Argentina Infrastructure Report Q1 2010

The country's construction industry has been hit especially hard by the economic downturn. According to the national statistics agency, Indec, construction activity in the country fell by a seasonally adjusted 7.2% in July 2009, compared with July 2008. However, there were signs of improvement on a month-onmonth basis, as construction activity grew by 0.9% in July 2009 compared with June, according to the Wall Street Journal. For August 2009, the year-on-year (y-o-y) decline in real construction sector activity was 3.2%, on a seasonally adjusted basis. The month-on-month performance showed a rise of 1.8%, according to Indec. As such, data for these two months appeared to show that the sector may be starting to stabilise. However, broad economic data remained extremely weak, as the economy as a whole contracted by 0.8% in real terms in Q209, according to Indec.

Against this backdrop, there is no change to our core forecasts for Argentina’s construction industry this quarter. The report estimates a contraction in the real value of the construction industry of 3.4% in 2009. We also continue to expect an even deeper contraction in 2010, owing to the structurally weak condition of Argentina’s economy and concerns about the viability of the government’s spending plans. Indeed, we anticipate a further downward plunge in real construction sector output in 2010, with -5.3% growth forecast.

Despite significant plans for infrastructure investment by the government, doubts remain as to how far such plans are viable, given the negative impact of the economic downturn on an already-strained fiscal situation. Alongside funding concerns, further doubts about the government’s ability to push through its infrastructure spending plans were raised by a poor showing in mid-term elections in June 2009, which saw the administration of President Cristina Fernandez suffer embarrassing defeats (including the loss by her husband, ex-President Nestor Kirchner, of Buenos Aires province). This electoral defeat may increase opposition to the use of the public purse – including the possible use of US$26bn in proceeds from a controversial nationalisation of the private pension system – for ambitious infrastructure spending projects.

Argentina’s Roggio presented a proposal to build a subway in Cordoba to the city’s authorities, according to Business News Americas writing in August 2009. The plan would require US$1.25bn of investment, according to the company, including around US$1bn on stations and US$200mn on rolling stock. The firm calculates that the subway could carry over 200,000 people per day on working days. The project would involve four phases, if approved by the authorities.