Abstract
The effects of the global economic downturn are feeding through in earnest to
company balance sheets.
Cemex reported a net loss of US$707mn in Q408,
with worrying implications for debt servicing,
particularly in a context
where the company has lost its investment grade status. As we went to
press,
Empresas ICA was yet to file its Q408 results, but markets
speculated that it had managed to generate a
rise in sales over the
quarter.
Luis Tellez, Mexico' s head of the Secretariat of Communications
and Transportation, postponed bidding
for the construction contract for
the Punta Colonet terminal, Baja Peninsula, according to online news
source Frontera NorteSur (January 2009). Punta Colonet is intended to be
northern Mexico' s shipping
centre, with capacity to manage 6mn containers
every year. This was the second such delay in recent
months.
There are
no changes to our infrastructure sector forecasts for Mexico this quarter. It
might be tempting to
believe that the country is set for a surge in
infrastructure investment, like its giant counterpart to the
north, the
US, where President Barack Obama is pouring billions of dollars into public
spending
programmes. Indeed, one key player – Mexican construction
giant ICA - said in January 2009 that it
expects public works to take
precedence this year as part of the government' s National Infrastructure
Plan
(NIP), which is reportedly to be accelerated in an effort to boost
overall economic growth. ICA estimates
that the 2009 budget allocation for
the NIP will be 60% higher than last year (MXN570bn). However, the
NIP is
dependent on significant private finance at a time when the willingness of
potential investors to
provide funds remains extremely limited. Moreover,
the government has limited ability to plug the hole.
Unlike the US, whose
government bonds remain in strong demand, the Mexican government has much
more significant constraints on its ability to raise borrowing to any dramatic
degree.
We therefore retain our forecast that Mexico' s construction sector
will grow by a modest 1.4% in 2009.
Beyond 2009, our core scenario still
envisages that the global economic environment will improve, with
renewed
GDP growth in the US feeding through to the Mexican economy and government
revenues. We
forecast that real growth in Mexico' s construction sector
will register 4.2% in 2010 and 4.5% in 2011,
before accelerating further
in 2012. However, risks to our infrastructure forecasts remain to the
downside,
particularly for 2010 and 2011.
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