Boston, MA -- (ReleaseWire) -- 04/11/2014 -- We are maintaining our expectation that 2014 should see a recovery in the Mexican construction industry, following a housing market crash and public sector inertia in 2013, which saw the construction sector record a contraction of 4.5%. Given the persistent weakness into late 2013 and the uncertain timelines of infrastructure projects, we have moderately downgraded our 2014 growth estimate to 3.7%. We expect Q114 may still show signs of weakness. However, with a number of infrastructure tenders due over the quarter, and President Enrique Pena Nieto vowing to redirect his attention towards public works projects, the outlook is more positive for the remainder of the year. In 2015, we expect continued acceleration in growth, to 4%.
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Infrastructure High On The Presidential Agenda
President Enrique Pena Nieto's US$315bn National Infrastructure Plan has outlined greater scope for private investment into Mexico's infrastructure sector. Based on a strong track record, including presiding over the country's first healthcare PPP in the State of Mexico, we expect the PPP law to gain significant traction under President Nieto and over the coming years.
Mexico's infrastructure sector has been stagnating over the past few years, and was further weakened by the lull in activity driven by public sector sluggishness in the wake of the transition of power in 2013. We expect this to turn around in 2014, especially after a number of priority reforms came into law, which should allow more on other areas of the economy, with infrastructure likely to be a priority. Liberalising the energy and electricity sectors should allow for greater private sector investment into both.
Over the medium term we see the energy and utilities sector on track for the strongest growth, with average annual growth of 8.2% expected between 2014 and 2018. Growth is being driven by all three subsectors, including the development of new pipelines bringing US natural gas to Mexico, the opening up of Mexico's electricity sector to new competition and the number of high value water infrastructure projects being developed. In the transport sector, uncertain timelines and contract terms over projects is creating some cause for caution. We would highlight the port and rail sectors as potential outperformers over the medium term. In the rail sector, US$7.4bn worth of tenders are due in H114. However, already these projects have been transferred from PPPs to EPC contracts and therefore we will be closely watching timelines.
Energy Reform And Manufacturing To Drive Industrial Engineering
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