Argentina Infrastructure Report Q1 2008

The Argentinean construction industry grew rapidly during the 1990s propelled by an increased demand for housing and newly available credit. However growth was halted in 1998 when the country was hit by recession, which peaked in and lasted till 2002. Since then, the country's economy has grown at more than 8% for five years and grew at 8.3% year-on-year (y-o-y) in June 2007. The Argentine construction sector grew at 6.1% y-o-y in July 2007.

Infrastructural development is clearly the prime focus area in Argentina. Some of the recent infrastructural projects are plans for the construction of an international highway and an investment of about US$600mn for the construction of a road corridor. More than US$4bn will be invested for the construction of gas pipelines and a regasification plant. Construction of power plants and diversification of energy sources are also being carried out on a large scale. Apart from these, extension of facilities at airports, ports, hotels, and residential and commercial construction has also been pursued on a massive scale. Further, the government plans to emphasise on improving and upgrading energy supply and export infrastructure during 2009-11.

Still, a few roadblocks in the course of further growth can be identified. Availability of private funds or rather the lack of it remains an area of concern. Recent state efforts to attract private investment into the construction industry have met with only limited success. Further, the investment of state funds into infrastructure may accentuate an existing deficit. Though the debt-restructuring process is being effectively resolved and should eventually provide access to international capital markets, high levels of inflation and lack of structural reforms will prove to be obstacles to the country's investment outlook.

That notwithstanding, the country has huge potential for the development of its infrastructure. BMI forecasts the construction industry to grow at an average annual rate of 4.71% in the period 2008-12, reaching a value of US$31.09bn by 2012.