How will construction in Latin America perform in 2024?

The Latin American economy recently received good news as the Economic Commission for Latin America and the Caribbean (ECLAC) revised its forecast for 2024 slightly upwards.

Brazil should see moderate growth of 2.3%

According to the entity’s new estimates, the region is expected to grow an average of 2.1% this year, nine percentage points above the previous projection.

Within this context, in terms of growth the most important subregion is the Caribbean with a projection of 9.6% (or 2.8% excluding Guyana), followed by Central America and Mexico with 2.7%, while the countries of South America continue to face some major difficulties with a growth forecast of 1.6%.

The region faces a complex international scenario, marked by global economic and commercial growth below historical averages, as well as high interest rates in developed countries. These conditions have increased financing costs for emerging economies, including Latin America and the Caribbean.

And although the projections are upward, ECLAC warns that the region is in a development crisis characterised by three interrelated traps: low growth, a high inequality and low social mobility trap, and a low institutional capacity and ineffective governance.

To boost growth, ECLAC insists that the region must increase its productivity and invest more in critical areas such as infrastructure, telecommunications, digitalisation, research and development, health, and adaptation of educational systems to the changes that digitalisation and automation bring. to the labor market.

Progress and stagnation

In terms of growth, it is important to mention Guyana, whose economy could expand by more than 34% according to ECLAC. The country has experienced impressive economic growth in recent years, driven by the discovery and exploitation of vast offshore oil and gas resources.

For their part, more solid economies such as those of Brazil and Mexico, countries that are among the largest in the region, will show moderate growth of 2.3% and 2.5% respectively, reflecting the structural and cyclical challenges that these nations face.

In contrast, Argentina and Haiti face serious challenges with negative projections of -3.1% and -2% respectively, underscoring the diversity of economic situations within the region.

Construction performance 

As in the general economy, the construction sector in Latin America presents a diverse panorama, with growth opportunities in several countries, but with very great challenges and risks in others.

Brazilian construction has good news and at the end of April the Brazilian Chamber of the Construction Industry (Cbic) revised upwards its projection for civil construction GDP in 2024 up to 2.3%, a positive sign for the sector that would have contracted 0.5% during 2023.

According to the Cbic, among the reasons for this new projection are the positive expectations of companies for purchases and new projects and the growing forecast for the Brazilian economy, in addition to the effects of the adjustments planned by the program Minha Casa, Minha Vida (My house, my life).

The Construction Industry Union of the State of São Paulo, in partnership with the Getulio Vargas Foundation, are more positive and are betting on a growth of 2.9%, based on numerous factors, such as the growth of consumption of materials by families and companies. Furthermore, the base interest rate is expected to continue falling, which could translate into a decrease in interest rates to finance the construction and purchase of residential property.

Argentina’s economic growth in recent years has been poor

A quite different scenario is what Chile is experiencing after investment in the sector registered a drop of 4% during 2023. According to the Chilean Chamber of Construction (CChC), this year the sector faces important challenges and although will recover because of a significant public investment, aggregate investment will continue to be negative, especially due to the lack of dynamism that private investment would present, both in housing and infrastructure.

The entity detailed that, according to its forecasts, investment in infrastructure will fall 0.3% annually. Although investment in public infrastructure will grow 5.3%, this figure does not offset a 6.3% drop projected for productive investment.

Investment in housing will experience a comparable situation and will contract by 3.2% in 2024. According to the CChC, public investment in housing shows record figures, with US$ 3.8 billion allocated to the execution of housing programs and investment, representing a growth of 9% compared to 2023, but investment in private housing would fall by 6.4%.

Another country with a construction sector navigating turbulent waters is Colombia. According to the National Administrative Department of Statistics (DANE), the industry experienced a contraction of 4.2% during 2023.

Infrastructure challenges in Colombia are pressing and encompass not only expansion, but also adaptation and maintenance of existing infrastructure.

Construction was also one of the most affected sectors in Peru, both due to exogenous factors such as climatic phenomena (El Niño) and international prices, and due to its own issues, such as social conflicts, political crises, and uncertainty about investors.

The Central Reserve Bank of Peru (BCRP) estimates that the sector would have closed 2023 with a fall of 8%, the worst sectoral performance of the industry in the last twenty-four years, except for 2020. For its part, the Peruvian Chamber of Construction is more pessimistic and estimated that the drop could be 8.7 percent.

For this year, most projections indicate that construction will grow between 3% and 4%. However, this depends on the government acting proactively, and even then, it would not be enough to reverse last year’s sharp contraction.


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