Venezuela Infrastructure Report 2007

The Venezuelan economy has been growing rapidly since it emerged from a recession in late 2003. The profits from oil have enabled President Hugo Chvez's administration to boost public spending. Consequently, the heavy expenditure towards infrastructure has contributed to double-digit growth of the construction industry. BMI's newly released Venezuela Infrastructure Report 2007 forecasts that the industry will log an average annual growth rate of 9.6% over 2006-2010 and is likely to develop from an estimated US$5.4bn in 2005 to more than US$12bn by 2010.

While road construction could see spending of about US$5bn up to 2009, deepwater port construction has an estimated budget of US$1bn. A US$6bn Venezuelan-Chinese fund will support various projects in Venezuela involving housing construction, a national railway plan and development of the telecommunications and technology sector. Institutions such as the Andean Development Corporation are extending financial assistance to Venezuela.

On the flip side, as in the case of other oil exporting economies, Venezuela will remain extremely vulnerable to any global downturn, especially when combined with declining production. The implementation of stringent foreign-currency controls has also hit the business community hard. As to the level of government spending, critics warn that current levels are not sustainable in the long run and were expected to place the national finances under strain, bloating money supply and boosting inflation. Corruption is also common, with the judiciary generally perceived as incapable of stemming the problem. Nevertheless, BMI expects the Venezuelan construction industry to grow at a moderate rate driven by government's prioritisation of ambitious energy and housing projects. On the Anticipated Potential parameter, Venezuela is allocated a score of 10 out of a possible 10. The construction industry's contribution to GDP is likely to hover around 5-6% throughout the forecast period.