Print
Email
The construction sector in Latin America faces a myriad of challenges
The global pandemic outbreak has caused many new problems; however, the crisis has also worsened existing problems and weaknesses. Notably, for many Latin American countries recovering from the health, economic, and societal problems of the global pandemic is going to be an uphill task because the problems in the region were mounting before the Covid-19 pandemic struck.
Since the 2014 – 2016 recession, Brazil has seen many problems drag on. From 2015 to 2020, the growth rate of Brazil has not been more than 1%, whereas the unemployment rates have stabilized at around 14%. During the same period, approximately 36,000 factories have shut their doors, according to the Brazil National Confederation of Commerce. While the basic interest rate dropping to 2% stimulated the recovery of real estate and housing sectors, large-scale infrastructure is still stagnating in the country.
According to ConsTrack360, over the next three to four years, the rising investment from the private sector, as well as the government, across the Latin American region is expected to boost the recovery of the infrastructure sector.
The infrastructure sector in Brazil utilizes the concessions model
The infrastructure sector in Brazil has been increasingly using the concessions model, wherein both investors and companies bid to invest in and operate long-term projects. Notably, investors put almost US$10 billion into a wide range of projects, including a rail line linking the east coast of Brazil with the western agricultural interior.
Investment has been made in multiple road works, five ports, and 22 airports. According to Financial Times, the Infrastructure Minister in Brazil has predicted an infrastructure development boom of the nation’s highways, railways, and airways on the back of US$50 billion in investment in concession projects. ConsTrack360 expects this to support the growth of the overall construction industry in Brazil from the short to medium-term perspective.
Construction of underground Metro Line in Peru to support infrastructure sector growth
In Latin America, one of the construction trends seems to be Metro Lines., many cities in Latin American countries are suffering from traffic congestion. Consequently, various metro line projects have been undertaken in the region. For instance,
The Metro Line project in Bogota is expected to commence operation in Q2 2028
In 2019, after decades of studies and arguments, Bogota, the Colombian capital, awarded a contract for building a metro line to a consortium. Notably, the US$5.1 billion projects will be developed under the design?finance?build?operate?maintain?transfer model (DFBOMT) to the consortium comprising China Harbour Engineering Company (CHEC), Bombardier, and Xi’an Metro Company.
The Argentinian Government is looking to stimulate economic growth by awarding works for housing complexes
Argentina, the second largest country in Latin America, is also experiencing problems similar to Brazil. The Argentinian peso has experienced a strong devaluation compared to the dollar. An increase in debt and lower participation in international trade are other factors affecting economic growth. This, coupled with the lack of availability of international financial reserves, has resulted in lower growth and lower income for the population.
Consequently, to stimulate economic activity in the country, the Argentinian Government awards works for housing complexes in various parts of Argentina. For instance,
Through these tenders, the Government is aiming to provide more families with access to their first home while at the same time increasing the participation of local suppliers, which will subsequently have an impact on the regional economy.
Public investment supporting the Colombian construction industry
While the construction sector suffered heavy contraction over the last few years, the industry is expected to record positive growth based on the growing interest of the Government. For instance,
Of course, the Latin American region has several issues to overcome. However, the vast growth potential that exists in the region cannot be denied. The growth of the construction industry in Latin America depends on a successful vaccine rollout and the government's involvement in the infrastructure segment. If this occurs, Latin American countries are expected to record strong growth over the next three to four years.
To know more and gain a deeper understanding of the Latin American construction industry, click here.
