Stable outlook for Latin American infrastructure

28 June 2012

Latin America is proving resilient to global economic stresses, and the outlook for the region's infrastructure market is stable, according to Fitch Ratings.

The rating agency's 2012 Mid-year Outlook: Latin America Infrastructure report said governments in Latin America were continuing to promote investments in transport and energy infrastructure, and had introduced new legislation to facilitate developments.

For instance, the Brazilian government has introduced a tax provision to incentivise infrastructure project financing, while new public-private-partnership laws in Colombia and Mexico are also expected to boost infrastructure investments.

Population growth and sustainable internal demand for basic services from a rising middle class are also contributing factors to Fitch's stable outlook for the region.

The report said Latin American governments were searching for ways to increase local capital market financing for infrastructure development. The capital and liquidity constraints faced by US and European banks are limiting long-term financing, traditionally provided by their regional banking affiliates - a factor which is pressuring Latin America's governments to seek alternative funding sources.

Renewable power is also of growing importance in the region - Fitch noted that onshore wind farm projects were being built in several Latin American countries in an effort to diversify energy sources and increase electricity reliability, for instance.

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