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Argentina Freight Transportation Report Q2 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: April 2008 Product Code: R302-3163 Description Bolivia and Argentina signed a contract in March 2007 to build a US$1.5bn, 1,500km gas pipeline thatwill eventually quadruple the amount of natural gas Bolivia exports to its southern neighbour. The dealfinalised the terms of an agreement the preceding October between Bolivian President Evo Morales andthe then Argentine President, Néstor Kirchner, and brought a step closer to reality a project first proposedby the two South American nations three years previously. The Northeast Argentina Pipeline (GNA) willbe able to pump up to 20mn m3 of gas daily from Bolivia to Argentina, effectively quadrupling the 7.7mnm3 daily capacity of the existing pipeline built between the two countries in the 1970s, officials said.Completion is planned by 2010, but in our view could slip to a later date. Meanwhile, in mid-2007Argentina entered its fourth-straight winter with cold-weather natural gas shortages. President Kirchner'sadministration blames shortages on private energy companies for not investing, while analysts say a fiveyear-old utility rate freeze for residential clients gives companies little incentive to do so. Gas distributorswere forced to severely restrict gas supplies to industrial clients in July, threatening to undermineeconomic growth and leading some industry executives to rethink investment plans. In our latestArgentina Freight Transport Report, BMI concludes that pipeline throughput growth will reach an annualaverage of 4.8% over the next five years, expressed in terms of million tonnes-kms (mntkms). This willbe a little faster than the country’s economic growth rate over the same period.Various factors support this prediction. Across our 2007-201 forecast period, we now expect averageannual GDP growth of 4.6%. Energy demand will expand more strongly, however. Despite the Boliviadeal, there are still some question marks about how fast new capacity will be built. We still envisage thatpipeline throughput will only begin to pick up a little more towards the tail-end of our forecast period aswe are predicting that the new pipeline will only come onstream around 2011. The outlook for the overall freight industry is moderately encouraging. Road haulage will continue to bethe dominant freight transport mode. Growth will be somewhat constrained by capacity limits, withinvestment needed in both the highways network and truck fleets. Nevertheless, over the forecast periodannual average growth in road freight carried will be 5.4%, down from the preceding five years, whengrowth was 6.1% a year. BMI now forecasts 5.7% annual growth in rail freight over the next five years,with China-funded new investments helping to lift capacity. We are forecasting maritime traffic to growby an annual average of 4.5%, with the growth concentrated in the early part of the forecast periodbecause of the global shipping boom. We see airfreight registering satisfactory, but not spectacular,growth rates - partly because much of Argentina’s international trade remains in the relatively higherbulk/low value pattern and is therefore not particularly suited for transport by air. However, we takeLAN’s entry to the Argentine market as a positive sign of some supply-side impetus and are nowforecasting average annual airfreight growth of 6.7% in the forecast period. We have awarded Argentina a combined freight transport business environment ranking of 33.0 (out of atheoretical maximum of 70.0), which places it below the average score of 38.9 for the range of key LatinAmerican markets that BMI monitors. The positives include the country’s long-term economic risk andpolitical risk and infrastructure growth. The total value of transport and communications GDP will rise to US$32.6bn in nominal terms by 2011,representing 9.0% of Argentina’s GDP. The transport and communications sector employed around652,980 people, or 7.1% of the labour force, in 2006. We see the figure rising to 686,380 by 2011,although as a proportion of the labour force it will remain unchanged at 7.1%. Table of Contents
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