the medium term we believe the nationalisation will be detrimental,
preventing money from filtering into the country’s shale potential and therefore prohibiting the infrastructure expansion which would have been required.
BMI Industry View 5
SWOT Analysis 7
Argentina Infrastructure SWOT 7
Market Overview 8
Competitive Landscape 8
Table: Argentina EQS Data 8
Building Materials 10
Latin America 13
Cement Forecasts 18
Table: Argentina Cement Production and Consumption Data, 2008 - 2016 18
Table: Argentina Cement Production and Consumption Long-Term Forecast, 2014 -2021 18
Industry Forecast Scenario 20
Table: Argentina Construction And Infrastructure Industry Data, 2008 – 2016 20
Table: Argentina Construction And Infrastructure Industry Long-Term Forecast, 2014 - 2021 21
Construction And Infrastructure Forecast Scenario 22
Transport Infrastructure 24
Transport Infrastructure Outlook and Overview 24
Major Projects Table – Transport 26
Table: Major Projects -- Transport 26
Energy And Utilities Infrastructure 28
Energy And Utilities Infrastructure Outlook And Overview 28
Major Projects Table – Energy and Utilities 29
Table: Major Projects – Energy And Utilities 29
Residential/Non-Residential Construction And Social Infrastructure 32
Residential/Non-Residential Building Outlook and Overview 32
Risk/Reward Ratings 33
Argentina’s Risk/Reward Ratings 33
Regional Overview 34
Table: Latin America Infrastructure Risk/Reward Ratings 40
Company Monitor 41
Skanska Latin America 41
Global Overview 46
Table: BMI Infrastructure Index - YTD Top Performers (%) 49
Table: BMI Infrastructure Index - YTD Worst Performers (%) 49
Industry Forecasts 50
Construction Industry 51
Argentina Infrastructure Report Q4 2012
© Business Monitor International Ltd
Data Methodology 51
New Infrastructure Data Sub-sectors 51
Capital Investment 53
Construction Sector Employment 54
Infrastructure Business Environment Rating 54
Table: Infrastructure Business Environment Indicators 55
Project Finance Ratings 56
Table: Design And Construction Phase 57
Table: Commissioning And Operating Phase – Commercial Construction 58
Table: Commissioning And Operating Phase – Energy And Utilities 59
Table: Commissioning And Operating Phase – Transport 60