Ecuador Infrastructure Report Q4 2013 - New Market Research Report

From: Fast Market Research, Inc.
Published: Thu Sep 19 2013

A notable deceleration in construction activity from Q112 to Q113, reported by the Banco Central del Ecuador, confirms our view that, after two years of double-digit growth, a slowdown is on the cards for Ecuador's construction sector. Having expanded by an estimated 14% in 2012, we predict that real industry growth in 2013 will come in at a more modest 6.5%. This decelerating trend is likely to continue over the medium term, with BMI forecasting average annual growth of around 3.6% between 2013 and 2017.

We believe that a drop-off in government spending following February's general election and a weakening consumer outlook are likely to put the brakes on infrastructure investment and residential construction respectively. Meanwhile, Ecuador's persistently weak business environment and prohibitive financing conditions will continue to starve the sector of much-needed investment over the medium term at least.

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Key developments in the industry:

* Following re-election, we believe President Correa's populist agenda will accelerate throughout his next four-year term. While this poses some upside risk to our forecasts given the focus on social and economic infrastructure investment, we believe chronic financing difficulties will see the government struggle to maintain its ambitious levels of spending.
* In July 2013, the World Bank - through the International Bank for Reconstruction and Development (IBRD) - authorised a US$205mn loan for the construction of the Quito metro system. The project, scheduled to be operational in 2016, will also rely on loans from the Andean Development Corporation (US$250mn), the Inter-American Development Bank (US$200mn) and the European Investment Bank (US$262mn).
* The new Mariscal Sucre International Airport in Quito was officially opened in February 2013. The US $700mn facility includes a 410,000sq ft passenger terminal and a 452,000sq ft cargo terminal. Initially, the airport will accommodate 5mn passengers per annum, increasing to 7.5mn by 2030. In addition, the new airport is expected to transform export and provide travel connections to several tourist destinations, such as Quito, the Galapagos and Cotopaxi. The new terminal won two UN sustainability awards and secured a brace of airport finance and structuring honours.

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