Market Monitor - Construction Mexico

Uncertainty about interest rates and currency volatility could derail the performance in 2016.

Mexican construction output grew 3% in 2015, with both residential and non-residential construction recording increases. Growth was mainly driven by private investment. Housing construction has rebounded due to the low interest rates on mortgage loans, increased funding for housing companies and increased subsidies.
In 2016, construction output is expected to grow at the same rate as in 2015. The energy sector reform and a national infrastructure plan should boost the construction of pipelines, power plants and airports. The 500 most important projects planned for 2016 would amount to Mexican pesos 446 billion (EUR 24 billion).
However, a further decline in oil prices, slower US growth, uncertainty about interest rates and currency volatility could derail the performance of the sector in 2016.
On average, payments in the construction industry take 45-120 days. It is common for buyers in this sector to pay slowly, especially in the public infrastructure segment. In 2015 payment delays by public bodies and state-owned enterprises increased.
Considering the potential impact of the still uncertain domestic and international environment on the construction industry, we maintain our 2016 performance outlook of ‘poor’ for the time being.

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