21
may 2014
international
construction
REGIONALREPORT: LATINAMERICA
Infrastructure emphasis
>
E
conomic growth inLatinAmerica has been disappointing
in the aftermath of the global financial crisis. The Inter-
American Development Bank (IDB) expects just +3.0%
GDP growth for the region this year, rising to +3.3% in 2015. It
cites theabsenceofgrowth-inducingreforms toboostproductivity
as a key problem.
Despite this poor growth, the construction sector looks in
reasonablehealth.AccordingtotheInter-AmericanConstruction
Industry Federation – Federación Interamericana de Industria
de la Construcción (FIIC) – the Latin American construction
market is worth some US$ 320 billion. Growth varies across
the 18 countries the Federation draws data from, and in some
cases constructionoutput looks set to grow faster than thewider
economy thanks to heavy investment in infrastructure.
For example, construction output in Chile is expected to
increase by +7.5% this year, while the country’s GDP growth is
around +4.9%. Uruguay is another countrywhere construction
growth is abig stepaheadof theexpansionof thewider economy,
and there are other countrieswherebothGDP and construction
growth are very high, thanks to industry activity.
The obvious example is Panama, where GDP growth is up
around +7.0% thanks mainly to the expansion of the Panama
Canal, the biggest construction project in the world at the
moment. Colombia is another example of a countrywhere high
GDP growth is going hand-in-hand with heavy investment in
infrastructure.
But of course for sheer volume of work, it is the major
economies in the region that are themost important.Consultant
CG-LA Infrastructure has identified 100 strategic projects
throughout the region that will start in the next 18months or
so, with a total investment value of US$ 145 billion. Of these,
47 are inMexico and Brazil, and with a total value of US$ 91
billion, they account for 62% of the schemes by value.
The total of US$ 145 billion applies to infrastructure in the
broad sense.The biggest slice is transport schemes, accounting
for nearly 64%, or US$ 93.3 billion. Water and sanitation is
next, with a total approaching US$ 22 billion, the oil & gas
sector has some US$ 16.5 billion of imminent projects and
finally there is the energy sector, which has US$ 14.8 billion
worth in the pipeline.
The immediate pipeline of significant
infrastructure projects in LatinAmerica is
put at US$145 billion, comprising urban
transport systems,major city-to-city
links and cross-continent corridors.
Many governments are looking to PPPs
to finance their schemes.
Infrastructure emphasis
T
he gauntlet has been set down for
theBrazilian construction industry
after the ratings agencyMoody’s
warned that, “A failure to have needed
infrastructure in place could sully the
country’s image.” This of coursemeans
delays and safety issues, whichmeans
litigation, and as theWorldCup deadline
looms, disputeswill start to hot-up.
In Brazil disputes are resolved through
a state court – there are no specific
courts for construction disputes. However,
as elsewhere in theworld, alternative
methods such as arbitration ormediation
are available to help resolve disputes
without the costs or publicity of a court
case. Parties to a dispute can adopt
the arbitration rules of any national or
international institution they chose,
andmany pick themajor international centres that havemore experience of complex
infrastructure disputes.
Dispute adjudication boards (DABs), dispute review boards (DRBs) and combined disputes
boards (CDB) are an increasingly popular option chosen before going downmore formal
routes. They not only tend to be cheaper, but also help to preserve relationships and
minimise delays.
Their popularity could increase evenmore in Brazil, as the priority for theWorld Cup is to
have venues ready in time.
■
Michael Regan is a partner and head of the Construction and EngineeringGroup at
Mayer Brown.
Disputes in Brazil
WorldCupdeadlines are encouraging alternative dispute resolution
Panama City inaugurated Central America’s first metro
system in April.
