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Argentina Infrastructure Report Q4 2013 - New Study Released

New Construction research report from Business Monitor International is now available from Fast Market Research


Boston, MA -- (SBWIRE) -- 09/11/2013 -- Our view for a sharp slowdown in the Argentine construction sector played out over 2012 and the trend continued through Q1 2013 with a reported contraction of 3.2%. Given the underlying weakness in the market, a result of fundamental policy and regulatory constraints, we maintain our bearish near-term outlook for the sector with a contraction of 2.6% forecast in 2013. There is some upside potential from residential construction - given strong base effects in place - and the oil and gas infrastructure with a number of projects in the pipeline which will contribute with some stable, but weak, growth. However, this will not be enough to offset the downward trend in the industry in 2013.

Key developments in the sector:

- We had for some time anticipated that Argentina's construction sector would experience an abrupt slowdown in 2012, following inflated growth of 9.1% in 2011, as a result of pre-election spending. However, as inflation ticked ever higher, the business environment continued to deteriorate and revenues declined, the slowdown was more abrupt than anticipated with a contraction of -2.64%.
- Our Country Risk team forecasts that Argentina's economy will continue to slow in 2013, with real GDP growth falling to 1.8% from 1.9% in 2012, as currency devaluation pushes inflation higher, weighing on consumer and government spending. Despite government efforts to halt the rapid price growth, our country risk team estimates that consumer price inflation remains above 20% in year-on-year terms.
- Leading indicators for building permits show a contraction of 0.5% during the first five months of 2013, as the industry runs out of steam under the pressure of heavy inflation, import restrictions, a funding squeeze and a slowing macro picture. Policies on the residential construction sector and falling industrial production will have a medium-to-long term impact on the industry. On the upside, infrastructure should remain the one area of growth, as a number of projects progress. However, this will not be enough to reverse the trend of falling industry.
- Nationalisations continue to affect the railway sector. On June 4 2013, the government announced the nationalisation of two cargo railway concessions operated by the Brazilian firm America Latina Logistica (ALL). The first line runs through the centre of Argentina while the second line connects the country with Paraguay, Uruguay and Brazil - they are two of the most important freight railways in all of Argentina. The government argues that the reason for the expropriation is the noncompliance with the contractual agreement in the form of underinvestment, unpaid royalties and accumulated fines for up to 30% of the concession.

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