Argentina Infrastructure Report Q3 2009

BMI estimates that Argentina's construction industry grew at just under 11.11% in real terms in 2008.

However, we have further downgraded our forecasts in 2009, and now expect a 3.38% deceleration in real construction growth in 2009. BMI forecasts that the market will not return to real growth until 2011, with the market eventually reaching a value of US$21.7bn by 2013. Indeed, construction data indicates that President Kirchner's huge infrastructure spending plan has yet to have an impact on the sector. For example, construction permits were down 41% in Buenos Aires in the first three months of year, according to research company Abeceb.com (as reported by Bloomberg). On a positive note, there are some signs that the market is beginning to recover. Cement sales, for instance, grew by 11% month-onmonth (m-o-m) in March 2009. Overall, we expect the construction sector to expand by a Compound Annual Growth Rate (CAGR) of 3.14% between 2008 and 2013 in local currency terms.

Still, Argentina has witnessed the sharpest drop in home sales in Buenos Aires since 2002. According to the Association of Public Notaries of Buenos Aires, home sales dropped 54% in February from a year ago - the sharpest decline since the 2002 economic crisis. Fausto Spotorno, an economist at Buenos Airesbased research company, Orlando Ferreres & Asociados, stated that declining real estate sales data is signalling that construction will continue to fall. Retail sales are down, consumer confidence is down and private sector credit growth has slowed to a standstill. The news supports BMI's view that the Argentine economy is likely to suffer substantially in 2009. We have revised down our real GDP growth forecast to
-1%.

In the energy sector there is positive news, according to the minister of Federal Planning, Julio De Vido, with the construction of a fourth nuclear power plant (NPP) in progress. The announcement is in line with the country's strategy to further develop its nuclear power sector. The national news agency of Argentina, T?(C)lam, states that the new power plant is part of the government's key strategy to develop the nuclear power sector. Further details of the planned project have not yet been released.

Meanwhile, in April 2009, Chile's public works minister, Sergio Bitar, stated that the Argentine firm, Corporaci??n Am?(C)rica (CASA), has presented due diligence studies for the Trasandino Central rail tunnel project to Chile's public works ministry (MoP) and to the Argentine government (reported by Business News Americas). According to the feasibility study, the first stage of the project includes construction of a tunnel with a 10 million tonnes per year (Mt/y) capacity. In the second and third stage of the project, the tunnel will be expanded to a 20Mt/y and 70Mt/y. The total project is expected to cost US$3-4bn.