2010-01-30 20:07:27 - New Construction market report from Business Monitor International: "Mexico Infrastructure Report Q1 2010"

This quarter, owing to the deteriorating macroeconomic environment and sector-specific developments, we have revised our infrastructure sector forecasts for Mexico. In BMI's Mexico Infrastructure Report Q309 we forecast that in 2009 the construction, and by extension infrastructure, sector will contract by 6.07%. We expect positive growth to resume from 2010 onwards, albeit at a very slow rate. Developments in the Mexican infrastructure sector depend to a significant extent on the progress of the country's National Infrastructure Programme (NIP). The NIP is a wide government initiative that forecasts a public and private annual investment of MXN420bn (US$38.44bn) for the period 2007-2012. One of the most important elements of the NIP is the FARAC programme of highway construction and operation. The FARAC

consists of a total of seven packages, and after the successful tendering of the FARAC I contract in August 2007, expectations were high for FARAC II. However, in March 2009, Mexico's Ministry of Communications and Transport (SCT) declared the FARAC II tender void, as the two bids that were submitted were below the reference price. In an effort not to lose even a little momentum around the FARAC programme, the SCT repackaged and re-launched a slimmed-down version of the FARAC II package in April 2009. The new package has been reduced from eleven projects to five; in terms of total kilometres the package has been reduced from 771km to 305km. The deadline for the submission of the bids is July 10 and the announcement of the results will be on August 4 2009. One of the most important elements of the NIP is the FARAC programme of highway construction and operation. The FARAC consists of a total of seven packages, and after the successful tendering of the FARAC I contract in August 2007, expectations were high for FARAC II. However, in March 2009, Mexico's Ministry of Communications and Transport (SCT) declared the FARAC II tender void, as the two bids that were submitted were below the reference price. In an effort not to lose even a little momentum around the FARAC programme, the SCT repackaged and re-launched a slimmed-down version of the FARAC II package in April 2009. The new package has been reduced from eleven projects to five; in terms of total kilometres the package has been reduced from 771km to 305km. The deadline for the submission of the bids is July 10 and the announcement of the results will be on August 4 2009. However, BMI is cautious about Mexico's infrastructure plan. The reliance on the private sector to deliver a significant part of the NIP finance is a major risk at a time when the willingness of potential investors to provide funds remains extremely limited. Moreover, the government is facing significant difficulties with its efforts to raise borrowing. The gap between the intentions of the Mexican government and its actual capabilities risks being further widened as the crisis deepens. Our overall view for Mexico calls for vigilance. Despite the government's efforts to sustain investments, macroeconomic conditions seem bound to deteriorate. For 2009, we now forecast the rate of real GDP growth to contract by 5.5% y-o-y, while we expect unemployment to rise to 7%. We forecast that the economy will begin to recover in 2010, with positive real GDP growth resuming in 2011.

For more information or to purchase this report, go to:
- www.fastmr.com/prod/43879_mexico_infrastructure_report_q1_2010.a ..

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