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(prHWY.com) January 22, 2013 - Ciudad BolÃvar, Venezuela -- BMI View: We expect growth to decline sharply in 2013 and to continue to deteriorate over our forecastperiod. Our 5% construction industry real growth forecast for 2013 is partly due to base effects fromexceptionally strong growth in 2012 (estimated at 15.8%), but is also due to the continuation of economicand policy mismanagement represented by the re-election of Hugo Chavez. Consequently, we believe thegovernment will struggle to finance high value projects such as the social housing programme, newrailways and revitalising the ports and electricity sectors. Consequently, we expect growth to average just1.3% between 2014 and 2021.
Despite strong growth in 2012, and a number of infrastructure projects promised by the government, aswell as a continuation of the housing construction programme, which drove activity in 2012, we do notexpect strong growth to be repeated in 2013. Indeed, factoring in base effects, high inflation, slowdown inproduction growth in oil, and waning momentum to pursue a social agenda following the election, webelieve 2013 will be the start of a steep deceleration in growth. While there are a number of projectswhich, if progressed, would present upside potential, we believe the fundamental weakness will beexposed.
Fundamental Weaknesses Underlining Pessimism:
The re-election of Huge Chavez for his third six-year term implies a continuation of economicmismanagement policies, which have been detrimental to the economy and businessenvironment. Arbitrary decision making, anti-market policies and under investment in favour ofpopulist spending has preventing investment in infrastructure over the past decade, and weexpect continuation of the same over Chavez's next term.
Rising oil production will do little to help the government fund investment programmes as muchof its future oil production has been sold to China, with fund diverted to the social spendingagenda enacted over 2012. Consequently, even though oil prices will remain elevated over thenear term, and production is expected to increase, the government's fiscal position will notimprove by the same level.
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High inflation is eroding real growth and we expect this to be exacerbated over the short term.Our country risk team is anticipating currency devaluation in Q113, which will place greaterupside pressure on the cost of imported building materials. We are factoring in inflation above20% until 2016, which is driving our low real growth outlook over the period.Projects moving forward present upside potential:
Estimated 15.8% real growth in 2012 was predominantly driven by government construction ofhousing under the Great Housing Mission (GMVV). The programme, launched in May 2011,hoped to build 350,000 houses in its first 18 months and eventually three million houses by2019, and was implemented vigorously ahead of elections. As of September 2012, a total of243,990 houses had been built since the launch of the mission, reaching 70% of the 18 monthtarget. However, we do not expect this pace of homebuilding to continue into the next 18months. Despite Chavez approving a further US$5bn for the programme for the 2013-14 period,the momentum prior to the election is likely to have dissipated and consequently we expect itscontribution to headline growth to decline rapidly in 2013 and 2014.
The government's Railway Development Plan is seeing billions of dollars invested into newrailway projects. The largest is the US$7.5bn project being built by China RailwayEngineering. The 468km rail line linking Anaco, in Anzoategui and Tinaco in Cojedes was 20%complete as of September 2012. Also under construction is the EUR3.3bn Puerto Cabello - LaEncrucijada railway line, which was 67% complete as of September 2012. The railway is beingbuilt by Impregilo and Ghella, and is due to be completed in 2014. The consortium is alsobuilding two new lines between the cities of San Juan de Los Morros and San Fernando deApure, and the cities of Chaguaramas and Cabruta.
The government is reportedly investing US$6bn to addressing Venezuela's practically defunctelectricity sector. The largest project under construction is the US$6.6bn Tocoma hydropowerproject (also known as Manuel Piar), which will have a capacity of 2,160MW.
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Table Of Contents
BMI Industry View
SWOT Analysis
Venezuela Infrastructure Industry SWOT
Market Overview
Building Materials
Latin America
Industry Forecast Scenario
Table: Venezuela Construction And Infrastructure Industry Data, 2010-2016
Table: Venezuela Construction And Infrastructure Long Term Forecasts, 2015-2021
Construction And Infrastructure Forecast Scenario
Major Projects Table - Transport
Table: Major Projects - Transport
Major Projects Major Projects Table - Energy And Utilities
Table: Major Projects - Energy And Utilities
Residential/Non- Residential Construction And Social Infrastructure
Major Projects Table - Residential/Non-Residential Construction And Social Infrastructure
Table: Major Projects - Residential/ Non-Residential Construction And Social Infrastructure
Risk/Reward Ratings
Venezuela's Risk/Reward Ratings
Rewards
Risks
Regional Overview
Table: Americas Infrastructure Risk/Reward Ratings
Company Monitor
Odebrecht
Otepi
Global Overview
Methodology
Industry Forecasts
Construction Industry
Data Methodology
Construction
Capital Investment
Construction Sector Employment
Infrastructure Business Environment Rating
Table: Infrastructure Business Environment Indicators
Project Finance Ratings
Table: Design And Construction Phase
Table: Commissioning And Operating Phase - Commercial Construction
Table: Commissioning And Operating Phase - Energy And Utilities
Table: Commissioning And Operating Phase - Transport
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