Market Monitor - Construction industry - Mexico

Market performance snapshots

Mexico

• Major public investments planned
• Construction is forecast to grow 4% in 2015
• Payments take between 45 and 120 days

The Mexican construction sector suffered a downturn in 2013 as production decreased 4.5% year-on-year. However, in April 2014 President Enrique Peña Nieto announced a National Infrastructure Plan, to be implemented between 2014 and 2018. This new program aims to invest approximately USD 415 billion (5.7% of Mexico’s GDP) in more than 1,000 projects in the transportation, water management and energy sectors, as well as in housing and urban development.

After three consecutive quarters of decline, Q4 of 2014 showed a significant improvement in construction performance, and the Construction Chamber expects the industry to have grown 2% by the end of 2014. In 2015 non-residential and public construction growth is expected to be mainly driven by the National Infrastructure Plan and supported by investments triggered by recent reforms in the energy and telecom sectors.

The expectations for the housing construction sector are cautiously optimistic. Just as in the non-residential segment, growth is expected to be generated by the National Infrastructure Plan that has budgeted approximately USD 95 billion for housing and urban development, including financial assistance for home ownership (subsidies, mortgage financing) and renovation of existing houses. Growth is expected to be driven by smaller players, which have a stronger market position following the bankruptcy of some larger companies in 2013.

On average, payments in the construction industry still take 45 to 120 days. It is common that buyers in this sector pay slowly, especially in the case of public infrastructure projects.

In 2015 the Mexican construction industry is forecast to grow 4%, however this would, among other things, require the federal government to accelerate the bidding process for the planned construction projects from the beginning of this year and to speed up advance payments for the completion of the projects. Taking those elements of uncertainty into account, the construction industry could face significant challenges again. Therefore we maintain our 2015 performance outlook of “Poor” for the time being.