Abstract
Latest Developments
In November 2008, the Communications and Transport
Ministry said that three consortia had submitted
qualified bids for a
US$577mn suburban railway project in Mexico City. The railway is the first of
three
planned systems to be constructed for the Mexico City area. The
winning bid will be awarded sometime
in March and construction will begin
in Q2 2009.
In December, the President of Mexico, Felipe Calderón,
signed the 2007-2012 national water plan into
action. The plan sets out
clear targets and a strategy to improve access to water services in Mexico.
The
decree signed by Calderón implements the plan which will be
separated into annual projects considered
within the annual budget. Also
that month, Conagua, the Mexican national water authority, approved a
US$3.76bn project that would sanitize 100% of the wastewater produced in
Mexico valley’s urban areas.
Currently, only 60% of waste water in
this region is being treated.
BMI is cautious about the prospects for
Mexico' s construction industry, on the back of the crisis in the
US and
the implications this has for real economic growth. Mexico' s economy is
closely tied to that of the
US, despite recent protestations by the
government that it is less vulnerable than it was during the US
downturn
of 2001. Moreover, in late September 2008, there were reports that planned
spending on road
infrastructure and power projects had been subject to
delays year-to-date, owing to the government' s
reluctance to release
funds. We estimate that real growth in the construction sector was close to
zero in
2008 as a whole, at 0.7% y-o-y. We also expect a modest
performance by the sector next year (with real
growth of 1.4% y-o-y), as
the escalation of the financial crisis in the US (and beyond) during
September
2008 provoked a downward revision to our global economic growth
forecasts. However, beyond 2009,
we expect the global economic environment
to improve, with stronger GDP growth in the US feeding
through to the
Mexican economy and government revenues. This should ensure a rebound in
private
construction and government investment in infrastructure spending.
As such, we forecast that real growth
in Mexico' s construction sector will
register an average of 3.7% y-o-y across our five-year 2008-2012
forecast
period.
The risks to our infrastructure forecasts are to the downside,
particularly for 2010 and 2011. Much
depends upon how prolonged the global
economic downturn is. A prolonged downturn may mean that the
government
has to reign in its spending on infrastructure projects, which would result in
a double
whammy to the industry and scupper our cautiously upbeat
long-term overall outlook for construction.
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