Boston, MA -- (ReleaseWire) -- 03/21/2014 -- Peru's construction industry experienced strong growth in the first nine months of 2013, a trend that follows on a remarkable 15.1% real growth in 2012. As a result, we now estimate the industry to grow by 8.1% in 2014 and an average of 7.4% real growth in the next five years. Our forecast is supported by a robust project pipeline, a growing tourism industry, and high value investment plans to bridge Peru's infrastructure gap, with particular emphasis on the transport sector. However, a deteriorating business environment and severe delays in the awarding of tenders continue to pose a downside risk to our forecast.
A US$20.5bn budget in infrastructure investment between 2011 and 2016 has prompted strong growth in Peru's construction industry in the last 18 months. Solid double-digit growth in 2012 has been maintained in 2013 when we estimate growth at 10.2%. High value investment plans to expand Peru's infrastructure over the next few years should continue to drive strong growth; however, cracks in the business environment cannot be ignored and may erode growth potential over the medium term.
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Key trends and developments in the industry:
- Public opinion of the administration of President Ollanta Humala continues to slip, with approval ratings falling to new lows amid perceptions of lack of social progress, security concerns, and endemic corruption. Humala has tried to reverse the trend through a shakeup of key personnel, but we believe that given the structural challenges facing the country, his approval rating will remain under pressure, potentially hamstringing the government's policymaking ability.
- Considerable investment is being ploughed into Peru's mining sector, putting pressure on the country's existing infrastructure and creating huge demand for new capacity. Mining is typically both electricityand water-intensive; this is placing a strain on existing infrastructure, which in turn is threatening mining activity. Therefore investment into desalination plants, expanded electricity supply and more reliable transmission and distribution is crucial to the sector, as well as the country's economy.
- Peru has a large concession pipeline, orchestrated by private investment agency ProInversion. The agency's project pipeline includes ports, airports, power infrastructure and desalination plants. However, continuous delays on the tendering process are affecting investor's confidence in the market.
- Increased interest is seen in renewables, with wind power and biomass, in particular, attracting attention. As developed markets cut back subsidies and incentives, Latin America is seeing growing interest from renewable developers. Peru can benefit from diversifying its electricity mix away from hydropower, and renewable seems to be a popular choice.
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