BMI View: Ecuador's infrastructure development will slow considerably over the next five years as the country faces the widest budget deficit in decades, mainly due to the sustained low oil price. The government's push for Public Private Partnerships ( PPPs ) will be critical to maintaining growth in the construction industry, particularly in the transport sector where there is a siz e able project pipeline.
Forecasts and Latest Updates
After a considerable slowdown in Ecuador's construction industry growth in 2015, we expect growth to remain modest over the next few years. We forecast an average real growth of 1.1% in real terms between 2016 and 2020, a further downgrade this quarter compared to our previous forecasts. This is low compared to the 9.0% average growth rate between 2011 and 2015.
Falling oil prices will have a detrimental impact on the government's capacity to spend in infrastructure development, particularly for projects in the planning stage. Our Oil & Gas team forecasts Brent to average USD60.3 per barrel over the next five years.
High urbanisation rates have increased demand for infrastructure in Ecuador - particularly transport and utilities infrastructure, as well as housing. However, weaknesses in the country's business environment will continue to present risks and cap growth. Chief among these will be financing.
Ecuador's government plans to build four PPP infrastructure projects in the country. The government is implementing regulations and laws to drive the PPP plan, including ports and highway projects. The schemes, which are expected to cost about USD1.5bn, could be developed on a build-operate-transfer basis.
|e/f = BMI estimate/forecast. Source: Banco Central del Ecuador (BCE), BMI|
|Construction industry value, USDbn||10.72||10.82||11.17||12.03||12.87||13.73||14.64||15.62||16.65||17.75||18.92|
|Construction Industry Value, Real Growth, % y-o-y||-1.75||-3.06||-0.73||3.70||2.98||2.66||2.65||2.63||2.62||2.61||2.60|
|Construction Industry Value, % of GDP||10.3||9.7||9.4||9.3||9.2||9.1||8.9||8.8||8.7||8.5||8.4|
Ecuador's business environment continues to pose significant risks to investors as reflected in the country' performance in our Risk/Reward Index for Latin America where it ranks 6th out of 15 countries.
The country holds the highest score for Industry Rewards in the region with 57.5, significantly above the regional average of 36.7. This is mainly due to the government spending component and as such, we have downgraded this score over the past quarter following the weakening oil prices and our expectation for a contraction in the sector over the coming two years.
Lack of transparency in the tendering process, widespread corruption and a precedent for nationalisations are some of the key factors impacting Ecuador's Risks scores.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
|Scores out of 100, lower score=higher risk. Source: BMI|
The Ecuador 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 Ecuador Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Ecuadorian infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Ecuador to test other views - a key input for successful budgetary and planning in the Ecuadorian infrastructure market.
- Target business opportunities and risks in the Ecuadorian infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Ecuador.
- 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.