Abstract
This quarter we have only slightly revised our infrastructure sector forecasts
for Mexico. In light of
slightly better than expected data, we now expect
the country’s infrastructure sector to contract by 5.1%
in real
terms during 2009, compared with our earlier expectation of 6.1%. We continue
to expect growth
of close to zero in subsequent years; indeed, we predict
it will take until 2014 for annual real sector
growth to move above
1%.
It should be noted that in the event of the National Infrastructure
Plan (NIP) taking off, the risks to our
forecasts could be to the upside.
The NIP is a wide government initiative that plans public and private
annual investment of MXN420bn (US$38.44bn) for the period 2007-2012. 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 is facing significant difficulties with its
own
efforts to raise borrowing. The government has already had to curtail
some of its plans for investment in
roads.
Aside from the upside risks
sketched above, there are also downside risks to our forecasts, particularly
for
2010. Much depends upon how prolonged the global economic downturn is:
at the moment, our core
scenario envisages a recovery in the global
economy during 2010, but this scenario is by no means
guaranteed.
There were a number of significant developments in the power sector over the
last quarter. A consortium
managed by Spanish utility company Iberdrola
secured a US$160mn deal to extend and modernise
power lines in the states
of Veracruz and Chiapas, Iberdrola and Mexican group Energias Ambientales
de Oaxaca secured a US$176.6mn deal for the construction of the 101MW Oaxaca 1
wind farm, and
France’s Alstom won a EUR45mn (US$61mn) deal to
supply the 25MW Los Humeros II geothermal
power plant, including key
equipment.
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