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Brazil Infrastructure Report Q4 2009
Market |
Construction |
Report Type |
Market Research |
Country |
Brazil |
Published |
16 September 2009 |
Number of Pages |
91 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Brazil forecasted to see a 5.15% contraction in its construction industry value for 2009, to reach US$64.02bn
Despite the government’s continued commitment to supporting the development of Brazil’s infrastructure, the country will be hit hard by the impact of the credit crunch on private investors.
However, investment is showing signs of returning gradually, and as such we have marginally increased our forecasts for Brazil’s construction industry, although we still maintain that the industry will contract.
In BMI’s Q409 Brazil Infrastructure Report we are forecasting a 5.15% contraction in construction industry value for 2009, to reach BRL132.3bn (US$64.02bn).
Over the past quarter a number of projects have been announced and therefore we believe that by next year activity will pick up significantly. As such we are forecasting the industry to grow by 8.61% in 2010.
The transport sector continues to be a key driving force behind industry activity, most notably the road sector. A number of states in Brazil have been awarded loans by the Inter American Development Bank for upgrading roads. In addition, a number of tenders are due to be launched for road projects by the end of the year; both of these elements will feed into activity next year and the year after. The major contract that was awarded in the sector was a concession for the Aryton Senna/Carvalho Pinto motorway to the Ecorodovias Group, which is jointly owned by Italian construction group Impreglio and Brazil's CR Almeida Group.
The utilities sector also saw activity as Brazil continues to build up electricity generating capacity to meet forecasts for rising demand. Both MPX Energia’s Pecém I thermal power plant and GDF Suez’s Jirau hydropower plant secured financing over the past quarter, showing that project financing is opening up.
The largest project currently in the pipeline, the 11.2GW Belo Monte hydropower project, hit a setback when it was announced that costs had more than doubled to US$11bn, the project is due to be tendered in October 2009.
The ongoing activity does present risks to the upside for our forecasts. However, it all depends on whether the government funds from the growth acceleration plan (PAC) are mobilised successfully, and therefore the promise of the plan alone is not enough to counter reduced private sector investment. Falling private sector investment due to difficulties in financing projects and risk aversion in the markets is one of the key factors behind our forecast for a contraction. In addition, the declining macroeconomic climate (real GDP contraction of 0.6% forecast in 2009), due to falling demand for Brazil’s key revenue source (exports), will impact on demand for construction. The issue of accessing credit has been a key catalyst in our revision. The country risk analysts continue to forecast a sharp decline in real capital investment growth in 2009 (-14.8% y-o-y), linked directly to the lack of financing which indicates reduced infrastructure investment and therefore upholds our forecast for a contraction in Brazil’s construction industry.
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