Boston, MA -- (ReleaseWire) -- 06/23/2012 -- BMI remains concerned about the effects of Argentina's soaring inflation on the country's freight transport sector. We believe that the Argentine government has artificially propped up growth during recent years. This should continue to support real term expansion over the coming quarters, but we believe that this government-led growth is ultimately unsustainable. We expect real GDP growth to cool to 4.1% in 2012, from growth of 7% in 2011.
With port workers and others trying to secure pay increases in line with the country's soaring inflation, we expect the threat of strikes at the country's ports to remain a risk. Further threats to the freight transport sector come from the barriers to import that recently re-elected President Cristina Fernandez's administration has been constructing. A potash project led by Brazilian mining giant Vale in Argentina stalled in 2011 when it was claimed the miner was not obeying rules concerning the use of local materials and workers.
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Despite the country's rich natural resources, it is possible the political and economic situation there could deter investors in the future.
Headline Industry Data
- Total volume at the Port of Buenos Aires is set to rise by 4.7% in 2012 to reach 12.6mn tonnes.
- Air freight volume growth is set to grow by 5.0% to 175,100 tonnes in 2012, with average annual growth of 4.2% during our forecast period.
- Rail freight hauled in 2012 will grow by a modest 2% to 22.70mn tonnes, with average annual growth of 2% during our forecast period.
Key Industry Trends
IADB To Provide US$300mn Loan For Road Development
The Inter-American Development Bank (IADB) announced in February that it will provide a US$300mn loan to finance the expansion and refurbishment of roads in the Norte Grande region of Argentina. The investment is intended to enhance the accessibility, efficiency and safety of the region's major road network, as well as improving the quality of its provincial thoroughfares. The provinces to be affected include Catamarca, Chaco, Corrientes, Formosa, Jujuy, Misiones, Salta, Santiago del Estero and Tucuman. Notre Grande has a population of approximately 8.3mn people, 21% of the country's overall population.
Skanska Awarded US$132.36mn Rail Extension Contract
Swedish construction company Skanska was awarded an ARS570mn (US$132.36mn) contract to extend the railway line between the province of Neuquen and the Port of Bahia Blanc in Argentina by 83km in January. The project will be undertaken for Brazilian mining company Potasio Rio Colorado by a joint venture comprising Skanska and local companies Chediack and Milicic. Construction was scheduled to begin in February 2012, with an expected completion date of Q114.
Key Risks To Outlook
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