Boston, MA -- (SBWIRE) -- 05/27/2013 -- BMI View: The latest data from the Banco Central de Ecuador are consistent with our view that Ecuador's construction industry would post strong growth in 2012, with the sector expanding by around 14% y-o-y through the first three quarters of the year (in line with BMI's full-year estimate of 15.2%). However, we expect industry growth to moderate in 2013 as a slowdown in government spending and a weakening consumer outlook put the brakes on infrastructure investment and residential construction respectively. To this end we are forecasting Ecuador's construction industry to expand by 6.5% in 2013, with growth continuing to cool over the medium term.

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Major recent developments:

As BMI expected, Ecuador's President Rafael Correa was re-elected in a first round victory in the February 17 general election. With 56.7% of the vote, ahead of the closest challenger, Guillermo Lasso, with only 23.3% of the vote, we believe Correa's populist agenda will accelerate through his next four-year term.

While this poses some upside risk to our forecasts given the focus on social and economic infrastructure investment, we believe chronic financing difficulties will see the government struggle to maintain the ambitious levels of spending.

- It was announced in January that the prequalification process for the construction of phase II of the metro project in Quito will likely be launched by state-owned subway operator Metro de Quito in March 2013. The construction of phase II will be carried out in line with the guidelines issued by development bank IDB, according to an announcement made by Metro de Quito in November 2012. The phase II involves the construction of 13 of the total 15 planned metro stations, acquisition of the rolling stock material, and a 22km tunnel and other civil works. Additionally, the phase II also includes a supervision contract to oversee the construction.
- The announcement in November that Ecuador's Manta Port concession had failed to attract any bids underscores our long held pessimistic outlook for the country's business environment. We had long held the view that the concession would be a tough sell, given the controversial and premature end of the previous concession. With President Rafael Correa winning a third term we see it unlikely that any significant improvement will be made to the business environment over the next four years; this will result in the country continuing to fail to attract the private investment necessary to see tangible improvements in its infrastructure.

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