Abstract
Deteriorating economic conditions are seriously impacting the construction
sector in Argentina, despite
the implementation of a major fiscal stimulus
programme by the government. BMI estimates that
Argentina’s
construction industry grew 8.8% in real terms in 2008. We anticipate a further
deceleration in
real construction growth to 1.4% in 2009, while we expect
the sector to contract by 2.39% in 2010.
The deep structural problems that
Argentina' s economy is facing are becoming increasingly clear. Slower
economic growth will not help soaring inflation abate from the current
estimated levels of 25% (although
the government is calculating inflation
at close to 9%, serious doubt exists as to the figure' s reliability).
However, financing is unlikely to be an issue for the public works projects as
the recent nationalisation of
the private pension system added close to
US$26bn in government coffers; money that some reports say
will go towards
the US$21bn infrastructure spending. However, this raises serious questions
regarding the
government' s ability to navigate the economy out of the
recession and safeguard long-term growth. In the
long term, a severe
deterioration of macroeconomic stability will be harmful for the
infrastructure sector
as well.
There has been some positive news in
the transport sector. In March 2009, Argentina' s infrastructure and
construction major Corporacion America (CASA) signed two Memoranda of
Understanding (MoU) for
the construction of the Los Liberatores railway
tunnel, which will help ease the transport link between
Chile' s port of
Valparaiso and Argentinean capital Buenos Aires. The estimated cost for the
23km rail
tunnel is US$3(can we find the proper amount, can’t be
$3?). Meanwhile, according to the Inter-
American Development Bank (IDB),
the city government of Buenos Aries is planning an ambitious
expansion
project for the city’s metro, which will involve building 25km of new
track. The estimated cost
of the project is US$2.5bn. The first phase of
the project will cost approximately US$750mn, with the
IDB providing
US$500mn of this funding.
Elsewhere, Argentine power company Geotermia
Andina is considering constructing a 20MW
geothermal power plant in the
province of Jujuy in the north of the country. The area near the Tuzgle
volcano has great potential for geothermal energy and the project will cost an
estimated US$35mn. BMI
believes that Argentina has good potential for
geothermal energy with 25 areas in the country considered
to have
favourable characteristics for power plants.
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