Abstract
In BMI’s Q209 Ecuador Infrastructure Report we have new historical data
to 2007, preliminary data
from the national statistics office, Banco
Central del Ecuador, for 2008 and our model forecasting from
2009-2013.
Based on this, BMI believes that Ecuador’s construction industry will
grow by just 0.45%
year on year (y-o-y) in 2009, reaching a value of
US$4.53bn.
The utilities subsector has seen perhaps the most activity in
2009, with a number of tenders released for
power projects, and bids made.
The largest project currently in the pipeline is the 1,500MW Coco-Coda-
Sinclaire hydropower project. The project will reportedly be built with around
80% of the US$2bn price
tag funded by China. Two Chinese companies –
Sino-Ecuador (Gezhouba) and Sinohydro-Andes JV –
were reported in
March to be bidding for the project. Also in March, state power company
Transelectric
announced that it would build a US$820mn transmission grid
to help connect the new hydropower plant
to the network.
In the
transport sector, very few projects were recorded, with most in the roads
sector. Most notably the
contract for upgrading Cotopxi airport has been
moving along, with 12 companies having submitted bids.
In the construction
sector no new projects were recorded.
Growth of 17.8% was estimated for
2008 based on preliminary estimates from the Banco Central del
Ecuador,
which were based on growth rates for the first three quarters of the year. BMI
believes that there
are downside risks to this growth rate due to the
likelihood of the global downturn having a more
pronounced impact in the
fourth quarter. These issues will be further compounded in 2009; as such,
BMI
believes that industry growth will be far reduced this year, with
risks heavily to the downside.
The biggest issue is the business
environment in the country, which has nose-dived following 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
multilateral
institutions practically ruled out.
The business
environment has also been dented through populist moves by the president,
which have seen
a number of contracts with international companies
terminated, with the threat of more very present. The
highest profile
cases are Brazil’s Odebrecht, and more recently Singapore’s
Hutchinson Port Holdings,
which had its contract for the Manta Port
concession terminated due to a disagreement over contract
terms.
The
moves make for an unstable and inconsistent business environment, which will
likely put off foreign
companies looking to invest in the construction of
Ecuador’s infrastructure. More to the point, any that
Ecuador
Infrastructure Report Q2 2009
© Business Monitor International Ltd
Page 6
would risk it will find it increasingly hard to secure financing,
especially in the current tight credit
conditions.
With little private
sector investment propping up the construction industry, the burden falls to
the
government. With the country unable to access international loans,
spending must rely on government
coffers. However, with oil revenues
declining, this will leave less in the pot. In addition, the economic
climate is also in decline, and BMI believes the country will enter into
recession in 2009, (–2.3% real
GDP growth), getting deeper in 2010
(-5.5%).
Going into 2010 we believe the situation will become even worse,
with a 5.24% contraction forecast for
the construction industry, reaching
a value of US$4.44bn.
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