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Latin American Construction Might Be Down, But It's Not Out

Joan R. Magee The Wall Street Journal
Latin American Construction Might Be Down, But It's Not Out - Latin American - Construction - Down - real estate - commercial - residential

NEW YORK (Dow Jones)--Not too long ago, real-estate development in Latin America was hot, foreign money was flowing in, and local companies were going public as the construction industry boomed.

The global credit crisis put the brakes on that euphoria, as seen in plummeting commercial and residential expansion, though not all countries in the region have been hit the same way.

One barometer of construction and development is cement output, which is set to decrease 4.1% this year in South America from the previous year. It will fall another 1.4% in 2010, according to a Portland Cement Association report released earlier this month.

The association predicted a 1.7% global decrease in cement consumption for 2009, with growth in China and India masking declines in both developed and developing markets.

Mexico, close to the U.S. both geographically and economically, is one of the worst-hit in the aftermath of the U.S. housing implosion. The country's growth decelerated to 1.3% in 2008 from 3.2% in 2007, and the economy is expected to contract by close to 6% this year.

Mexican Finance Minister Agustin Carstens recently said demand for housing this year will likely fall 7.1% from 2008, even though available financing will be up 2.5%.

The government's National Infrastructure Program calls for public and private investment of around $40 billion a year between 2007 and 2012. And while private investment is down sharply in the current recession, public investment has filled some of the gap, thanks to counter-cyclical government spending.

Public support for infrastructure has been such that shareholders of construction firm Empresas ICA (ICA) have approved a plan to sell up to $350 million in shares to finance infrastructure projects that are already under way or ones the company plans to bid on. And Desarrolladora Homex (HXM), one of the largest Mexican home-building companies, said it expects 8% to 10% revenue growth this year. 


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