Global Construction 2020

Introduction

Construction will outpace world GDP growth in the next decade as Asian markets continue to develop rapidly and the US construction market undergoes a cyclical recovery. The global construction market is expected to grow by almost 70% from US$7.2 trillion today to US$12 trillion in 2020.

Latin America

Construction growth in Latin America (LATAM) will be more muted, but infrastructure investment will drive output in Brazil in the first half of the decade as it prepares for the 2014 FIFA World Cup and the 2016 Olympics in Rio de Janeiro.

Growth in construction in LATAM is forecast to average 4.9% pa over the next decade, similar to the global average of 5.2% pa, but more than two percentage points lower than the average for emerging markets. This lower rate is partly due to the fact that the region is already highly urbanised.

Growth in construction will be higher over the next five years to 2015, at an average of 5.8% pa and will slow to an average of 3.9% growth pa over the period 2015 – 20.

During the next five years the annual average rate of growth in construction will be faster compared with the last five year period in Brazil, Chile and Mexico. The rate of growth in construction will slow in Argentina and Colombia compared with the last five year period.

Brazil

More than 85% of the population in Brazil already lives in urban locations. The rate of growth in the urban population is therefore expected to be comparatively low for an emerging market. São Paulo, whose population already exceeds 20 million, and Rio de Janeiro, home to 12 million, are expected to grow more slowly than the national average, particularly between 2015 – 20.

Brazil’s infrastructure ranks a comparatively poor 84^th in the World Economic Forum’s Global Competitiveness Index (GCI), with roads and ports particularly poor. Economic growth is significantly constrained by poor quality or inadequate infrastructure.

The Growth Acceleration Plan – PAC2 programme runs from 2011, with investments of US$526 billion for the period 2011 – 14, as well as US$346.4 billion allocated from 2014. PAC2 is a strategic investment programme that focuses on key areas including logistics, energy and social development. Energy is by far the largest programme, accounting for some 70% of PAC2. Housing is also a key focus and the plan provides US$152.5 billion for the urbanisation of informal settlements.

The Minha Casa Minha Vida National Housing Programme aims to build 2 million affordable new homes for low and middle income families by 2014.

A total of US$59.7 billion will be invested in transport. A significant proportion of the transport budget will be spent on rail, with the network expected to expand by 11 000 km to a total of 40 000 km.

The 2014 FIFA World Cup will involve 12 host cities, with the final being held at the Maracana Stadium in Rio de Janeiro. The Brazilian Football Confederation has earmarked US$1.1 billion to upgrade and remodel existing stadia.

The Olympic related budget, including capital investments in transportation and sports venues, is US$11.6 billion.

Colombia

Around three-quarters of Colombia’s population lives in urban areas and the rate of population growth in urban areas is forecast to average around 1.6% pa over the next decade. The population of Bogotá is 8.5 million and will increase by an average of 2.3% pa over the period 2010 – 15, but growth of the urban population will slow to just over 1.2% pa in 2015 – 20.

Colombia’s infrastructure is poor. It is ranked 97 out of 139 countries in the World Economic Forum’s GCI. Roads, rail and ports are particularly poor. The government’s economic stimulus package is now losing impact, although its finances are in a relatively good position to fund higher levels of infrastructure growth, whilst conditions for business investment have improved.

The Colombian National Institute for Concessions (INCO) is expected to overhaul its national rail network. Meanwhile, further investment is expected in hydro electric as well as renewable energy projects, particularly wind energy. Hydro currently accounts for around 70% of all electricity generation.

Mexico

Mexico is the second largest country in LATAM after Brazil. Over three quarters of its population live in urban areas, and this figure is forecast to exceed 80% in 2020, after growth averaging 1.15% pa over the next 10 years. Mexico City has a population of 19.5 million and will grow more slowly than nationally. Infrastructure in Mexico ranks 79 in the World Economic Forum’s GCI.

The Inter-American Development Bank has provided support and loans to improve housing supply, particularly affordable homes. Legal reforms have also helped stimulate public private partnerships (PPPs). Currently, there are over 20 PPP projects under construction or in planning, including hospitals, universities and road projects. Plans to extend PPP projects have been reflected in the National Infrastructure Plan and include a number of toll road concession projects.

A total of US$4 billion is to be invested in the rail system in Mexico, which has been neglected in the key cities with fast growing populations – Mexico City, Guadalajara and Monterrey in particular.

A total of US$6 billion will be invested in expansion and modernisation of existing port facilities, as well as providing new ports.

Chile

The Chilean economy is heavily dependent on copper, accounting for around one-third of government revenues. Almost 90% of the population in Chile lives in urban areas. The urban population is expected to increase at an average of 1.15% pa during the next five years, slowing to just below 1% pa between 2015 – 20.

Chile’s comparatively high economic wealth is reflected in its infrastructure, being ranked 24 in the World Economic Forum’s GCI. The country’s relatively low public debt and substantial mineral reserves will enable investment in Chile’s infrastructure to be increased further.

A four year concessions programme was outlined in July 2010 that included 92 infrastructure projects, including road, airport, transit, health and prison projects.

Argentina

Argentina is already highly urbanised with over 92% of the population currently living in urban areas. However, the urban population is still forecast to increase by around 1% pa over the next ten years to almost 94% by 2020.

Argentina’s infrastructure ranks 102 in the World Economic Forum’s GCI, with quality of air transport infrastructure ranked at 115 out of 139 countries.

The government’s US$32.65 billion stimulus package with investments in energy, transportation and the building of up to 300 000 homes is now losing impact. The stimulus plan also included gas pipelines and completion of Argentina’s third nuclear power plant in Buenos Aires. Currently, Argentina generates 10% of its electricity from nuclear power. This is expected to rise in the future with a possible third and fourth nuclear reactor.

The Norte Grande transmission project involves construction of a 1220 km, 500 kV transmission line to connect the northwest and northeastern parts of Argentina.

A number of rail projects are planned, including the proposed but delayed US$4 billion 710 km Buenos Aires to Cordoba High Speed Rail link. Buenos Aires has a population of 13 million and a housing shortage that affects an estimated 500 000 people.

This is an abridged version of the full article, which was published in the September 2011 issue of WORLD CEMENT. To read more download the issue now (subscribers only).

Read the article online at: https://www.worldcement.com/the-americas/25082011/global-construction-2020/