The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.Argentinas infrastructure sector remains dependent to some extent on a US$10bn credit agreement from China. In addition, events in Q411 reinforced our view that the financial support of multilaterals, notably the Inter-American Development Bank (IDB), will remain a key source of infrastructure financing.
Meanwhile, the sector continues to benefit from robust economic activity, although we expect this to cool slightly in 2012 - BMI forecasts a 4.1% year-on-year (y-o-y) increase in real GDP - as the government is forced to scale back some of its pre-electoral spending. Data from the INDEC reveals that Argentinas construction industry outperformed by an impressive 10% y-o-y in real terms through the first three quarters of 2011 and we therefore estimate that the sector experienced growth of 9.9% for the year. We are forecasting that Argentinas construction sector will, in real terms, grow by 3.3% y-o-y in 2012 and 4.8% in 2013.
Key developments include:- Argentina has inaugurated its third nuclear power plant. The Atucha II plant was opened by Argentine President Christine Kirchner, who said the plant was a step towards diversifying the countrys power production. The 700MW plant is expected to be fully operational by Q312, raising the proportion of Argentinas power production from nuclear to 10%.
- The Inter-American Development Bank (IDB) offered US$400mn in financial assistance to Argentina to develop infrastructure for 70 poor urban settlements (December 2011). The loan, secured by the Ministry of Federal Planning, Public Investment and Services, will be directed towards the provision of basic services, such as electricity, infrastructure and gas distribution for the urban settlements. The loan will also be used to build storm drains, access roads, pedestrian networks, green spaces, and water and sewage networks. The project has been designed to benefit 280,000 low-income residents.
This quarter saw Argentina downgraded in BMIs infrastructure risk/reward ratings. Having been on our political risk radar for some time, the downgrade reflects the rising risks within the countrys business environment. Although the October 2011 elections ran fairly smoothly, seeing incumbent Cristina Fernández win again as anticipated, the policy continuity is, in this case, detrimental to the countrys business environment. In the immediate aftermath of re-election, a form of capital control on the profits of extractive industry players was unilaterally passed, indicating a continuation of ad hoc marketunfriendly policies, making for an uncertain policy environment.
- Argentinas foreign minister, Hector Timerman, announced the completion of rail upgrade negotiations with Chinese engineering company China Machinery and Equipment, reports the Railway Gazette. The company will undertake a US$2.5bn upgrade of the Belgrano rail network. The contract was expected to be signed in October 2011.
Click for Report details:Argentina Infrastructure Report Q2 2012
