Abstract
Despite the government’s continued commitment to supporting the
development of Brazil’s
infrastructure, the country will be hit hard
by the impact of the credit crunch on private investors. As a
result of
this and other downside risks we have revised down our forecasts for
Brazil’s construction
industry and in BMI’s Q309 Brazil
Infrastructure Report we are forecasting a 6.2% contraction in the
construction industry value for 2009, to reach BRL130.9bn (US$52.75bn).
Despite fears over project financing, a number of projects have been announced
and are progressing in the
country. In the transport sector the biggest
news was the increased cost of the high-speed rail line planned
to connect
Sao Paulo and Rio de Janeiro. Initial estimates had put the figure at US$11bn,
but a feasibility
study by UK-based Halcrow suggested that it would cost
at least US$15bn and could reach US$20bn.
Despite cost fears, a number of
international players are positioning themselves to take part in the
bidding, which starts in June 2009. A number of road concessions have been
awarded with Portuguese
Mota-Engil’s joint venture company Ascendi
awarded a US$1bn concession for the Marechal Rondon
Leste highway.
Ports have been a major focus of transport infrastructure development over the
last quarter. China has
reportedly stepped up as financier for a number of
port projects, which it uses to export iron ore from
Brazil. The Brazilian
government is supporting a number of port projects and the private sector is
also
investing following the opening up of the sector.
In the
utilities sector investments have been ongoing in both generating capacity and
transmission lines.
Aneel has continued successfully auctioning off a
number of transmission-line concessions and the large
hydropower projects
currently being developed, e.g. the 11.2GW Belo Monte and the Jirau
Hydropower
project have been progressing well, with bidding under way for
the former and the environmental permit
approved for the latter.
Despite the ongoing activity we have revised down our forecasts as the risks
we had maintained to the
downside for some time have shown no sign of
easing. Falling private sector investment due to
difficulties in financing
projects and risk aversion in the markets in general has been a key factor.
In
addition, the declining macroeconomic climate (real GDP contraction of
0.6% forecast in 2009), due to
falling demand for Brazil’s key
revenue source (exports), will impact demand for construction. The issue
of accessing credit has been a key catalyst in our revision. BMI' s country
risk analysts are forecasting
sharp decline for real capital investment
growth in 2009 (-15.56% y-o-y) linked directly to this issue,
which
indicates reduced infrastructure investment and therefore has fed into our
forecasts for the
construction industry.
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