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Brazil’s construction sector to remain in recession

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World Cement,

The outlook for Brazil’s construction sector has been downgraded by BMI Research, which now expects a contraction of 1% year-on-year, following weaker-than-expected activity in 1Q17. A fall in 2017 would mark the fourth consecutive year of recession in the sector.

“The depth of contraction in the sector in 1Q17, combined with weakness in several forward-looking indicators suggests limited support for an industry still damaged by Lava Jato and significant public sector cuts,” BMI Research said in a recent report.

Originally focused on corruption at state-owned oil company, Petrobras, the Lavo Jato scandal has swept up some of Brazil’s most prominent construction companies, including its largest Odebrecht. Marcelo Odebrecht, the former CEO of the company’s largest construction company, Odebrecht, who was convicted of paying bribes of more than US$30 million to Petrobras executives.

Despite a return to growth in 2H17, the damage done in the first six months of the year will see the country remain in negative figures. BMI Research has previously expected growth of 0.7% in 2017.

Over the 2018 – 2026 period, there will be a move back into growth, supported by the government’s infrastructure programme. However, with Brazil’s political situation still volatile, investors will remain “highly cautious”, BMI Research said.

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