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New Analysis Report on Brazilian Construction Industry

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Reviewed

May 29 2013

Research and Markets has announced the addition of the "Construction in Brazil - Key Trends and Opportunities to 2017" report to their offering.

The Brazilian construction industry recorded a CAGR of 13.16% during the review period and valued BRL398.5 billion (US$204.5 billion) in 2012. The country's high tax burden, shortage of skilled labor, poor infrastructure and strong currency made it uncompetitive and reliant on domestic market growth. Realizing the importance of modernizing infrastructure to achieve long-term growth, the government announced a BRL133 billion (US$66 billion) plan to establish a set of auctions to attract private firms into building and managing the nation's infrastructure. Construction related to the FIFA World Cup and the Olympic Games will support all construction markets going forward and infrastructure construction is projected to remain the fastest-growing construction market over the forecast period. The nation's housing deficit has created a challenging environment and is adversely affecting the poorest sections of society. Speculative buying has resulted in a competitive property market which has driven prices and effectively excluded low income families. Timetric expects the Brazilian construction industry to record a CAGR of 8.67% over the forecast period and to value BRL603.8 billion (US$309.9 billion) in 2017.

Key Highlights

Overall construction industry output valued BRL398.5 billion (US$204.5 billion) in 2012 recording a CAGR of 13.16% during the review period. The industry is projected to record a CAGR of 8.67% over the forecast period and value BRL603.8 billion (US$309.9 billion) in 2017.
Inflated operational costs are associated with doing business in Brazil, making the country's goods and services more expensive. This is referred to as the Brazil Cost. Excessive bureaucracy, high levels of corruption within the public sector, high labor costs and taxes undermine confidence and industry competitiveness.
Brazil's infrastructure is currently in an under developed state and this poses a key challenge to the development of the country's industrial sector.
Delays continue to threaten infrastructure projects. In 2012, a spate of worker strikes, spurred by demands for higher wages, halted work on key hydroelectric projects. Difficulties in obtaining environmental permits could also delay major projects. In line with Brazil's National Development Bank (BNDES), Timetric anticipates infrastructural investments totaling BRL597 billion (US$294 billion) over 2012-2015, 30% higher than the BRL461 billion (US$227 billion) invested during 2007-2010. Electricity and transport are slated to be the main investment targets.
Despite the housing market being overvalued in Brazil, house prices continue to rise at one of the highest rates in the world. The residential construction market is set to grow over the forecast period, driven by rising incomes, the increased availability of mortgages and a scarcity of affordable housing.
A depressed economic environment in Europe and a slowing economic growth rate in China led to a decline in the demand for Brazilian exports, and consequently a decline in production. Wage indexation, combined with lack of an educated workforce decreased the competitiveness of the Brazilian manufacturing sector. Construction activity in the industrial construction market is projected to remain relatively sluggish. Indeed, industrial construction is projected to be the slowest-growing construction category over the forecast period recording a CAGR of 7.10%.
Institutional construction was the smallest construction category in Brazil in 2012, with a share of 3.8% and valuing BRL15.1 billion (US$7.7 billion). A lack of a qualified workforce forces hiring of foreign human capital, unnecessary salary inflation and a decline in industry competitiveness. In October 2012, Brazil's lower house of Congress passed a National Education Plan wherein public spending on education will be raised to 10% of GDP by 2020, the highest share in the world.