New Construction market report from Business Monitor International: "Mexico Infrastructure Report Q1 2014"

Boston, MA -- (SBWire) -- 01/07/2014 --We are maintaining our expectation that 2014 should see a recovery in the Mexican construction industry, following a housing market crash and public sector inertia in 2013 which has dragged growth into negative territory. Indeed, we have further downgraded our 2013 estimate to a 2.7% contraction as the slump accelerated in Q3 2013. Despite this, we are holding our 2014 and 2015 growth forecasts steady at 4.4% and 4.3% respectively, as we see the construction sector returning to trend. This will be driven primarily by infrastructure and industrial construction projects, whilst we see the housing sector stabilising, but remaining weak.

Infrastructure High On The Presidential Agenda

President Enrique Pena Nieto's US$315bn National Infrastructure Plan has outlined greater scope for private investment into Mexico's infrastructure sector. Based on a strong track record, including presiding over the country's first healthcare PPP in the State of Mexico, we expect the PPP law to gain significant traction under President Nieto and over the coming years.

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Mexico's infrastructure sector has been stagnating over recent years, and was further weakened by the lull in activity driven by public sector sluggishness in the wake of the transition of power in early 2013. We expect this to turn around in 2014, especially following the passing of a number of priority reforms, which should allow focus to be placed on other areas of the economy, with infrastructure likely to be a priority. Indeed, liberalising the energy and electricity sectors should allow for greater private sector investment into both.

Over the medium term we see the energy and utilities on track for the strongest growth. Between 2014 and 2018, we forecast annual average growth of 12.1% for the country's water infrastructure sub-sector, 7.6% for power plants & transmission grids and 5.3% for oil and gas pipelines. In the transport sector, tangible improvement into attracting private investors will need to be seen before we factor in stronger growth to our forecast; however, we have upgraded our outlook for the rail sub-sector, based on a dedicated plan to expand rail capacity in the country, which is showing signs of progress and has government support.

Energy Reform And Manufacturing To Drive Industrial Engineering

Energy reform is expected to provide a major medium term boost to the construction sector. We anticipate that the opening up of Mexico's energy sector to private players will precipitate a significant expansion in investment into the sector, this will require support infrastructure as new areas of exploration are opened up, including electricity supply and transport links, as well as processing plants, on site infrastructure, and pipelines and export infrastructure. We highlight ICA through its joint venture with Fluor as a major beneficiary given its current dominance in winning Pemex contracts.

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