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Building blocks

Tuesday, February 25, 2014

The construction sector in Central America is showing signs of recovery, at least in five countries.

Nicaragua's construction sector has grown at an annual rate of no less than 12 percent in the last two years, as part of strong overall economic growth, including a 17% increase in direct foreign investment last year, compared to 2012.

A proposed inter-ocean canal, whose construction is scheduled to start before the end of the year, would see a massive market for construction services, partly for the project itself, as well as for housing for the personnel involved. 

Local and foreign environmentalists have expressed serious concerns about the proposed canal. 

But construction economic considerations may prevail in the poorest country in Latin America. 

Costa Rica's residential construction sector will grow by as much as 10 percent this year, mainly as a result of easier access to credit. 

In a country with often-volatile interest costs, the opportunity to get a mortgage with local-currency rates fixed for as long as ten years at rates under 10 percent, has been a stimulus for buyers. 

By comparison, rates a year ago were close to 20 percent, while fixed terms were shorter. 

Panamanian real estate may be reaching bubble status, contributing close to $2 billion to the national economy last year, compared to just $500 million a decade earlier. 

On the other hand, continuing political unrest in various Latin American countries means that Panama attracts significant volumes of foreign investment, a big part of which goes into high-rise buildings and commercial centers in areas in and around the capital. 

Meanwhile, the public sector is continuing with a program of major projects, including a new section of the Canal, scheduled to open next year, as well the Panama City Metro, Central America’s first, which will start operating in April. 

In Honduras, a new program expects to stimulate public works, by awarding contracts to the most competitive bidder, regardless of whether a project involves a concession to a private company, state management with public funds, or a combination of both methods. 

Guatemala has also seen a reactivation, mainly due to a stronger fiscal outlook, and improved relations between contractors and developers. 

That leaves El Salvador, which has for several years suffered from chronic slow growth, the result of a combination of a lack of confidence on the part of the business community in a government perceived as left-wing, and a high level of violence.