Mexico Infrastructure Report Q2 2016

Mexico Infrastructure Report Q2 2016

BMI View: Driven by strong growth in the residential, non-residential and energy sectors, the Mexicoconstruction industry will continue its recovery into 2016. The infrastructure industry, particularlytransport, will lag behind as public-sector budget cuts weigh on growth; however we expect increasedprivate sector investment to help to offset these cuts and expect growth rates to accelerate over our forecastperiod.

Latest Updates And Structural Trends

We expect the Mexican construction industry to post 3.2% real growth in 2016, driven by continuedstrength in the housing sector and increasing investment in the newly liberalised energy sector.

The infrastructure sector will underperform as large public sector budget cuts continue to weigh ongrowth. Transport will be particularly hard hit, with an additional MXN12.3bn cut to the Ministry ofCommunications and Transport announced in February helping to solidify continued contraction withinthe transport segment.

We expect increasing levels of private sector investment to help lift the infrastructure industry over ourforecast period, with growth rates accelerating steadily out to 2025.

Mexico's energy liberalisation, kicked off by reforms in 2013 and 2014, will be fostered by a newinvestment vehicle - FIBRA E. It will encourage investment in the sector by opening up the market to awider range of potential investors and providing attractive tax incentives.