Fitch ratings sees a decade of opportunities for construction industry in Latam

Thursday, August 18th 2011 - 06:57 UTC

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Benefits of infrastructure spending will spill-over into the wider economy.

According to a new report issued by Fitch Ratings, the magnitude of investments in infrastructure during the next decade will provide unprecedented levels of opportunity for Latin American construction companies with the outlook for most companies in the industry being positive.

Companies in related sectors will experience above average growth rates and invest heavily to expand their operations, as benefits of infrastructure spending spill-over into the wider economy.

'Governments are under pressure to improve their infrastructures to meet basic needs of their citizens, as well as to provide a framework for higher levels of economic growth,' said Joe Bormann, Managing Director at Fitch.

'Much of the funding these companies receive comes from the local governments either directly or through their development banks, and the bank market. The capital markets will play an increasingly important role, however, as the absolutes size of these projects, plus pressure upon public finances, limits the amount of public and bank financing for the projects.'

Fitch says Brazilian construction companies are poised to benefit the most from the high demand for their services within Latin America due to their size, expertise and geographic diversification throughout the region.

Given the weak institutional framework in Argentina, that market will primarily remain the exclusive domain of local companies. Investment levels in Mexico are low relative to the region and the companies face a high degree of competition from global peers.

Managing the growth opportunities may stress the credit quality of these construction companies, given the investment required to support the backlog of projects plus high working capital requirements.

Execution and political risk are key factors that need to be analyzed and monitored. Other key credit risks include the availability of materials and skilled labour, raw material inflation, and financial transparency. Event risk is also present, due to the fragmentation of contractors in many markets.

Categories: Economy, Latin America.

Tags: economy, Fitch Ratings, Latam.

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GeoffWard2
“Brazilian construction companies are poised to benefit the most from the high demand for their services within Latin America due to their size, expertise and geographic diversification throughout the region.”

'It's good to hear that companies with this expertise exist in Brasil.
I look forward to them coming to the North East' - he says, in frustration.
Aug 18th, 2011 - 10:04 am 0
ElaineB
LOL! Not quite the same scale but I have heard some very funny stories about handy men in Chile. It appears that anyone with their own screwdriver is qualified to repair anything!
A couple of years back I was renting an apartment in BsAs and expressed my concern to the landlords about wires hanging out of the wall in the kitchen near the sink. I didn't know if they were live and wasn't prepared to experiment. They sent some chap (who looked about 14) with a hammer and some nails to investigate. He looked at it, scratched his head and disappeared for a couple of hours. Then he came back and proceeded to hammer and bang about in the kitchen before leading me away from my desk to show me the fruits of his labour. He had nailed - in several pieces - a piece of plastic over the offending wire. Job done! It was the worst piece of DIY I had ever seen, including my own poor efforts, but he was so proud of his work I felt compelled to smile and thank him.
Aug 18th, 2011 - 11:57 am 0
xbarilox
@ 3 “I felt compelled to smile and thank him.” good woman hahaha lo atamos con alambre
Aug 18th, 2011 - 08:23 pm 0

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