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Home > Manufacturing > Fabrication > Building/Construction
Argentina Infrastructure Report Q4 2008
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In May 2008, the public works secretary was quoted as saying that the Argentine government expected todouble investment in infrastructure over the next four years to US$25bn. The public works departmenthas invested US$12.5bn in social and productive infrastructure over the past four years. Improvements toroad, housing and sanitation infrastructure comprise over 80% of the investment.
Argentina is seeing a great deal of investment in its infrastructure. Increasing productivity of harvests andgrowing methods are straining existing port facilities. Upgrades in infrastructure will enable ports tohandle the greater demand. Repairs to existing transport structures will allow larger ships to takeadvantage of port facilities. In addition, planned upgrades in pipelines and power transmission networkswill reduce Argentina’s dependence on foreign energy imports.
In April 2008, the Argentine planning minister announced the signing of a US$3.93bn loan by the Frenchbank Natixis to finance a high speed rail network. Plans for rail links that will run from Argentina'scapital, Buenos Aires, to Chile's port city of Valparaiso were beginning to take shape in September 2008.Two domestic infrastructure majors - Corporacion America and Tecnicagua - were reported to beeager to get involved in building a rail tunnel in the Andean mountains, with an investment of close toUS$3bn. The tunnel would be approximately 25km long in Los Liberatores, in the Mendoza Province onthe border between Chile and Argentina.
Argentina is seeking to address power shortages. On the supply side, Planning Minister Julio de Vidoannounced that the long-delayed Atucha II nuclear power plant would begin operations in October 2010,on a visit to the plant (August 2008). The plant will add 700 megawatts (MW) of generating capacity tothe national grid. Work on the plant initially began back in 1980, before being put on hold, but workswere revived in August 2006 under the auspices of nuclear generation company NucleoeléctricaArgentina.
The respective Presidents of Argentina and Brazil - Cristina Fernandez de Kirchner and Luiz Inacio 'Lula'da Silva - were in late September 2008 expected to discuss and flesh out a preliminary agreement tocreate a bi-national nuclear energy agency. The two had earlier agreed to set up the agency, known asCoben (Comite Binacional de Energia Nuclear), which could see the countries co-operate in uraniumenrichment.
Meanwhile, electricity demand may be reined in by government plans to reduce subsidies. The 2009Budget Bill, unveiled in September 2008, envisaged an ARS3bn (US$955mn) cut in energy subsidies, inorder to rationalise power consumption in a country which currently maintains some of the lowest enduserprices in Latin America. The budget announcement followed a move in July to increase residentialelectricity rates in Buenos Aires for the first time in seven years. While putting a squeeze on households,the moves should help to generate a more reliable supply for companies.
Industry Forecasts
BMI forecasts Argentina’s construction industry to grow at 6.0% in real terms in 2008, downconsiderably from 14.8% in 2007. We anticipate a further deceleration in real construction growth nextyear, to 4.1%, despite the government’s ambitious public investment plans. The private sector will exert adrag, due to the feed through effects of the financial crisis in developed markets to global economicactivity (particularly in a context where economic growth in Latin America is so tightly linked to the US).Risks to our construction forecasts for Argentina are to the downside, particularly for 2009. If there is aprolonged recession in the US then it will have a big effect on growth and government revenues inArgentina, constraining the government’s infrastructure spending programme considerably.
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