Corruption Scandal Poses Risk To Construction Industry's Growth Outlook In Argentina - Constrack360

The third largest economy in Latin America continues to face adversity with the corruption scandal that has come to light in August 2018. The investment in public works from private sector has been impacted. According to IMF, the economy is expected to contract 1.6 percent in 2018.

Constrack360 expects, the construction industry in value terms increased at a CAGR of 3.5% during 2014-2018. Over the forecast period of 2019 to 2023, the industry is expected to record a CAGR of 3.8%, increasing from ARS 478 billion in 2019 to reach ARS 556 billion by 2023.

President Mauricio Macri spent his term cutting unsustainable subsidies and heavy currency controls that was favoured by the previous government. However, inflation is still high, and the currency has lost 52 percent of its value this year. The Macri government since 2015 has taken measures such as lifting capital controls and eliminating holding period on capital among other steps to stimulate the economy. Although a rise in foreign investment was seen in 2017 by 10.8 percent, recent events have hampered the investment. The implementation of economic reforms is expected to balance the economy in the long run.

Announcement of austerity measures in its primary budget for next year will impact public sector spending. Over the long term, however, current measures will help in attracting domestic and foreign investment. Significant investment opportunity lies in infrastructure, health, agriculture, information technology, energy, and mining.

Although the country faces financial turmoil, the government is looking for alternate financing options to sustain its public works. A number of highway projects have been awarded in 2018 to a tune of about US$ 8 billion.

Current conditions will impact the investment in the short term but opportunity and evolving economy paves way to a brighter long term. The transport minister commits to maintaining infrastructure projects in roads, airports railways and other public transport. Argentina's PPP program also includes electricity transmission which is expected in Q1 of 2019.

The first of its highway PPP contract of US$ 2 billion was signed with China Construction America (CCA) in August. The project connects the provinces of Buenos Aires and La Pampa that are important industrial and agricultural economic zones in the country. China has also established itself as one of Argentina's biggest lenders, primarily in infrastructure. Furthermore, Argentina's exports to China are growing at a high rate and has quadrupled since 2001.

Two hydroelectric dams contracted to a Chinese conglomerate along with local businesses are under construction which will boost construction activity in power sector. The renovation project of Belgrano Cargas cargo railroad will be completed by China Machinery Engineering Corporation in 2019.

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This release was published on openPR.