Boston, MA -- (ReleaseWire) -- 03/19/2014 -- We maintain our positive outlook on Chile's construction industry on the back of an investorfriendly business environment, political stability, and a strong pipeline of projects. Although we estimate a moderate slowdown in real growth for 2013 and 2014 to 4.7% and 5.6% respectively - compared to high 8.1% in 2012 - this is still a promising outlook. In addition, we expect the Chilean construction industry value to more than double in the next decade, reaching US$51.5bn by the end of our forecast period in 2014-2023. There is a strong pipeline of infrastructure projects, particularly in the energy and utilities sector, as the mining industry continues to demand additional power and the country has a significant potential for renewable energy.
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Key Trends And Developments
- Robust investment in mining infrastructure: BHP Billiton and Rio Tinto have announced a US$3bn investment to build a new seawater desalination plant to support operations at Chile's biggest copper mine - Escondida. This investment shows the commitment of these mining giants to maintain and expand their presence in Chile. The construction of this project was awarded to Bechtel in December 2013. - In January 2014, OHL and Sacyr submitted the winning construction and concession proposal for the US $1.06bn Americo Vespucio Oriente (AVO) expressway project in Santiago. The project involves the construction and operation of 9.3km of an urban highway at a cost of US$970mn.
- Renewables sector continues to expand: a US$1bn new solar power plant was awarded to Spanish firm Abengoa in January 2014. The 110MW Cerro Dominador CSP project will be in region II, in the Atacama desert. Once completed, the plant is designed to supply uninterrupted power 24 hours a day.
- The unanimous passing by parliament of the upward revision to the country's renewable energy targets in September 2013 confirms our constructive view of the Chilean market. The bill indicates Chile will source 20% of the energy mix from renewables by 2025, including micro hydropower (the previous target was 10% by 2020). The bill is now scheduled to be submitted into law.
- Chile continues to claim the top spot in our Latin America regional Risk/Reward Ratings this quarter, followed by Colombia and Mexico. Market-friendly policies and strong institutions have been the hallmark of the Chilean government and President Sebastian Pinera's administration has set the benchmark for political stability in the region. Despite presidential elections, we do not see any immediate threats to Chile's Risk/Reward Ratings score of 62.2 points out of 100, way above the regional average of 45.8 this quarter.
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