BMI View: Brazil's construction sector will remain in recession in 2016 as the direct and indirect implications of Operation Lava Jato weigh on the industry. With contracting effectively halted and existing projects in a state of flux whilst the investigation is ongoing, construction activity has stalled. Indirectly, with the scandal having fed through to major economic weakness and political turmoil, consumer related construction is also slowing.
Latest Updates And Structural Trends
We are maintaining our forecasts for Brazil's construction sector to remain in recession in 2016 following an estimated contraction of 7.6% y-o-y in 2015. Quarterly data supports our outlook, with -8.5% growth recorded in the first nine months of 2015. With worse to come in the broader economy and ongoing implications from the Lava Jato scandal directly impacting construction activity, we see no support for a recovery in 2016.
Brazil's residential and non-residential building segments will remain in recession in 2016. With projects still stalled at Petrobras, we see limited sign of improvement in industrial construction, while the weak economy, rising unemployment and high interest rates are all weighing on residential construction.
A number of announcements have been made, signifying the country aims to launch concessions under its BRL198.4bn logistics investment programme (PIL). Rail and airport concessions are currently being prepared and will present a major test for investor sentiment in the country. We continue to expect delays in light of tepid investor interest and maintain our view that the programme will not be fully realised.
Domestic construction capacity continues to be in a state of flux with a number of high-profile arrests having taken place. Thirty-two companies remain on Petrobras' banned contractor list. The first leniency deals are being agreed, indicating limited changes in the country's competitive landscape.
Chinese investor interest continues to expand in Brazil and could present one of the most viable sources of capital for infrastructure development. Following the acquisition of a number of assets in the power sector, Chinese investors have indicated interest in the country's transport concessions.
|f = BMI forecast. Source: IBGE, BMI|
|Construction industry value, BRLbn||306.68||310.41||320.94||345.52||372.13||397.23|
|Construction Industry Value, Real Growth, % y-o-y||-2.50||-7.58||-2.61||2.16||2.40||1.49|
|Construction Industry Value, % of GDP||5.6||5.3||5.2||5.2||5.2||5.1|
Brazil's Infrastructure RRI score has fallen again this quarter, and is now 44.9 out of 100, down over ten points since early 2014.
Brazil scores 35 out of 100 for Industry Rewards, reflecting our expectations for the industry to remain in recession in 2015 and 2016. Despite having the largest industry value size in Latin America, the country comes 9th regionally (out of 14 countries) for the segment.
We have downgraded our already low score for Industry Risks in Brazil due to the extensive depth and breadth of the Lava Jato corruption scandal, which has implicated a large number of contractors in the country. Brazil now scores 40 out of 100 for Industry Risks.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Brazil Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Brazil Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Brazilian infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Brazil to test other views - a key input for successful budgetary and planning in the Brazilian infrastructure market.
- Target business opportunities and risks in the Brazilian infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Brazil.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.