Boston, MA -- (SBWIRE) -- 07/16/2013 -- Mexico's construction sector started 2013 on a weak footing as President Nieto's proinfrastructure agenda created some cashflow difficulties for Mexican homebuilders. The construction and infrastructure industry value is expected to reach US$86.1bn this year, equivalent to year on year (y-o-y) growth of 3.6%. Over the forecast period to 2022 average y-o-y growth is forecast to be 4.1%. Energy & utilities infrastructure will likely lead growth but transport investment - specifically rail and roads - is also expected to be significant.

Key projects this quarter included:

- The Mexican transport and communications ministry, SCT, announced plans to tender 1,000 road projects by end-2013 and launch a crackdown on corruption. The tenders will include various studies and sub-division of highway packages. Highway modernisation work will help in achieving the target of increasing cargo transport across the country.
- SCT is planning to direct MXN5.5bn (US$454mn) towards the Altamira, Tampico and Matamoros ports in the Mexican state of Tamaulipas. Of the total amount, MXN1.5bn (US$123.8mn) will be used to upgrade the Matamoros Port. The ministry will make the investment during a three-year period, with MXN1bn (US$82.5mn) likely to be invested during 2013.
- Mexican state-owned energy company CFE and the government of Mexico City signed a deal to upgrade infrastructure and service in the capital. Under the deal, a work group has been set up for the improvement of the company's response to complaints, as well as track infrastructure projects. In February 2013, the company and Mexico's consumer protection agency, the Federal Prosecutor's Office for the Consumer, signed a deal for the improvement of the former's response system to complaints in the country.

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Infrastructure high on Presidential agenda

President Pena Nieto has called for a greater private sector role in the economy and presided over the country's first healthcare PPP in the State of Mexico. For this reason, we expect the PPP law to gain significant traction and spearhead a wave of new infrastructure projects. We have already seen a commitment from the government to pursue reforms in the Energy sector and provide investment across the sector.

Existing pressures on Mexican homebuilders have been exacerbated however by the government's latest housing policy announcements. Fears that the measures will result in write-downs of land value, high cost outlays and the uncertainty over government support during the transition is weighing on investor perception. Subsequent fears over cash flow and the cost of capital is creating a vicious cycle, with homebuilder equities tanking and bond yields spiking. We see little short-term upside potential for the sector until more details are released; however, longer term, government measures should create a more efficient and sustainable housing sector.

Energy sector to drive change

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