Construction in North America: US hands the baton to Canada and Mexico | Article

Canada and Mexico have more of the cycle to run

Meanwhile, we expect Canada to be the strongest-performing developed market economy in 2022 and 2023 overall with high commodity prices, firm domestic demand, and record employment supporting GDP, as well as potential corporate investment projects across the economy.

Infrastructure spending is also a key plank of the Canadian government’s growth strategy, having promised more than C$180bn of funding over the next 12 years. Projects include public transport links, and improving broadband and energy infrastructure.

In Mexico, the deep recession and the subsequent growth relapse have heaped pressure on the government to do something to jump-start the economy, and there are proposals for a “multi-billion dollar” infrastructure package. Plans in progress include $10bn on rail infrastructure to link five southern states with more than 900 miles of new track, while the Dos Bocas refinery project is expected to exceed $12.5bn. Finance minister Rogelio Ramirez de la O has said an announcement on joint public-private financed projects will be forthcoming and it could involve more than 40 projects including highways, energy, ports and telecommunications. 

That said, details are lacking and there is the risk that weak tax revenue growth and the government’s reluctance to increase debt make grand aspirational infrastructure plans vulnerable to cuts. We are wary about getting too optimistic about these announcements.

We are hopeful that the corporate sector will contribute to an improving outlook for the construction sector as economic confidence recovers while the impact of Covid on global supply chains may incentivise investment and construction activity in Mexico. The zero-Covid policies implemented in China have extended the challenges for US manufacturers in the region, particularly the auto sector, and we suspect this could result in more sourcing and production of components in the Americas region at the expense of Asia over time.

Nonetheless, concerns regarding government interference and the weakening of independent regulatory bodies and the associated worries surrounding transparency and accountability may make some companies wary.