Industry Trend Analysis - 2017 Construction Growth Revised Down With GSP Delay - FEB 2017

BMI View: We have revised down our forecasts for construction and infrastructure industry growth in 2017, as Peru's largest project - the USD7.0bn Southern Peruvian Gas Pipeline - will face major de lays after the cancellation of the concession contract due to corruption and subsequent financing issues with its largest stakeholder, distressed Brazilian builder Odebrecht .

Peru's Construction and infrastructure industries will face major headwinds stemming from the cancellation of the contract for the construction of the USD7.0bn Southern Peruvian Gas pipeline - Peru's largest project currently under development. The Peruvian government decided to cancel the contract after the concession holders failed to meet a financing deadline.

Brazilian builder Odebrecht participation in the project had held up a USD4.0bn syndicated bank loan after the firm was implicated in a sweeping corruption scandal. The company had been close to selling its stake which would have allowed the current concession to continue; however, the Peruvian government's intransigence in upholding an anti-corruption clause caused interested parties - including Sempra and Brookfield - to balk on the deal. We now expect severe delays for the beleaguered project - which is reportedly 37.6% complete - as the government attempts to retender the contract.

GSP Delay Will Weigh On 2017 Growth
Peru - Construction And Oil And Gas Pipelines Infrastructure Industry Value Real Growth % y-o-y
e/f = estimate/forecast, Source: BCRP, BMI Research

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