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Ecuador Infrastructure Report Q3 2009
Market |
Construction |
Report Type |
Market Research |
Country |
Ecuador |
Published |
2 July 2009 |
Number of Pages |
71 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
In 2010 the construction industry in Ecuador is forecast to contract by 5.24%.
In the Q309 Ecuador Infrastructure Report we are forecasting construction industry value to grow by 0.45% to reach a value of US$4.53bn. Ecuador’s infrastructure sector continues to be in turmoil and therefore we believe risks are to the downside.
On the positive side, the utilities sector received a boost from China, with Sinohydro-Andes having signed a letter of intent for the project. The company, through the Export-Import Bank of China, will provide 85% of the project costs. The remainder of the funds will come from the Ecuadorian and Argentinean governments. The 1,500MW power plant will cost US$2bn in total and once completed – scheduled for 2014 – the plant will be a major boost to electricity generating capacity in the country.
On the negative side the business environment continues to decline. The Odebrecht issue is persisting – the Ecuadorian government has filed a court claim for US$250mn for compensation for failures during the construction of the San Francisco Hydropower Plant. Odebrecht has rejected the claims and called the measures unjustified. In addition, the Manta Port issue is still unresolved. The Ecuadorian government’s hard stance on construction companies has impacted on several contracts, with a number terminated. The prominence of these issues, illustrated in our new and ongoing projects section, will undoubtedly be a cause for concern for companies looking to get involved in the country. As a result, it has fed through into our Infrastructure Business Environment Ratings, with Ecuador placing last in the Americas region, with a score of 41.8 out of 100.
Despite these issues, some projects are making progress. The transport sector has seen a number of road projects and the utilities sector a number of power projects. As such we still believe there will be growth in the construction industry value in 2009. The real impact of the declining business environment will be felt in 2010. The business environment has also been severely dented by President Correa’s decision to default on the country’s international loans. This has effectively dried up any source of funding from outside the country, with the prospect of loans from both international banks and multi-lateral institutions practically ruled out.
With external sources of financing having dried up, the responsibility will fall to the government to support infrastructure development. While the newly re-elected President Rafael Correa has made commitments to do so, the report is concerned, with oil revenues declining, that there will be much less money in the pot. In addition, the economic climate is also in decline, and it is believed the country will enter into recession in 2009 (-2.3% real GDP growth), which will get deeper in 2010 (-5.5%).
As such, in 2010 the report is forecasting the construction industry value to contract by 5.24% y-o-y.
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